Buyer Wants To Use Seller Appraisal.

[Doug in NC]

I talked to the appraisal board on this, and was told it is ok to proceed. I did an appraisal for a seller, the appraisal is acceptable to the buyer so now the buyer's lender wants their own copy of the appraisal. Lender will have to order their own appraisal.

Just wondering what steps I am required to do now. Should I do another inspection, or can I leave it retrospective with some explanation in the addendum? (If I do ask for a re-inspection, the homeowner will have a 1.5 hour drive to let me in again - earlier inspection was less than a month ago) I will, of course, search for more recent comps if there are any. As far as the fee, is there any reason to discount it? I am thinking NO discount.

 

[Lee Lansford]

Doug--I assume that there were no restrictions placed upon you by the original client (seller) as to confidentiality or not appraising the subject property in the future for another party.
That said, yes you may provide a "new" appraisal to the new client (lender). IF they are willing to accept the effective date being prior to the date of the assignment to you, I would strongly suggest that you require them to make that point exactly clear in their written request to engage your services.
Also...watch out that this new client/lender doesn't first inform you that "you don't need to change the effective date in the appraisal" but they need you to add a statement something along the lines of..."The market value today is AT LEAST the same as it was XX/XX/XX (the original effective date)". This last sentence in quotation marks changes the effective date and means that you just provided another appraisal report.
--Lee Lansford, IFA

 

[Doug in NC]

There were no restrictions by the seller, they are willing to share the appraisal. I have a feeling the mortgage broker isn't keeping up with the FDIC directives. It is clear to me that Gov't regulators expect the appraisal to be ordered by the lender, not done for someone else and transferred. Sounds like the guy just wants to get a copy of the report, which he intends to get and use for free. He'll get no cooperation from me. <_< The thing that bothers me is how he thinks he can get away with using a report that was clearly engaged by another party; it won't even have his borrower's name on the report. :question:

 

[Steve Owen]

I agree with Lee, Doug. What you do will depend somewhat on your client's needs. The lender may want a more recent date, especially if comps in the original report are getting old. If they want a current date, then you need to re-inspect; whether it is exterior or interior depends on what the client needs for scope of work. If they want the same date, there is nothing wrong with using the same date, in which case you do not need to re-inspect, but may need to add things to the scope of work that were not done before. As Lee warned, be very careful about any language they ask you to add, particularly if that language starts to amount to an update with new date of value.

What to charge is, of course, a business decision. Typically if I am doing one of these and don't have to measure I discount by about 45 minutes at my standard fee. Additionally, if I can use all the same comps and don't have to go photo, etc. I will discount by an additional amount of so much per comp. Some appraisers don't discount these at all, using the theory that it isn't the amount of work but, rather the amount of liability. I personally think that if you do good work your liability is minimal and the scope of work and amount of new work to be done should drive the fee structure. Like I said, that is a business decision.

 

[alex gilbert]

You can accept a new assignment for this property. As Lee said, you’ll need to clarify with your new client (the lender) if they want a new appraisal with a new effective date of value or if they want a retrospective appraisal with the exact date of value of the prior report. If they want a new report you’ll have to re-inspect and research/analyze new data, if available. If they’re ok with the retrospective value, and their scope of work the same as in your original assignment, you would not have to re-inspect or search for new data. In fact the report would be very similar to the original, except for the borrower, intended use, intended users and date of report. Lee makes a good point about getting the specifics of the assignment in writing so everyone’s clear about what they’ll get. Also don’t forget that you’ll need two work files, one for each assignment.

Personally, I’d think some fee discount might be reasonable. If they go with the “new effective date” option, at the least you won’t have to re-measure the improvements. If they ask for the same effective date as the old report, your work will be limited to reviewing your scope of work, editing the relevant language and reprinting the report.

I do have a question for other readers …When you accept this type of assignment, particularly when asked to do a retrospective appraisal where the effective date of value is the same as another assignment you’d recently completed, do disclose your previous appraisal in the new report? And if you do, do you identify your prior clients or only disclose that you’d appraised the property for another client/intended use?

 

[Steve Owen]

I have a feeling the mortgage broker isn't keeping up with the FDIC directives

:rofl: :rainfro: :rofl: :rainfro: :rofl: :rainfro: :rofl: :rainfro:

Do any of them ever keep up with regulations (or even care)?

There is nothing wrong with you providing a copy so long as your client authorizes it (be sure to get that in writing) and nothing is changed. That being said, I would tend to be a bit uncooperative (in a professional and polite way) by pointing out the rules and regulations to the MB. I would probably charge something for the copy, maybe even as much as half fee if it is to be an original signed copy. I might say something to the MB like this:

"Well Mr. MB, you know that federal regulations will not allow you to use an appraisal done for an individual. If the original report had been done for a bank or other lender then it would be allowable. So, I don't really see any advantage in you paying to obtain a copy of the report done for Jim Homeowner. On the other hand, if you wanted to order an new appraisal from me, I could do it for a lower fee than it would take if I had not recently appraised the property because I won't have to measure and draw again, and even some of the comps might wind up being the same."

That usually leads to a question of what the fee will be, in which case I quote a fee based on how much the work will be reduced. I would try to lead them towards a new appraisal with a new date, mainly because it is cleaner and will work better for them. MAKE ABSOLUTELY SURE that you get a written order for the new appraisal and that it does not contain any language for pre-determined value. Good luck; it sounds to me like you just might have an easy way to convert this into some actual work.

