"Appraisal fee to be paid at closing!"

[Lee Lansford]

At various times in this forum I have seen postings from appraisers indicating that they--or other appraisers--were accepting appraisal assignments with the stipulation that the appraisal fee was to be paid at closing.
FURTHER, there was no alternative arrangement (agreement between the appraiser and the client) for payment if the loan did not close.

I was aware--and I suspect that many of you held the same belief--that such an arrangement violated the "Management" section of the ETHICS RULE of the USPAP.

Last month, I directed a request to the ASB that they address this issue in their monthly "USPAP Q&A".
Though the ASB had "nearly" addressed this issue previously (SEE the 2006 edition of the ASB's "FAQs"; questions #24 and #30), there was the obvious (in my opinion) need to directly address this question.

Today I received a message from the ASB that this question has been addressed and is a part of the November 2006 "USPAP Q&A":

"QUESTION: I have a potential lending client that wants to arrange for my appraisal fees to be paid at the closing of each financing transaction. Does USPAP permit this fee arrangement?

RESPONSE: USPAP does not address the time frame for payment of fees. In the situation described there must be a clear agreement that the fee cannot depend on the closing of the financing transaction. Accepting an assignment where the appraisal fee is paid ONLY upon successful closing of the transaction is a violation of the "Management" section of the ETHICS RULE:
'It is unethical for an apraiser to accept an assignment, or to have a compensation arrangement for an assignment, that is contingent on any of the following:
1. (edited here for brevity);
2. (edited here for brevity);
3. (edited here for brevity):
4. (edited here for brevity);
5. the occurence of a subsequent event directly related to the appraiser's opinions and specific to the assignment's purpose.'

One way appraisers can avoid any ambiguity is by having a written agreement with the client detailing the manner in which the appraisal fee will be paid if the transaction does not close."

Well, hopefully we will not again see any misunderstanding regarding this matter!

Lee
AQB Certified USPAP Instructor

 

[Mountain Man]

Cool! Now if only it would be enforced.

 

[DB]

Enforced??? What's that???

 

[Lee Lansford]

Doug, if appraisers willingly accept such an arrangement, they are the fools who have no recourse.

Lee

 

[DB]

Got no problem agreeing with that ...

 

[Lee Lansford]

Doug: "Great minds think alike!"

Well, maybe not all of the time, but at least some of the time.

Lee

 

[Webbed Feet]

Should be a Sticky

To All,

I believe we have what should be a new Sticky folks!

Barry Dayton

 

[Ross (CO)]

There is yet another option which works wonders in aiding the appraiser to avoid biases and influences from that client which might affect eventual payment for the assignment's report......and it makes for smoother Management of the appraiser's process and can assure a higher level of Ethics in that end.......

.....and that is creating a compensation arrangement whereby the agreed fee payment is made BEFORE the report is communicated to the client. Hard to find much else which enables that appraiser to perform their services without bias or influence from the client ! Talk about a sense of freedom and raising of the personal spirits to perform one's duties with full diligence !

Does such a policy need to be implimented every time and with every client's order ?.......of course not. Are there "types" of clients for which this policy is expressly favorable ?....yes. How about first-time clients, out-of-staters, and a mortgage brokering entity who you know will NOT be the ultimate funder of the loan.

Just a moment to share a thought.....and, other than that, I fully agree with what Lee posted !

 

[hastalavista]

Lee-

I hope this becomes a "sticky" too!

How many times have we read in a thread where someone is arguing this:
Yes, I accepted the assignment and agreed to be paid at close of escrow. But the client should know that if escrow doesn't close, they owe me the money anyway! Agreeing to get paid at close of escrow is fine and it is done all the time!

Without the express and specific statement of a payment time-frame (for example: close of escrow or 60-days, which ever occurs first) by the appraiser to the client, then (IMO) anytime an appraiser accepts an assignment with only "to be paid at close of escrow"
A. The appraiser is certainly entitled to get paid regardless if escrow closes or not.
B. The appraiser has violated Management Section of the Ethics Rule for agreeing to the assignment in the first place.

 

[Terrel L. Shields]

I simply would not accept an arrangement which stipulates my fee won't be paid until closing. They can pay at closing, but after 30 days, i dun them and after 60 days, I file liens...no exceptions. Luckily in Arkansas you can do that and they will pay period....