Changing borrower name issue:

[J Grant]

AI Overview


Changing a borrower's name typically does not require a new appraisal assignment if the lender/client remains the same, as it is considered a clerical update rather than a change in the scope of work. However, if the lender (client) changes, or if the loan purpose changes (e.g., from refinance to purchase), it must be a new assignment under USPAP guideline

 

[Brian F]

Look at the scope of work rule in USPAP. They talk of "assignment elements" which include things like:

The six key elements for defining the appraisal problem are:

1. Client and Other Intended Users: Identification of who requested the appraisal and who is authorized to use the report.
2. Intended Use of the Appraisal: The purpose for which the report is being produced (e.g., lending, tax appeal).
3. Type and Definition of Value: Establishing the standard of value, such as market value, liquidation value, or investment value.
4. Effective Date of the Appraisal: The specific date for which the valuation applies, which can be current, retrospective, or prospective.
5. Property Identification and Characteristics: The subject property, including physical, legal, and economic characteristics.
6. Assignment Conditions: Any special conditions, such as Extraordinary Assumptions, Hypothetical Conditions, or Jurisdictional Exceptions, which might limit the scope of work.

If any of those change, it has to be a new assignment per USPAP. If not, there is no requirement for a new assignment.

I'm also curious as to why they wanted to change the borrower's name now; they could have done it prior to my completion of the appraisal report. It's now almost 3 months later, and they are still sending over new budgets for me to analyze, along with this new name change. I mean, I've had name changes before. Like, add the husband to the borrower names, take him off, put the borrower in all caps, oops, change it back to non caps, spell it like this, take out the middle initial, you know, stupid things like that. But I've just never had a lender ask to change a company name of LLCs, one that isn't even on the title to the property. By the way, it is not a purchase; it is a rehab loan. Burned home, multiple budgets out the wazoo. Just wondering if I'm still going to be dealing with their revisions till the end of June. Thanks for the pointers.

 

[Brian F]

Here is the reason I was asking real humans about this because I was using an AI assistant to ask the question and here is what it told me:

The primary issue with the LLC request is that Standard 1 of USPAP requires an appraiser to identify the client and intended users at the time of the assignment. Since the LLC did not legally exist as of your effective date, it could not have been a party to the assignment at that time.
Appraisal Institute +1

The LLC and the Effective Date

• New Assignment Required: Simply "swapping" or readdressing a name on a completed report is a violation of USPAP. Changing the borrower to an entity created after the fact constitutes a change in the assignment elements, making it a new assignment.
• Misleading Report Risk: Naming an entity that didn't exist on the effective date as the borrower/user is inherently misleading. Under Standards Rule 2-1, a report must not be misleading; backdating a relationship with a non-existent entity violates this core principle.
• Inspection Necessity: Whether a new inspection is required depends on the new "effective date" requested by the client:
  • Same Effective Date (Retrospective): If they want the original date, you cannot technically name the new LLC without using a Hypothetical Condition (stating the entity existed when it didn't), which is rarely appropriate for a standard loan.
  • Current Effective Date: If they need a current date to match the new LLC's existence, a new inspection is typically required to verify the property's condition has not changed since your last visit.
    National Mortgage Professional +8
    
    Up until I posted this question, this was the advice I found. Not completely happy with the AI response, I posted here to see what's what.

 

[Brian F]

Calling it a new assignment fine change Name and signature date and be done. Personally we didn't charge for that it's a simple revision and you normally want to keep a potential client. The USPAP police aren't coming just document your work file that lender changed borrowers name to LLC.

It's not just the name change; they sent a new, completely different budget than the one they had me analyze before. Right now, I'm on my 4th new budget from them. There are still missing items in the budget, like permits, inspections for plumbing, electrical, HVAC, etc. This is a gutted home, down to the studs on the inside, that had a fire. But now there is no electrical, no plumbing, and none of the 4 budgets accounted for any permits from the city or city inspections for electrical, HVAC, or plumbing. To assemble a kitchen, their budget was $4000. I guess that was supposed to include cabinetry, countertops, and appliances. Their budget for plumbing fixtures for the whole home was $400. Every new budget they send me keeps going higher in value, and I have to reword a lot of my appraisal to accommodate the new budget, so no, it is not just a simple thing with this lender. I'm assuming that the owner or lender knows very little about budgeting to rebuild a home from the studs in. So far, the range on their "Budgets is about 35K.

