Borrower and lender are going to cancel

[CANative]

I'm working on a FHA assignment. It was one of those quirky properties that made me a bit nervous and I've been doing some due diligence for about a week (cryptic agent comments in the MLS sheet of the property when it sold last year, references to "documents and disclosures" but the agent could really remember the issues and could not get to the old files), permit card states Failing Septic - No evidence of failing septic. Illegal second dwelling unit, demolition of kitchen from storage building, legalize wood stove in storage building, failing septic, sewage in back yard, Illegal 2nd dwelling unit, two storage buildings converted into living space, etc, etc. This series of issues has been ongoing since 1999 with the last entry in Aug, 2005. The property sold in March 2007. The house also has 4 layers of comp shingles, one of the large accessory dwelling units is substandard and when you flush the toilet you get a whiff of sewage smell. There was also a rumor that the well got contaminated by Ag runnoff into a seasonal, unamed creek which runs through the property.

Anyway, this stuff didn't just jump out and announced itself. It took a week to get this far. And to top it off, when I did the inspection the 12 x 18 "Storage building" was locked and the husband has the only key and he is out of town working. All the windows had plywood boards over them. I noticed a gas wall heater vent sticking out of one side of the building. This was before I knew the other stuff. Now I'm wondering if they really did demolish everything the were supposed to.

I called yesterday and said I needed to come out and inspect the building and that I could come over anytime. She called me this morning and states I don't need to come out. They've cancelled the loan with the FHA lender (my client) and are going to go with the lender who has their loan now (chaise). She's thinking because she paid for it I should just complete the report and send it to ?Chase... her? I don't think Chase selects appraisers directly but maybe the do in some cases.

Anyway, my question is: If the lender and the borrower decide to cancel their loan while I'm still in the middle of the appraisal report, do I have any further obligation to HUD/FHA?

 

[Randolph Kinney]

Anyway, my question is: If the lender and the borrower decide to cancel their loan while I'm still in the middle of the appraisal report, do I have any further obligation to HUD/FHA?

I wouldn't think so. You got paid so that is good because you did the work.

As for getting another appraisal done on the same property, that's up to the new lender to select you to do the job at whatever agreed upon price.

 

[stefan olafson]

I'd make sure you are notified by your client that the job has been cancelled. I think you were looking just a little bit too closely at what they had. Sounds like a good one to get paid for and not have to complete.

 

[CANative]

I just got this email from the borrower...

Dear Mr Boyd,

After speaking with our lender yesterday, we are no longer seeking a new loan. Please write up what you have and send to us at our home address so we can at least use the appraisal for our property tax reduction. If that can't be done, than I expect some type of refund on the appraisal.

Please advise,

Ignoring that the amount of time I've spent on this project so far exceeds the fee they paid me, I'm not sure I can abandon the client. I guess I need to see how they want to proceed.

I'm thinking if they don't want anything else to do with it, I can probably accept a new assignment for the homeowner. It wouldn't be too hard to transfer the report to the non-lender form and adjust the scope of work. I probably won't charge them because I kind of feel bad for them. They have a 100% loan on a property that wasn't worth what they paid for it last year and now it's worth even less. And being as this is California, the Prop 13 State, I don't think they are going to have any luck getting their taxes reduced.

 

[Matt Mattina]

Hey, Greg. Same thing just happened to me.

Your appraiser-client relationship with the mortgage client has effectively ended as their is no longer an intended use (no FHA borrower = no FHA loan). Confirm this with your client, and create a new appraiser-client relationship with the owners with a short engagement letter that states: owner as the client, effective date of value, tax use, and report format (non-lending form). If it is one of those brokers who wants the you to complete the appraisal to hold it "hostage" to try and hang on to the deal. Make them pay the fee so you can refund the borrower. Don't get caught in the middle!! Hopefully, its a good client.

Warn the owner that a new lender will likely need the property inspected after the new application date and will likely want AN appraisal in their name, but it will be up to the new lender to select and engage the appraiser.

You are smart to change the form and make sure it says not for lending use. The last thing you need is your appraisal getting passed around anymore than it alreadly will be.

Or, (unless the really need it for a tax appeal) you can agree with the owner to give them a oral report and refund a portion of the fee. Then, if your are engaged for lending use, complete a written report then with a new fee.

 

[RSW]

I think it would be a blessing to not have to complete the appraisal.

The borrower is not your client and you will need to get permission from your client as to if the appraisal order is cancelled or not.

I believe that the lender has to refund the money to the borrower if the loan does not go through.

 

[Mike Boyd]

Your client for the original report is whoever ordered it in the first place. Ignore the homeowner's request. You can accept a new assignment from the HO but it's a new deal. What you charge them is your business decision.

 

[ZZGAMAZZ]

It is surprising (at least to me) that the Forum is not citing the appraiser's relationship with FHA as an intended user, as what typically is described as an inviolate contractual relationship that is integral to the SOW beginning when an assignment is accepted and ending 6 months later.

Also if the assignment isn't completed as ordered, as per the SOW, how can you expect to have earned the fee, especially if the borrower decides in the future to seek relief/reimbursement in the courts and you're unable to demonstrate that the job was completed for which you were paid in advance. (My company just lost $2,000 when a property owner reversed his credit card charge from 4-5 months ago--that the card company approved because we had nothing in writing from the borrower acknowledging that he ever received a copy of the completed report.)

Also there have been numerous CA threads concerning the request for tax reduction based upon declining property values.

 

[Kevin Mc]

complete the report, send it to the lender. Notify the borrower the lender is required to provide them a copy of the report. If they need additional services beyond that, charge them accordingly.

 

[Ross (CO)]

Perhaps there is truly more to that inaccessible building......and enough to bring a halt to all the good intentions. One might think by now that your client would have informed you of the cancellation. Has that happened yet ? The homeowner is baiting that usually uncomfortable predicament for the appraiser with the same old....."because she paid for the report" line. She is surely correct, that part about paying for the ordered report !

So, complete it a.s.a.p., and give clear mention to the inaccessible building and your effort to arrange for a subsequent visit to fulfill that observation. Deliver the report in a manner that can confirm its receipt. Let the client (then) inform you that all plans for them have been cancelled. At least you will have done what was ordered from you ! Imagine your attempt to explain later, if they come after you formally to recoup their money.....and you are left stating that you never did complete the report you were asked to do !

Reply to the homeowner that the lender has this (original) completed report ......and that the lender can pass along the homeowner's "copy" when that request is directly made and that this is the proper manner in which you are obligated to fulfill your contractual duties. Suggest that any discussions about a fee refund can likely be worked out between this lender and the homeowner......and that "many lender clients will do this when plans change and loans do not proceed further".

Any tax appeal report in the future can be approached in an entirely different conversation and under whatever terms you and this property owner create then.