Charging for "trip fee" only ethical?

[Doug in NC]

Some appraisers work with lenders with the agreement that, if the value isn't there when the appraiser gets to the property, then the appraisal will be stopped and a trip fee only is charged. Is this ethical? If so, how do you justify it? Isn't this the same thing as deciding to accept or reject an appraisal order because the value is or isn't there? :?: :?

 

[Ray Ohler]

ETHICAL at least in my book. Depending on a lot of things, and I don't care how "well" you know your market, unless its a cookie-cutter house with nine recent sales on the block or in the subdivision in a tight range and the value they "need" is out in left field. Either the client wants an appraisal or they don't.

 

[Will Granger]

Doug,
This is always sticky. I've gotten to the point that all the requestor saves is my printing and a stamp. You might go up $50 on the regular appraisals and charge half for a "dud." Yeah, right... Good luck my friend.

 

[Jeff Horton]

Isn't this the same thing as deciding to accept or reject an appraisal order because the value is or isn't there?

Maybe I am missing something but I have a broker that I worked something out trip fee's with a while back. When it is obvious the value is overstated I advice them before I start.

I have one on my desk right now that falls in the category. The loan amount requested is over the value of the property. Due to the rural nature of our market there is no way to know this till I see the home. Once I did my inspection it was obvious without even looking for comps that this was not going to fly. I came back and looked through the sales to make sure I was not mistaken and I called my client and told him to forget this one and that’s that.

Have I appraised the house? I am not sure but I don't think so. In this case it was obvious that value was not there. I never stated a value or was I asked to hit a predetermined value. I realize that you can argue that I have appraised it by telling them that they are not even close in value but I don’t feel I have.

Now if the value is going to be close to what they are they looking for I do the appraisal and bill them. I only do this when there is an obvious problem in stated values. Otherwise they asked me for an appraisal and they get an appraisal.

 

[Farm Gal]

Doug:

I have NO smypathy and a fair amount of disgust for anyone who signs such an agreement with a lender/client. :x

I have on many occasions stopped an appraisal after a site visit: my ethics are not in question, as it is usually a clear case of the property not meeting lender minimum physical condition requirements.

I have also with not a qualm, changed an accepted appraisal assignment after inspection to a site inspection fee for reasons of 'significant cosmetic issues which preclude a normal valuation of the home' which is my fancy way of saying the thing is a real dump on the inside and possibly outside and won't make anywhere near the expected value.

IF I make that second choice (without ever voicing a value or even a value range other than the 'nowhere near expected') it is because I chose to do so. I usually see an older inhabitant with a row of medicine bottles perhaps a wheelchair, and possibly an oxygen bottle in the corner. Business decision on my part. And I have broken no ethical rules.

Other clients (some after a LOT of education from little old me) have taken to asking that they get a courtesy call if the property will patently not make their estimate of value, and then go ahead and complete the assignment. I have no ethical problems there either.

I think that educating these clients (since you weren't going to stoop to working for them anyway is only fair.... as long as you do it on their long distance call.... :idea:

 

[JWBourgeois]

When you estimate a home's value, whether you come up with a specific number or determine that it is worth less than a specific amount, you have appraised that property.

Accepting a trip fee because the value estimate, in whatever terms it is couched, is too low for the loan to fly is a violation of USPAP. You have just agreed to let your fee be determined by the value. It is unethical, wrong and bad business practice to engage in this kind of idiocy excused by sophistry of the simplest sort.

Appraisers who do this encourage lenders to exert pressure on all appraisers. You may be helping yourself with a particular client, insuring that you get the lion's share of business in your coverage area, but you are performing a disservice to the profession and to every other appraiser in your market and elsewhere, too.

I am a professional and peform a professional service for my clients. I am not a loan facilitator, I am an appraiser. It is not my job to cover for ignorant, greedy loan originators who are too damned lazy to make the necessary effort to determine whether an appraisal is justified. I am not going to lose my license or get reprimanded for breaking rules we all are supposed to know and follow.

We all need to inform our clients that if they are unsure of whether a property's appraised value will be sufficient for a loan, then they should either find a realtor to do a BPO, or drop the deal. I tell my clients that if I go, I get a full fee, regardless of the value. If that doesn't work for them, they can call someone else. And, guess what, there are always guys (and gals) out there who are willing to do whatever it takes to get that lender's business.

 

[Pamela Crowley (Florida)]

I agree 100% with JWBourgeois

 

[jtrotta]

JW, will agree with you also, as established with my current client base, send what you like, when I begin research the meter is running.

There has been many a discussion regarding Fee's on here, and if you don't want to work for peanuts, shore up your business practice. It's YOUR business, run it like any other "millionaire" would - "Time Is Money" make the best use of it :!:

:?: when was the last time any of you took a cab and asked the driver if when you get to your destination & the people aren't home, that you don't want to pay for the trip; what do you think his/her response will be :?: Opposite of the millionaire, but similar, don't you all think :idea:

 

[Ross (CO)]

O.K., so what is a sincere and fair trip fee ? Most clients would probably like to believe that your entire appraisal process STARTS with the home inspection.....then continues from there. Little do they know that very likely 50% of you time could have been invested up-front with research of county records and MLS sales, and driving out to the subject, taking those 3 photos, measured the exterior.......and then you walk inside and see the filth, the dis-repair and the numerous on-going "projects" which no "typical buyer" would find attractive or appelaing ! I had one recently, just like that, and fortunately only about 8 miles from home. I proceeded anyway and gridded it all out. What was I really to do ? Non-chalantly go back out to my car and call the client ....and simply drive away, or does one go back inside and announce to the h/o that you are "done". This client wants anything >10% cost-to-cure to be that red flag. How do you actually and completely conclude cost to cure on total ugliness and a poorly-skilled h/o's attempt to "do it all himself" and never get anything done ? The report was cancelled by the client after they read my addendum page. Get this !....the nicest place in the house was the corner of the cracked-walled basement where he had all his tools hung up nicely on a pegboard wall, no lie. If I was ever driving far from home, and experienced that, I would raise a big stink about a measely $50 "trip fee", to the extent that it might be the last order I got from them. Real close to home, maybe trip fee tolerable....far from home and the game changes.

 

[Anonymous]

JW got it right. Read USPAP, starting at line 328 in the Management section. If i receive an order that states "call if value not there" I call before I accept the order. I read USPAP to them. Then I fax them a copy of it. I tell them I will be happy to do the appraisal, but not under those conditions. I also tell them that I do not know what the house is worth until I have compelted the assignment. The only thing left for me to do once I know the value is to sign it and send it to them.

I do however charge trip fees. If I go to a property and know the lender wil not lend on it do to their guidelines, ie. many in our area will not lend on a singlewide, homes that need major repairs, etc. In these cases, I stop, call the lender, advise them of what the house looks like or is and charge them a trip fee. The difference is, such as a singlewide, all I have done is drive to the property, I dont even do the inspection.

Back to USPAP, has anone else noticed that in the line I quoted above, it is perfectly ethical to accept these assignments if you dont get paid? Read it. I have suggested to the ASB several times that the wording be changed to : " It is unethical for an appraiser to accept an assigment ..." Although, I guess this could be covered under line 301, which would also apply to the above senario.