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Client request. Any Suggestions?

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The Sheriff

Thread Starter
Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Arizona
Completed an FHA manufactured appraisal WITHOUT completing the cost approach on 10/3/2007. I did include the site value for land as $80K. I have since ended my partnership at the prior firm and opened my own firm on 12/1/2007. Considering this appraisal was done back in October and not for this current assignment (and also while I was at my old firm), what options do I have? Personally, its a new assignment they are requesting because they are doing an FHA streamline loan today and it has nothing to do with my original report (besides a pushy insurance company wanting a cost approach). This client does send me a lot of work... however, values have since declined by at least 8-10% since the report was completed in the area (if not more). What would you do? Bueller?


Here's a copy of the email between the clients before it got sent to me (in order):

Lyla,

You forwarded me an appraisal for the Thorpe's at 2XXXX N. 37th Ave. The appraisal does not have any site values on page 2 of 7. The company we have them with WILL NOT increase the dwelling coverage until we have another appraisal with those values.

Paula XXXXX



John,
You need to follow up on this. Please get your appraiser on this file to complete the site value information on the appraisal the he completed for the last time we refinanced this borrower. Needs to be completed ASAP!!!!!!!

Lyla



John,

The insurance company will not up the coverage to include replacement cost, unless she sees the cost approach analysis that the appraiser usually does for each property that they appraise. This is on the appraisal that was done on the previous Thorpe loan.
This has nothing to do with the current loan, except that the insurance company will not up the coverage unless we provide them with proof as to the value of the property.

James XXXXX


Michael (Me) -

Can you take care of this - if you are unsure what needs to be done - please call Lyla - I am trying to get doc's out on this (FHA Streamline).
This is a rush.

John




 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
Sheriff,

If I follow this right, the original loan closed and your job was done. It is also true that the FHA appraisal stays with the property for a period of time and during that period, a new appraisal would not be accepted by FHA.

So, I think that until that time is up, they can't order a new appraisal.

So far so good.

However, their stated use for their new request is for insurance value. The cost approach to market value that is included as one of three possible approaches to market value is not the same thing as insurance value.

If the client wants insurance value and you wish to peform a new assignment for that, it would not need to be a part of a market value appraisal but could be done separately as a new assignment.

The lender (even a good client) needs to suck it up and get the insurance value estimate from the insurance company.
 

The Sheriff

Thread Starter
Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Arizona
Marcia... What is the nicest way to tap dance around this with the client without denying them altogether. I know we both know the insurance companies try to utilize our cost approach... but the lender is going to insist on me reopening that report. The report was in my old company's name (so I figured I could use that as my out... although I know the appraisal is mine).

The comment that irks me the most is: "This has nothing to do with the current loan, except that the insurance company will not up the coverage unless we provide them with proof as to the value of the property."

That was the old value of the property... not the new value today.
 

stefan olafson

Senior Member
Joined
Apr 2, 2003
Professional Status
Certified General Appraiser
State
North Dakota
Sheriff,

The nice way is to tell them you are not competent to arrive at a value by the cost approach for insurance purposes. You are a fee appraiser specializing in the appraisal of Real Estate, not an insurance agent. Let the client go to the insurance industry to get the value.

The other nice way is to inform them you will accept a new assignment, strictly to provide an opinion of value based on insurance value, not market value and that you probably should take a class somewhere prior to completing it to make sure you are competent. Make sure your fee is large enough to pay for the class also.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Even Marshall & Swift has a separate cost estimator for Real Estate Appraisal building costs and insurance costs.

It's the job of the insurance company to do their own cost estimates for their own insurance coverages. NOT the Real Estate Appraisers job and "I am not a licensed insurance agent".
 

Patti Jury

Senior Member
Joined
Mar 23, 2002
Professional Status
Licensed Appraiser
State
Colorado
In my Cost Approach I always add a statement to the effect that "The Cost Approach Method is not intended to be used for Insurance purposes".

As all have stated...It is up to the Insurance Company...
 

The Sheriff

Thread Starter
Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Arizona
I have no problem completing a new cost approach using M & S, however, I will not include it in the new report. They can have at it all they want... however, I will get paid for this information as well as providing a site value. M & S ran me $800... I'm going to at least get $50 of that back.
 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
Sheriff,

I guess the nicest way is to offer to do a new stand alone assignment for insurance value. Be sure to use the insurance value section of M&S and be sure to get a definition of insurance value that is used by the insurance company in question. There is different liability associated with that.

And, I suppose you are already aware that there is liability associated with doing a cost approach to market value when the client needs and has asked for insurance value.

I don't suppose there is a nicest way to explain that you can't re-open the old report. It's too late to change the scope of work on that completed report.

What the client is asking for is not a correction of an error in the first report, what they are asking for is a new assignment with a completely different scope of work.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
In my Cost Approach I always add a statement to the effect that "The Cost Approach Method is not intended to be used for Insurance purposes".

As all have stated...It is up to the Insurance Company...

Ms. Jury,

That's nice.... But that is NOT a solution once a client comes back to us, after the fact, specifically stating that the intended use is for INSURANCE VALUE.... We cannot accept a SOW for Insurance Value and then attempt to "disclaim" our way out of not complying with the SOW we just were asked to do and agreed to.

Or good luck with keeping your E&O in force when pulling that little stunt.

Webbed.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Sheriff, don't know what to tell you. Either do it as a consulting assignment, or tell them NO.

Personally, I won't use an insurance agent who is so incompetent that they can't do their own cost for their own underwriting.
 
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