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Client and intended users

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moh malekpour

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Joined
May 25, 2002
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Certified Residential Appraiser
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California
Clients and intended users often are the same when the intended use of the appraisal report is mortgage loan transaction only and the intended user is a regulated lender but when client is a broker who is the agent of several regulated lenders and may take the appraisal report to several lenders for approval, how are you going to specify the intended users? The one that you put in the report may not be the intended user that the report ends up to. I suppose, regulated lenders accept appraisal reports with intended users of another regulated lenders or it is better to put a general phrase such as federally regulated lenders as intended users of the report.
Moh
 

Jo Ann Meyer Stratton

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Jan 16, 2002
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Certified Residential Appraiser
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Arizona
The client that orders an appraisal, whether the actual end lender or the originating mortgage broker is the both the client and intended user. The purpose and intended use of the report is for a mortgage transaction The mortgage broker's intended use is to find a lender for that mortgage transaction. Whichever lender is able to make a loan based on the applicants credit history, employment history, type of property, appraised value, etc, etc, is able to use that report (with the broker's name as the client) if they have a review process in their company. The final lender does not have to be named as the client. Once the appraisal is sent to the original client, that is the only client the appraiser deals with. If the underwriter for the final lender has some questions or additional requirements for that specific report, that underwriter has to channel their questions/requirements through the originating broker to the appraiser. The appraiser cannot respond to the final lender without permission (I require it to be written) from the original client.
 

moh malekpour

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Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
Jo Ann:

There is neither ambiguity about the client nor any about the intended use of the report. The question is intended users of the report, as we ought to put the intended use and intended users in the there. If your client is Broker A, whom do you put as intended users in the report? Broker A? Any lender that the broker A intends to take the report to? Broker A and any other lender? Or a general term such as any regulated lender?

Moh
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
The statements I have on the USPAP Compliance Addendum attached to all my URAR/2055 is as follows:

"The purpose of the appraisal is to offer an opinion of market value for the subject property as defined herein. The intended use of this appraisal is to assist the client named in the report in evaluating the subject property for a mortgage finance transaction only and is not intended for any other use or purpose. Use of this report by others is not authorized or intended by the appraiser, the appraiser assumes no olbigation, liability or accountability to any third party."

One client requires the specific following wording: "This report is intended for use by XXXX for loan purposes and is not intended for use by any other party or for any other purpose."

Typically when a mortgage broker or client orders an appraisal, they do not disclose whether they will do the funding themselves or will be seeking funding from a different source. With the wording I use, my liability is only to the client that ordered the appraisal, nobody else. But once they have received the report they can process it any way they want--throw it in the trash can, fund the loan themselves, reject the loan application, try to obtain funding from a different investor, etc. A different lender can use that report without their name as the client if they meet other criteria that has nothing to do with me. But they cannot contact me directly and I cannot respond to them about that specific assignment because they were not my client. I am attempting to limit my liability. Any thing else is the client's problem. If broker A uses the report to get funding from lender B, that transaction is their responsibility, mine ended with broker A. And since I am not an attorney or liability insurance adjuster or USPAP guru--I sure do hope that is what I am accomplishing!!!
 

Terrel L. Shields

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Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
My reports include the following statement


The Client [and any intended user] is the sole intended user of this report. "Parties who receive a copy of an appraisal...as a consequence of disclosure requirements applicable to an appraiser's client do not become intended users of the report unless the client specifically identifies them at the time of the assignment." [excerpt from USPAP Statement 9]

Intended User:
The Client is the intended user of the report.

Borrower:
The borrower is zzz and has not been identified as an intended user of this report.
 

Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
8)

Hate to throw cold water on some of you're wording but............the client is not always the "client" named in the report. Example:

On a VA Appraisal the VA is the client, the client named in the report as well as others who are authorized to receive, make VA loans, or engage in VA underwriting may become an intended user. I am doing a final inspection on a property tommorow for a "client" that is not named in the report but has had the report transferred to them(no name change on the report), and will close the loan with my final report(inspection), report still in another "clients" name. This is the way VA has authorized VA loans to operate, and VA is the client. Yes, I will disclose this in my final report that will become an integral part of the report.

Also, FHA is the client in an FHA appraisal and the "client" named in the report is an intended user. Works a lot like the VA example with some difference.

With the change next year in the 2003 USPAP, the "appraisal" will become the intelectual property of the appraiser. The "Client" will own the report, done for them based on the appraisal. Along comes another lender and wants a recertification of value or update(terms will be meaningless in 2003 USPAP), you tell them "what you really are asking for is a new assignments", I can do that based on the appraisal that I own of that property, and my fee will be........$zzz.XX

My suggestion is to clearly identify by name or type the intended user, and the intended use. However, with the changes referred to, almost any entity can become an "intended user".

Suggestion........get a copy of the 2003 USPAP as soon as possible, and in the mean time get a copy of the approved(adopted) changes to the idea of an update of an appraisal.

Don Clark, IFA

Overheard in my local barbershop.........."It's good to have money, whether you are rich or poor".
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
I don't do VA appraisals, but my comment is different for FHA assignments.

"The purpose of the appraisal is to offer an opinion of market value for the subject property as defined herein. The intended use of this appraisal is to support the underwriting requirements of a FHA insured mortgage and the use is to support FHA';s decision to provide mortgage insurance on the subject real property. The intended users include the lender/client named above and HUD and is to be used for FHA insured mortgage lending purposes only." (wording from the 4150.2)

I went digging in my file cabinet and found a "Claim Alert" issued by the Appraisers Liability Insurance Trust several years ago. It has several suggested comments to use in a report and stresses that an appraiser should not rely on preprinted forms, etc but make sure to take the time to include their own limiting language clauses because each appraisal is unique and individual. Following are some of their suggestions:

"This appraisal report is prepared for the sole and exclusive use of _________ to assist with the mortgage lending decision. It is not to be relied upon by any third parties for any purpose, whatsoever."

"This appraisal report is prepared for the sole and exclusive use of the appraiser's client ______________. No third parties are authorized to rely upon this report without the express written consent of the appraiser."

"This appraisal report is prepared for the sole and exclusive use of the lender ___________ to assist with the mortgage lending decision. The appraiser is not a home inspector. This report should not be relied upon to disclose any conditions present in the subject property. The appraisal report does not guarantee that the property is free of defects. A professional home inspection is recommended."

And yes, everyone start making plans to take a USPAP class in 2003 from a certified USPAP instructor. Find the Appraisal Foundation web site, start reading the exposure drafts and any other additional information you can find.
 
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