Appraisal for the purchase without the purchase contract.

[Brad Ellis]

Moh,

It can be done if you like.

CAR contracts if they are using that (I suspect so) have a clause in them that provides for a potential renegotiation based upon the appraised value- or at least it used to be in there. I always bristled at that.

Still this would differ only slightly from that and if the lender ordered it then it could also be used for the mortgage transaction.

Pamela Biggers,

RE contracts in every state I know of requires the contract to be in writing.

Brad

 

[Webbed Feet]

Mr. Malekpour,

Ahhh! So we are on the same page now...

First I think the posts that followed your last question to me are all spot on. I agree with Mr. Ellis. The issue here is you are being out and out told that there is in fact no sales transaction that exists yet. The parties are just considering one. To me that raises what the heck to do over the check boxes on page one in the "Subject" section over "Assignment Type" .. It's a small issue, but "Purchase Transaction" box is a difficult choice when you MUST turn around and say in the contract analysis section that there is no purchase transaction! Only people talking about maybe doing one, so hence this is why you have no contracts.

Again, I agree with the latest posts that no written contract on real estate means there is no sale legally taking place. At least here in Oregon I really agree with that, you check your State .. call a broker. You have no offer, you have no acceptance, you have no pending sale! This all makes me lean to using the "Other" check box regarding assignment type and typing in "possible future sale" instead. Because that is exactly what I'd have to say in the addendum and I would not want to contradict myself via a check box.

In a way, the above from an appraisal standpoint is a good thing. Because it also means you have no written contract stating anyone is going to use the appraisal report done for financing to negociate a contract price or possibly back out of the sale agreement. I am with Mr. Ellis, I also HATE that when I read it in a earnest money sales agreement! I bet a good real estate lawyer would advise to turn down such assigments or demand a hold harmless clause signed by both the buyer and seller. But I am no expert on that. Maybe since the appraiser is not a party to such a contract we just have an unintended use going on the appraiser cannot be held responsible for.

The remainder is going to be disclosures in the "Contact" analysis why you don't have a contract with a disclosure that the intended parties are not going to represent a future "arms length" transaction anyway... Crap!.. LOL.. I just thought of something else... Ask your client how a borrower's name can be used when your client does not have a real estate sale yet? There is no borrower... there is no sale.. there is no transaction .. your client cannot even have loan application paperwork to submit without a sales contract from a "borrower" who doesn't own the property and has not made an offer. Somebody else with a lending background check me on this... so far all we have is a hypothetical borrower.. correct?

Technical stuff. Either way an appraiser decided, if everything was disclosed, borrower name used or not, "assignment type" check box used or not... If I reviewed I'd probably be ok with it. Mr. Ellis?

Barry Dayton

 

[Brad Ellis]

Mr. Dayton,

I concur. And BTW, years ago I did seek legal advice on the very issue of using the mortgage finance appraisal for pricing. That attorney told me to make it clear in the report that anyone who used it for that purpose did so at their own risk and that neither sellr or buyer were clients or intended users (but I do not recall the wording on intended user except to say he did not use those specific words).

Brad

 

[moh malekpour]

Mr. Malekpour,

Ahhh! So we are on the same page now...

First I think the posts that followed your last question to me are all spot on. I agree with Mr. Ellis. The issue here is you are being out and out told that there is in fact no sales transaction that exists yet. The parties are just considering one. To me that raises what the heck to do over the check boxes on page one in the "Subject" section over "Assignment Type" .. It's a small issue, but "Purchase Transaction" box is a difficult choice when you MUST turn around and say in the contract analysis section that there is no purchase transaction! Only people talking about maybe doing one, so hence this is why you have no contracts.

Again, I agree with the latest posts that no written contract on real estate means there is no sale legally taking place. At least here in Oregon I really agree with that, you check your State .. call a broker. You have no offer, you have no acceptance, you have no pending sale! This all makes me lean to using the "Other" check box regarding assignment type and typing in "possible future sale" instead. Because that is exactly what I'd have to say in the addendum and I would not want to contradict myself via a check box.

In a way, the above from an appraisal standpoint is a good thing. Because it also means you have no written contract stating anyone is going to use the appraisal report done for financing to negociate a contract price or possibly back out of the sale agreement. I am with Mr. Ellis, I also HATE that when I read it in a earnest money sales agreement! I bet a good real estate lawyer would advise to turn down such assigments or demand a hold harmless clause signed by both the buyer and seller. But I am no expert on that. Maybe since the appraiser is not a party to such a contract we just have an unintended use going on the appraiser cannot be held responsible for.

