Being asked to provide Insurance Value

[deaksmom]

Does anyone have a comment to the effect that the appraisal cannot be used for insurance purposes? Thanks!

 

[jay trotta]

Does anyone have a comment to the effect that the appraisal cannot be used for insurance purposes? Thanks!

your done

 

[The Bob]

I don't address on a case by case. I put this in every report to head 'em off at the pass.

 

[DWiley]

We always used to note that the cost approach was presented only as an indication of market value and was not intended for any calculations related to insurance.

Insurable value is a thing, and I have performed assignments for developing the insurable value of an asset. However, in such cases it is critical that one know and apply the proper definition of insurable value that is applicable. It is usually defined in the insurance contract itself.

 

[TerryRohrer]

The following is a comment I saved that my notes attribute to LIA (Liability Insurance Administrators). I will be using it later today, and may tweak it a bit to reinforce the notion that my estimate of replacement cost should not be assumed to be reliable in estimating replacement cost for insurance purposes. My primary rationale is that, in development of the cost approach, the replacement cost new does not necessarily need to be as accurate for valuation as it should be for insurance simply because, if done consistently, any errors in developing the replacement cost for the subject and comparable sales is "self-corrected" in the development of depreciation estimates.

"The cost approach has only been developed by the appraiser as an analysis to support their opinion of the property`s market value. Use of this data, in whole or part, for other purposes is not intended by the appraiser. Nothing set forth in the appraisal should be relied upon for the purpose of determining the amount or type of insurance coverage to be placed on the subject property. The appraiser assumes no liability for and does not guarantee that any insurable value estimate inferred from this report will result in the subject property being fully insured for any loss that may be sustained. Further, the cost approach may not be a reliable indication of replacement or reproduction cost for any date other than the effective date of this appraisal due to changing costs of labor and materials and due to changing building codes and governmental regulations and requirements."

 

[JTip]

They can ask and you can provide a cost approach even when it is not appropriate for the assignment.

The PRICE you charge for this a la carte item is up to you.

It bugs me when appraisers say 'I can't do that' instead of 'sure, I can provide that service for an extra $zzz'.

 

[Ariba]

They can ask and you can provide a cost approach even when it is not appropriate for the assignment.

The PRICE you charge for this a la carte item is up to you.

It bugs me when appraisers say 'I can't do that' instead of 'sure, I can provide that service for an extra $zzz'.

So, why do it when it is not appropriate for the assignment? Do you really need the $$$ that badly?

 

[deaksmom]

The following is a comment I saved that my notes attribute to LIA (Liability Insurance Administrators). I will be using it later today, and may tweak it a bit to reinforce the notion that my estimate of replacement cost should not be assumed to be reliable in estimating replacement cost for insurance purposes. My primary rationale is that, in development of the cost approach, the replacement cost new does not necessarily need to be as accurate for valuation as it should be for insurance simply because, if done consistently, any errors in developing the replacement cost for the subject and comparable sales is "self-corrected" in the development of depreciation estimates.

"The cost approach has only been developed by the appraiser as an analysis to support their opinion of the property`s market value. Use of this data, in whole or part, for other purposes is not intended by the appraiser. Nothing set forth in the appraisal should be relied upon for the purpose of determining the amount or type of insurance coverage to be placed on the subject property. The appraiser assumes no liability for and does not guarantee that any insurable value estimate inferred from this report will result in the subject property being fully insured for any loss that may be sustained. Further, the cost approach may not be a reliable indication of replacement or reproduction cost for any date other than the effective date of this appraisal due to changing costs of labor and materials and due to changing building codes and governmental regulations and requirements."

Thank you Terry! This is exactly what I was looking for - I agree 100%. I appreciate you sharing your report "comment" with me

 

[George Hatch]

So, why do it when it is not appropriate for the assignment? Do you really need the $$$ that badly?

I would say that "not appropriate for the assignment" isn't a good way of expressing that idea. The appraiser doesn't need to do it in order to get to their opinion of MV, however that doesn't stop a client or user requiring it for their own use. In which case it falls under the category of "assignment conditions", along with several other things that appraisers routinely do in their assignments that they don't necessarily need to do for all assignments involving that property type.

This is actually a SOWR issue, and unilaterally opting out isn't one of the options. Appraisers don't have the discretion to opt out of assignment elements they have agreed to meet. They can renegotiate the terms of the assignment. They can withdraw from the assignment. They can (usually) add more on their own. But once they accept the assignment they can't short the client. Unless that element actually undermines the minimums or otherwise undermines the credibility then "I decided on my own to skip that" doesn't fly.

For example, if a client requests a rent survey and 216 on an SFR, the appraiser doesn't usually need to do that in order to get to their opinion of MV. But they will still need to do that in order to meet the assignment conditions and user expectations for that assignment. Moreover, if the user is requesting something and the appraiser accepts that assignment but proceeds to short them on that element then that's actually a problem for the appraiser.


"this extra was included in my SOW as the result of an assignment condition" explains why the appraiser is doing something that is supplemental to their normal process.

 

[deaksmom]

I would say that "not appropriate for the assignment" isn't a good way of expressing that idea. The appraiser doesn't need to do it in order to get to their opinion of MV, however that doesn't stop a client or user requiring it for their own use. In which case it falls under the category of "assignment conditions", along with several other things that appraisers routinely do in their assignments that they don't necessarily need to do for all assignments involving that property type.

This is actually a SOWR issue, and unilaterally opting out isn't one of the options. Appraisers don't have the discretion to opt out of assignment elements they have agreed to meet. They can renegotiate the terms of the assignment. They can withdraw from the assignment. They can (usually) add more on their own. But once they accept the assignment they can't short the client. Unless that element actually undermines the minimums or otherwise undermines the credibility then "I decided on my own to skip that" doesn't fly.

For example, if a client requests a rent survey and 216 on an SFR, the appraiser doesn't usually need to do that in order to get to their opinion of MV. But they will still need to do that in order to meet the assignment conditions and user expectations for that assignment. Moreover, if the user is requesting something and the appraiser accepts that assignment but proceeds to short them on that element then that's actually a problem for the appraiser.


"this extra was included in my SOW as the result of an assignment condition" explains why the appraiser is doing something that is supplemental to their normal process.

Thank you for responding my request for help with a comment for my report. This was not an assignment condition, I did not agree to provide an insurance value. It was a request emailed to me directly by the borrower who wanted to do his insurance broker a favor. I of course politely said no, it has to be part of the order that comes from the lender/client or requested by the AMC. I just wanted a little help with a comment to include in the report to cover the bases.