Appraised Value Below Contract Price

[Calvin the Airedale]

Calvin ... I have to disagree with you here. I see no requirement for an appraiser to make any comment comparing the opinion of market value against the sales contract ... I would think that done during the normal course of underwriting.

There is certainly no requirement for an appraiser to do so. In fact, Im not sure an appraiser should. An appraiser is (or should be) an expert in market valuation of property rights ... I dont think we have the obligation to put on legal, Realtor and underwriter hats as well.

USPAP is interesting .. it says what it says and it doesnt say what it doesnt say. I personally think there is a reason for that and our obligation is to only do what it says ... not what others wish it said.

My dear friend,

There is the world as we wish it to exist, and the one which we must live in. Sometimes they are the same, many times they are not.

It is clear that we have an USPAP obligation to "analyze the SC" the difference is in how we interpret what it means to "analyze".

Again, my interpretation is based on having been examined by the OTS, and on having my former staff's reports be conformed to GSE requirements. It is based on the practical application with which these sources view the term "analyze the sale agreement" and not on what I would wish it to be.

As a further source of such practical application or interpretation, I quote the following narrative from a State of Colorado finding against an appraiser for USPAP violations:

"
Pursuant to USPAP Standards Rule 1-5(a) and 2-2(b)(ix), the appraiser is required to review and analyze the contract and the listing (market exposure) and to “summarize the information analyzed, the appraisal procedures followed, and the reasoning that supports the analyses, opinions and conclusions.”
Pursuant to USPAP AO-1, the appraiser must take into account the listing, the agreed price, and the pending sale of the subject. The appraiser’s failure to analyze these facts may exclude important information....(See AO-1, lines 32-39).

Pursuant to USPAP Standards Rule 1-5(a) and 2-2(b)(ix), if a copy of the contract was unobtainable, a statement on the efforts undertaken by the appraiser to obtain a copy of the contract is required. If the contract is irrelevant, a statement acknowledging the existence of the information and citing its lack of relevance is required. It is unclear if the appraiser (xxxxx xxxx) reviewed a copy of the contract. If he did not review a copy of the contract, the required statement is not in the report.

If he did review a copy of the contract, the report violates the USPAP requirement to “summarize the information analyzed and appraisal procedures followed”, i.e., clearly state that he did review a copy of the contract.

On page #1 of the URAR, the sale price is shown as $176,015 and the seller concession is shown as $5,334. At the top of the addendum page, the report states:
“The seller agrees to pay $5,334.00 at closing. This has been considered in this appraisal report.”
This is inadequate and /or misleading. My dictionary defines “Analysis” as an examination of the parts to find out their nature, proportion, interrelationship, etc. A detailed examination. A statement of the results of this process.
How could xxxxx xxxx conclude that the market value was $176,000 when it was obvious that you, I, or anyone else could have bought the property for $164,500? There is no answer in the report."

The report shows the sale price as $176,015 and the seller concession as $5,334. If we accept these figures at face value, it means the seller agreed to accept $170,681 and the buyer agreed to pay $170,681. Therefore, the “agreed price” (USPAP AO-1 terminology) is $170,681. How could xxxxx xxxx conclude the market value was $176,000 when it was obvious the agreed price was $170,681? There is no answer in the report.
USPAP AO-1 requires the appraiser to consider the pending sale of the subject. Typing the words.... “has been considered” does not (in and of itself) constitute compliance.
The plain meaning of USPAP 2-2(b)(ix) requires that the report provide sufficient detail for the intended user(s) to understand the reasoning and the rationale for how the market value could be higher than the publicly stated asking price. Common sense dictates that there needs to be some stated reason, and the reason must be plausible.
There is no mention of the appraisal procedures followed – this is a violation of USPAP Standards Rule 1-5(a) and 2-2(b)(ix). There is no analysis of the contract, there is no mention of the asking price, and there is no mention of the days on market of the subject. There is no analysis of the subject listing or subject market exposure. There is no reasoning and there is no rationale – this is a violation of USPAP Standards Rule 1-5(a) and 2-2(b)(ix).