The remainder is going to be disclosures in the "Contact" analysis why you don't have a contract with a disclosure that the intended parties are not going to represent a future "arms length" transaction anyway... Crap!.. LOL.. I just thought of something else... Ask your client how a borrower's name can be used when your client does not have a real estate sale yet? There is no borrower... there is no sale.. there is no transaction .. your client cannot even have loan application paperwork to submit without a sales contract from a "borrower" who doesn't own the property and has not made an offer. Somebody else with a lending background check me on this... so far all we have is a hypothetical borrower.. correct?

Technical stuff. Either way an appraiser decided, if everything was disclosed, borrower name used or not, "assignment type" check box used or not... If I reviewed I'd probably be ok with it. Mr. Ellis?

Barry Dayton

Mr Dayton,
I agree with some of what you said and disagree with some others.
I suppose, you agree that the SOW is an agreement between the appraiser and client as long as everything is in USPAP compliance. If the client/lender requested an appraisal for purchase financing and named the purchaser in the assignment and the appraiser agreed to do so, then the assignment type would be purchase.
When the assignment type is purchase, the appraiser has to review the purchase contract and make a comment about it but when the client/lender says there is no purchase contract, the appraiser simply disclose in the report that there was no purchase contract and no sales price at the time of appraisal and the appraiser is done with it. Of course in this situation, it should be emphasized that the appraisal is for purchase loan transaction only and not for the buyer or the seller or purchase decision making.
The idea that the lender officially doesn’t have a purchase price or purchase contract or even a purchaser to initiate the loan is not appraiser’s business. It is the lender’s business. I believe, the purchase box should be marked and not the other in this case because the assignment is for the purchase.
I am sure you have situations when the purchase contract was drawn but it wasn’t sent to you. What would you do? You don’t mark the other. You mark the purchase if assignment was for the purchase and disclose that the purchase contract was not available.
I think for the appraiser’s point of view, it doesn’t matter if the purchase contract was drawn and not sent to the appraiser or was not drawn yet and told the appraiser about it. In both situations, the assignment is for the purchase but the purchase contract is not available to the appraiser that appraiser has to disclose it.
The appraiser also has to put down the recorded owner in the report. What would you do if the seller in the purchase contract that you reviewing is not the owner’s name. Could be the owner’s spouse, partner, attorney but you don’t know? You just disclose it. what would you do if you don't have the purchase contract? You know who is the owner in the record but you don't know who is the seller if you don't have the contract. What would be your answer to the question "is the owner of the property the seller? The answer has to be yes or no. If you don't have the contract what do you say?

 

[Marcia Langley]

Mr. Dayton,

I concur. And BTW, years ago I did seek legal advice on the very issue of using the mortgage finance appraisal for pricing. That attorney told me to make it clear in the report that anyone who used it for that purpose did so at their own risk and that neither sellr or buyer were clients or intended users (but I do not recall the wording on intended user except to say he did not use those specific words).

Brad

(my red)

Years ago that would have worked. But, now? What about the new guidelines?

 

[Webbed Feet]

Mr. Malekpour,

You know I don't think it's all that overwhelmingly important as long as you drop down into the contract analysis section and explain what is really going on.

Not too long ago I had an assignment where the proposed buyer was trying to get prepared to purchase a property at auction. The buyer and MB involved had to have an appraisal ready to go before the auction so they could have financing all hot and ready to go. I used the "Other" box myself and explained everything even though I had the MB attempting to tell me there already was a sales contract only he did not have a copy for me. (LOL, guess what the MB was trying to pull?.. .. Proposed buyer told me there was no contract available because it was nonexistant so far! .. Which made sense.) I made my "Assignment Type" to be to prepare for a pending sales auction and a proposed financing transaction of a possible sale at auction. Apparently everyone down the line were all ok with that, no call backs for any changes.

Like I said in my last post, maybe I was not clear, this seems a minor technical issue. In your case I would personally use "Other" and put "Proposed Purchase Transaction" in the comment area because it is loud and clear there is no meeting of the minds so far, no pending sale at this point. But, if you did it your way, but explained it all in the contract section so it was clear what was going on..... I'd personally not have any issue at all if I were to read your report. Too many other fish to fry. Honestly, I find having a "Client / Lender" label on the same identification line in the forms FAR more confusing and a bigger issue than this one. I'd like to see those split up to separate lines on the forms.

Barry Dayton