 

[Steve Owen]

Alex, the answer to your question about whether to disclose having appraised the property before is "it depends." Usually I disclose that I have recently appraised the same property in the following manner, comment addendum:

Exterior walls were previously measured to the nearest 0.1 foot, with minor rounding, as needed, to square the property; floor plan drawn at that time; previous measurements and floor plan were used in this appraisal; there has been no change in subject size or configuration since previous measurement and floor plan was made. "Gross Living Area" was determined in accordance with American National Standards Institute (ANSI Z765) standard for measurement and calculation of residential property.

I may make other comments concerning having appraised the property before. I do not, however, comment on the name of the client or the purpose of the previous appraisal. I believe that to do so would be a violation of confidentiality. Even though the MB already knows who you apprised it for, the secondary lender or some other party that ends up with a copy may not know. USPAP has specific language dealing with the confidentiality of the appraised value and purpose of the appraisal.

On some rare occasions, a client might not want you to disclose that you had appraised the property. IMHO what the new client wants in this regard is of no consequence, but if the former client asked me not to disclose, then I would not. Finally, some clients will restrict your ability to appraise the same property for a new client. It is a business decision whether to accept such an assignment, but if you do, you must live by the restriction.

 

[Farm Gal]

Weblinkto PDF: http://www.occ.treas.gov/ftp/advisory/2003%2D9a.pdf


Office of the Comptroller of the Currency
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of Thrift Supervision
National Credit Union Administration

INDEPENDENT APPRAISAL AND EVALUATION FUNCTIONS

October 27, 2003

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) (the agencies) are jointly issuing this statement to address concerns identified during examinations about the independence of the collateral valuation process. This statement applies to all real estate-related financial transactions originated or purchased by a regulated institution for its own portfolio or as assets held for sale. It provides further clarification of, and should be reviewed in conjunction with, the agencies' appraisal and real estate lending regulations1 and the Interagency Appraisal and Evaluation Guidelines (Guidelines).2 {snip}, appraisal or evaluation development work should not commence until the institution finalizes the selection process.
The agencies' appraisal regulations address appraiser independence and require that an institution, or its agent, directly engage the appraiser. The only exception to this requirement is that an institution may use an appraisal prepared for another financial services institution, provided that the institution determines that the appraisal conforms to the agencies' appraisal regulations and is otherwise acceptable. Independence is compromised when an institution uses an appraiser who is recommended by the borrower or allows the borrower to select the appraiser from the institution's list of approved appraisers.

Institutions may not use an appraisal prepared by an individual who was selected or engaged by a borrower. An institution's use of a borrower-ordered appraisal violates the agencies' appraisal regulations. Likewise, institutions may not use "readdressed appraisals" -- appraisal reports that are altered by the appraiser to replace any references to the original client with the institution's name. Altering an appraisal report in a manner that conceals the original client or intended users of the appraisal is misleading and violates the agencies' appraisal regulations and the Uniform Standards of Professional Appraisal Practice (USPAP). {snip} An appraiser may also incorporate an engagement letter in the appraisal report. The engagement letter confirms that the assignment was made in a manner that complies with the institution's procedures and the agencies' regulations and Guidelines.
{snip}
Last Updated 10/28/2003 communications@FDIC.gov

and there you have some direction... :idea:

As I read it you should DEFINITELY disclose the prior assignment... and state that it is in fact a NEW appraisal, even if using the prior effective date... which I'd be REAL careful to disclose... if you went that way. The directions are not crystal clear but the intent of the above, and potential additional scruntiny on the report should give an appraiser pause.

 

[Ross (CO)]

alex, ..... The questions you pose at the end of your posting are the very land-mine issues that would have been, and should have been, completely cleared out by the introduction of AO-26 and support from that FDIC memo ! Why should any of us re-visit the past, and dredge up the same scenarios that were so conflicting througout all of the past two years. We all remember the countless postings entered by participants in the Forum regarding the re-issue, re-assign and re-type requests that bombarded appraisers across the land. The subtle guile lurking in the background is that Client B thinks they are "doing US a favor" by giving us an "easy" assignment, you know, just change the names around so that we can be equally dependant on your liability if things go wrong....blah, blah...

To avoid wasting everybody's time, and eliminate a need to spend more money (the fee for a "new" report) just let these two lending entities exchange the prior report between themselves.......and do not even call the appraiser. They are big boys and girls. I am sure that the user/client of the original report would be willing to "handle" any issues for Client B if the future foretells a changing story. Short of that, let Client B order another NEW appraisal, with a legitimate document to speak to client, use, purpose, suggested scope, etc. etc......and do not put Doug into a position of having to consider whether he needs to employ special wording regarding ANY acknowledgment or existance of that other OLD and PRIOR report done for somebody ELSE, and the effective date shell game. Why can't many of these clients just stop trying to twist and flex and re-fight the old wars which we thought we had "won" not so long ago !

Sorry, ranting here, I am sure it will work out just fine.

 

[Mike Simpson]

"Sounds like the guy just wants to get a copy of the report, which he intends to get and use for free. He'll get no cooperation from me."

Assuming you're allowed to do this...

...I wouldn't charge full fee but, just enough (IMO) so they'll still be willing to pay you. The person wanting to use your appraisal at no cost will have to weigh your reluctance to just do as you're told, against having to pay another appraiser full fee.

I just went through a similar scenario a couple months ago...it was a "retype" situation: I explained the rules in writting & the lender pretended to understand & agree. The problem arose when I informed both the borrower & the lender that there would not only be an additional fee but, it was gonna have to be paid COD.

They both thought they could pressure me into delivering a report before I received payment...they thought wrong.

-Mike