 

[CANative]

First you state that it's unfortunate that the contract analysis section is on the front page of the appraisal report and then you post this cite? You're all over the place. And in any case, there is nothing relevant in that reference anyway.

You boxed yourself in a corner Calvin.

 

[Calvin the Airedale]

No offense, Calvin, but it was the government who decided to regulate us in the first place. Then, as our government ALWAYS does, they saw fit not just to regulate us, but to regulate the living crap out of us to the degree that many of us decided we were just too overregulated, and that the rewards of our profession were outweighed by the risks. Residential appraisers have been burdened for a couple of decades now by a set of "rules" designed primarily by non-residential appraisers. These "rules" are written in an obfuscatory manner and are often used as a noose with which to hang targeted appraisers. Let us not forget - not for a moment, that the primary reason these "rules" were foisted upon us, (residential types), was that folks like you, (commercial types - not you specifically), committed a whole bunch of fraud. As with any government boondoggle, the rules have taken on a life of their own and just grow and grow - because we all know that whatever the problem, greater governmental intervention and regulation must certainly be the answer. God forbid the free market were allowed to take its natural course ever again. This profession is becoming completely farcical. Each and every time I read posts about the INSANE level of scope creep inherent in even the most straightforward appraisal work, I thank my lucky stars that I am longer a participant in this charade.

Pardon me David, but any narrative complaining about the amount and source of our regulation might do well to remember that one of the reasons this profession exists in any numbers at all is because appraisals are required of lenders by regulation. If they were not, more than half our number would be retired or greeting shoppers at Walmart in the alternative.

 

[CANative]

Each and every time I read posts about the INSANE level of scope creep inherent in even the most straightforward appraisal work,

I don't think scope creep has anything to do with government regulation.

 

[David Mescon]

Calvin, thanks for lending substantial credence to my previous post - it's good to know we're on the same side here.

By the way, the fact that "you, I, or anyone else could have bought the property for $164,500" may or may not have any bearing upon the market value of the property. If it's relevant, it's relevant; if not, it's not. Properties go under contract for more than or less than their market values every day. The anality of the detail of the charges against the appraiser in the example you cited, above, is a realistic demonstration of the implications of the overregulation I noted. I'm not a conspiracist, but maybe I should consider signing up... Hey, was that helicopter black???

 

[Calvin the Airedale]

First you state that it's unfortunate that the contract analysis section is on the front page of the appraisal report and then you post this cite? You're all over the place. And in any case, there is nothing relevant in that reference anyway.

You boxed yourself in a corner Calvin.

Please re-examine as my first post omitted the second half of the opinion.

But in case you still disagree: so what? This was not an isolated decision. I can post dozens from this and various other states that basically say the same thing: "the appraiser failed to analyze the sale agreement". The substance of most such complaints is the failure to reconcile the difference between the sale price with the value estimate. Opining that the sale price is either reasonable, too high, or too low based on the value herein reported is, in fact, such reconciliation.

 

[CANative]

Baloney.
..............

 

[Calvin the Airedale]

Calvin, thanks for lending substantial credence to my previous post - it's good to know we're on the same side here.

By the way, the fact that "you, I, or anyone else could have bought the property for $164,500" may or may not have any bearing upon the market value of the property. If it's relevant, it's relevant; if not, it's not. Properties go under contract for more than or less than their market values every day. The anality of the detail of the charges against the appraiser in the example you cited, above, is a realistic demonstration of the implications of the overregulation I noted. I'm not a conspiracist, but maybe I should consider signing up... Hey, was that helicopter black???

Again, David, it might be over-regulation. You're certainly entitled to believe so. It is, however, reality.

 

[mark hurlock]

It is clear that we have an USPAP obligation to "analyze the SC" the difference is in how we interpret what it means to "analyze".

Cal,

don't forget, I'm still waiting for you to document that analyzing the contract requires forming and reporting an opinion of the contract price.

Whenever you're ready!

 

[CANative]

Cal,

don't forget, I'm still waiting for you to document that analyzing the contract requires forming and reporting an opinion of the contract price.

Whenever you're ready!

Why are you asking him this? It's not there.