Appraisal Deadline Date On The Contract

[Ron Hauser]

I received an appraisal order on a new purchase the other day. The loan officer that sent it asked if I could go out and look at it right away becuase the appraisal deadline had passed a few days ago. I asked the Realtor if he could change the appraisal deadline date on the contract. The contract reads that if the appraisal value does not meet the sale price the purchaser can put in writing to terminate the contract before the appraisal deadline date. However if the deadline has passed and the appraisal comes in low, the seller can force the purchaser to buy the property. I feel the purchaser is put in a bad situation by the Realtors and loan officer if the date is not changed. They could be forced to purchase a property that may not meet value and loose the option to terminate. Am I just in asking the Realtor to change this date?

 

[Tom Barclay]

Ron,
Although you are like to get many answers to this, I don't believe that it is an appraiser's responsibility to even suggest changes to a legal contract between the parties. It puts you in the position of negotiating terms. I certainly know how you feel, but the LO already knew the deadline had passed when they sent you out. It is the buyer's agent's responsibility to ensure that the terms of the contract are follwed, and it is their job to insist on extensions when deadlines, such as inspections, appraisals or closing cannot be met. At least in Oregon, they can be held responsible for damages for failure to represent the best interests of their client.

 

[Richard Carlsen]

Good Morning Ron

Two things: Tom is right. Forget any deadlines in the contract. They are not your problem. That is for the buyer and the seller and their agents to worry about.

The thing that bothers me is that you seem to have accepted an additional assignment in this order without raising objection. You seem to worry about the buyer being able to back out of the deal if the value is not there. I think you need to ask yourself who is your client and what is the purpose of the appraisal. If it is for lending consideration then the client is the lender--period. Not the buyer or the seller.

I have received a few of these lately where the contract is made subject to "an acceptable appraisal". On one, I made the report subject to removal of that clause as I did not trust the buyer. On the last one I did, they made it subject to an acceptable appraisal and I put this in the comments on the P.A.:

LISTED WITH LOCAL MLS (WW 236949), AT $159,500. UNDER CONTRACT OF SALE FOR $148,500. SELLER TO CONTRIBUTE $2000 TO CLOSING COSTS. NO UNUSUAL TERMS. P.A. IS MADE "CONTINGENT UPON APPRAISAL." APPRAISER DOES NOT & HAS NOT AGREED TO THESE TERMS AND IS NOT GIVING VALUE OPINION HEREIN FOR BUYERS BUYING DECISION. (Yes I use all caps)

Whenever you see something like this, you need to distance yourself from it because it is not part of the appraisal assignment. I would be glad to do an appraisal for the buyer but it will cost him for my time and liability.

Remember that you are, by definition of USPAP, independent of the process. If you worry about something like this within the purchase agreement, you in essence have been sucked into the process and made to think that the buyer is your client also. Don't go that route. Stay out of these things. Let the broker and the buyer/seller worry about such things. Stick with appraising for your client only.

 

[Ron Hauser]

Lets assume the lender, my client, and the buyers agent, who both know the financials of the buyer, maybe they are selling a home and purchasing this one and have extra cash, so the Realtor tells the lender that the property is over priced and to not order the appraisal until after the deadline, which will force the buyers to not have the option to terminate the contract. So when I receive the order, I am supposed to ignore this date and go ahead with business as usuall. The listing Realtor is not going to push this deadline because he knows he over price this property by tens of thousands of dollars. There needs to be some justice for the consumer who is put in the middle with the only way out is to loose their $1,000 earnest money or face a lawsuite forcing them to complete the contract that is manipulated by the system. I will take my chances in court and believe a judge may slap my hand but that may change the way some realtors are doing business in a down market.

I do not believe I have broken any USAP rules, I did not have a pre determined value before looking at the property, even though the comps were $50,000 below the selling price but I knew this property was updated and had a mountain view. I did not mention to the Realtor that there was a value issue before looking at the property. I merely asked that the date be changed to reflect a more obtainable date for the buyers to have the option. If that is wrong then the lender can sue me, however they are the ones that will have to also explain the late ordering of the appraisal. The Realtors, who are being paid to insure that the dates are meet will also have to explain their lack of professionalism. If I did not say something about the date it makes me appear to be in on their plan.

As appraisers our job is two fold. We provide to our clients the knowledge of and give our opinion of value on a property so they can determin the risk factors in lending against that property. By donig this we also protect the borrower from getting a loan that exceeds the market value of their property. I think it is also our job to insure that proceedures are followed within the scope of doing business, which also seperates us from the fradulent activites between lenders and Realtors.

 

[Richard Carlsen]

I think it is also our job to insure that procedures are followed within the scope of doing business, which also separates us from the fraudulent activities between lenders and Realtors.

If you believe this is part of the job, make sure you put it in the scope of work. You have to disclose this to your client.

Personally, I would never take an assignment where I have to oversee the details of the transaction. At least I would not take it without the authority to make things happen and adequate compensation for my time.

When we begin to take on things that are not part of the assignment, we increase our liability and raise the expectations of what is normally expected of you. All, I would be willing to bet, without an increase in the compensation for these extra duties.

 

[Jim Onderisin]

Ron, I agree that you may be over-thinking the assignment here. I sympathize with your viewpoint and sense of justice, but also think that 1.) it's not our business to keep everyone straight and narrow, and 2.) you might be setting yourself up for trouble by doing anything but the appraisal requested.

 

[wyecoyote]

Ron,

I agree with everyone else in that it is not your job to negotiate the terms of the P&S. That is for the agents, buyer, & seller. Not an appraisers job unless the P&S is to set the purchase price via an appraisal.

Also you are assuming that you are the first appraiser. Perhaps there was another one or two appraisers or more that came out did the appraisal. Determined that the purchase price was not supported by the market. So they are appraiser shoping.

 

[Randy Beigh]

Ron,

I agree with the other respondents. You should stay out of the negotiations and worrying about artificial dates imposed in the contract. This stuff has nothing to do with you.

Sounds like you are trying to be a nice guy. However, no good deed goes unpunished. My advise is to just do your job.