 

[Sadie]

AI Overview


Changing a borrower's name typically does not require a new appraisal assignment if the lender/client remains the same, as it is considered a clerical update rather than a change in the scope of work. However, if the lender (client) changes, or if the loan purpose changes (e.g., from refinance to purchase), it must be a new assignment under USPAP guideline

I think the point is that particular borrower did not exist as of the effective date of the appraisal.

 

[Carnivore]

You got your answer here that's a good thing

Depending what AI source your using can make a difference, I use AI-Copilot at the bottom of the response it shows it's sources and you can look at the sources to see if it is credible and or has more details


In regards to hard money lenders well yes they can be demanding, I have two and honestly they are good and THEY PAY WELL, Way better than some conforming lender who uses an AMC
Just my take

 

[JTip]

'Client' is addressed in USPAP, but not 'borrower'.

 

[J Grant]

I think the point is that particular borrower did not exist as of the effective date of the appraisal.

An LLC is not a person; it is a corporation that people set up for tax or some other purpose. The borrower likely is the original person, but for some business or legal reason, decided to use an LLC name to purchase. Just disclose it and move on.

The borrower is not the client.

 

[Surf Cat]

It's not just the name change; they sent a new, completely different budget than the one they had me analyze before. Right now, I'm on my 4th new budget from them. There are still missing items in the budget, like permits, inspections for plumbing, electrical, HVAC, etc. This is a gutted home, down to the studs on the inside, that had a fire. But now there is no electrical, no plumbing, and none of the 4 budgets accounted for any permits from the city or city inspections for electrical, HVAC, or plumbing. To assemble a kitchen, their budget was $4000. I guess that was supposed to include cabinetry, countertops, and appliances. Their budget for plumbing fixtures for the whole home was $400. Every new budget they send me keeps going higher in value, and I have to reword a lot of my appraisal to accommodate the new budget, so no, it is not just a simple thing with this lender. I'm assuming that the owner or lender knows very little about budgeting to rebuild a home from the studs in. So far, the range on their "Budgets is about 35K.

The name change wasn't bothering me as many here commented on. However, the assignment conditions, budget changing, lack of permits, is a concern in concluding a hypothetical, proposed completion value.

Is the assignment for a proposed, ARV (after repair value)? Does the area you are appraising in require permits and C of O's ( certificates of occupancy)? Who is determining the structural integrity and safety deficiencies of the dwelling due to the fire?

You have to spoon feed some hard money lenders with the requirements of doing such an assignment. For example, you need approved plans and specs, stamped from the building department, you need a materials list with the costs, inspections, and an entrepreneurial percentage cost. If this is even feasible. All this information leads you to the comparables that you'll choose.

This is the beauty of doing proposed construction appraisals. If they don't follow the plans and specs and use the materials, get the safety inspections, they say that they're going to, and don't get a certificate of occupancy, all bets are off.

Also, the appraisal is not a living document. It's a snapshot from the effect of date.

When I first started reading your thread, I was like "change the name, document it in the report, change the signing date, no big deal.... then I read your above comment. I now understand why you're apprehensive.

 

[sputnam]

I recently completed an appraisal for a hard money lender. After delivery, I was asked to change the borrower’s name to an LLC. Upon checking, I discovered that this LLC did not legally exist as of my appraisal's effective date—it was formed several days after my inspection.
The Compliance Concerns:

1. USPAP Standards: Since the entity didn't exist at the time of the appraisal, naming them as a borrower/intended user in the original report seems misleading. Would this legally require a new assignment with a new effective date (and a new inspection) to reflect the current reality of the borrower?
2. Assignment Conditions: We’ve already gone through four budget revisions, each essentially changing the scope of work. Now, they want this name change "retrofitted" into the existing report.
3. Communication Issues: Both the lender and the borrower have bypassed the AMC to call me directly to demand these changes, even after being reminded of the contractual communication protocols.

I’m leaning toward treating this as a new assignment. Simply "swapping names" for an entity that wasn't around for the original effective date feels like a violation of Standard 1. Has anyone dealt with hard money lenders pushing for this? How did you handle the "effective date vs. entity existence" conflict without it becoming a USPAP violation?

The borrower is rarely an Intended User. No where in USPAP does it say anything about stating the borrower's name in the appraisal report. That is a lender thing. It's not a USPAP violation to change it. Changing the borrower's name isn't going to have an impact on any part of the appraisal. It is going to be extra time... not much usually... but extra time that you have to spend on the assignment. Your agreement with the AMC is whatever it is... however, is the AMC the Client? or is it the Lender they are acting as an agent for?