(Cont.) failure to Disclose Prior Appraisal- now what to do?

[al66pine]

Continuation ---Failure to Disclose Prior Appraisal

Possibly Extraneous re my earlier post's question but…. thinking about consequences for us of non-disclosure
If appraiser had disclosed he appraised home a year earlier, we would not have placed appraisal order with him
(on supposition he would not veer far from his year-prior appraisal, esp. as a re-fi, which forums suggest,
even state, are sometimes more “elastic“ than is credible and reliable.
We don’t mean to paint with a broad brush, but can see 2nd appraisal in 12 mo.
could put an appraiser in a somewhat awkward or defensive posture.)

You may know N. Mex. Assoc. of Realtor’s “standard” SFR resale contract clause provides
that if appraised MV < contract price, then, even w. cash purchase ( I think like 3rd party-financed purchase)
1. Seller can drop price to appraised. MV,
2. Buyer can come to closing table with contract price amount, or
3. Buyer & Seller can meet between appraised amt. and contract amt.
OR if none of the above, Game over, earnest $$ is returned.

We have report by Appraiser-Who-Violated (it seems)-USPAP-Rule-Before-Even-Starting-Assignment-or-Finishing-Assignment.
Per R/E contract, we had only a few days after receiving appraisal to respond, negotiate with Seller.
Not enough time to order appraisal, etc. from other appraiser.
As to the not-yet-closed contract, we have lost opportunity to reach new price w. appraisal done by appraiser
who does not repeat this same action. Based on our gut feel for house, may be “overpaying“ some, but may go ahead with it.
If other appraisal wld. show, say, $300,000 or $305,000 MV, …
well…annoyed at best, if we pay $337,000 per contract.

We realize appraisal is art-science-experience hybrid, not a chemical formula.

:icon_question:
Is our situation one of those USPAP Disclose-Prior-Services Ethics Rule targets?
So appraisers disclose their prior services to “Promote & preserve public trust” etc.
:icon_question:
Anyway, I don’t know if this info --- consequences (for what we perceive as a violation)--- influences your recommendations for us…..
But may be something to think about, in your answer.

In advance, we appreciate your thoughts on this.

 

[hastalavista]

A few questions:

First, who are you in this transaction? The buyer, the lender, the seller?

Second, was the appraisal used for a mortgage finance or used to establish the purchase price?

If the appraiser failed to disclose prior service as required in the Ethics Rule, that is a violation of USPAP.

Letting us know your standing/position in the transaction (buyer, etc.) will help us provide additional feedback on your issue.

 

[al66pine]

Mr. DeSaix

I appreciate your post w. questions; my responses are in blue.
--------------------------------------------------------------
A few questions:

First, who are you in this transaction? The buyer, the lender, the seller?

Second, was the appraisal used for a mortgage finance or used to establish the purchase price?
No loan. Cash purchase.
Under "standard" NM Assoc of Realtors SFR resale form,
---if appraisal MV is less than contract price, and
---if Seller will not reduce price to appraised MV,
then Buyer can opt out of contract and is entitled to return of earnest money.

If the appraiser failed to disclose prior service as required in the Ethics Rule, that is a violation of USPAP.
We read Jan 2011 report (every word) looking for disclosure of prior appraisal, and have not found it.
By USPAP rule, appears, prior-appriasal-disclosure should be part of appraiser's certification page(s). It is not in there. We also have copy of Jan 2010 report with his signature.

Letting us know your standing/position in the transaction (buyer, etc.) will help us provide additional feedback on your issue.
--------------------------------------------------------------------
More info is in my 2 other related posts, marked with green circles and black arrows.
I did not want the question to be longer than War and Peace. (LOL)


Hope this helps you and/or others to respond. Thank you.

 

[Smokey Bear]

Sounds like nitpicking. In appraisal review, we generally start big and work our way down to the details. Our biggest question: is the report credible. Failing to disclose a prior appraisal doesn't affect credible in and of itself. At the other end, there are USPAP violations that have no bearing on the credibility of the report. They might get an appraiser in trouble with the state, but they're not going to get your appraisal thrown out. If there enough errors in the report that, taken together, make the report unreliable, that's a bigger issue. But starting out by finding inconsequential errors or inconsistencies is not the way to approach an appraisal.

We've had several threads lately by consumers that were trying discredit appraisals, focusing on things like 200 SF off on lot size (most appraisers wouldnt' even adjust for a 200 SF lot size difference, so it's not relevant) or small value items not being adjusted (we can't measure market reaction to granite vs. silestone counters) and are included under quality of construction. Underground easements? Unless really obvious, not our problem. That's addressed in the title report. If someone has an issue with it and thinks it effects value, they should provide it to us.

Start by reading the limiting conditions and certifications in the report to see what the report does and does not include. Also, if you were not the client or an intended user, you have very little interest in the appraisal. If you didn't get the appraisal prior to closeing, you can't exactly say you relied on it to your detriment. Every buyer has to do their own due diligence. If the appraisal is ordered by the lender, it's there to help the lender make an informed decision, NOT to help the buyer set a purchase price. Any buyer is welcome to get their own appraisal to protect their own interests. Any buyer is welcome to get a home inspection as well. They should also inspect the property thoroughly themselves.

Appraisers aren't a party to your purchase contract, and having clauses in the contract regarding the appraisal STILL don't make the appraiser a party to the contract. In fact, it is an improper use of the appraisal if the appraisal was ordered by the lender for lending purposes. The appraiser isn't liable for that.

A simple 'reporting' violation of USPAP that doesn't affect the credibility of a report. Even if it had been reported, the bank wouldn't have notified you of it because you're not the client or an intended user.

We don’t mean to paint with a broad brush, but can see 2nd appraisal in 12 mo.
could put an appraiser in a somewhat awkward or defensive posture.)

OR it could mean you have an appraiser who has experience with the house, the neighborhood and the market.

I'm sorry, but it seems like you are grasping at straws here. Markets change. That means adjustments can change. If the market isn't moving quickly, older or distanct comps may be necessary.

If you're really concerned, you can hire a qualified appraiser to review the appraisal. But still, in order to recover anything you'd have to overcome certain issues, such as you not being the client or intended user, (therefore not having standing to sue) and your lack of due diligence on your own part. Once you get over those hurdles, you'd have to prove that you relied on a negligently prepared (another hurdle) apprasial and that the reliance caused you harm.

Like I said, start with the big picture, not the details.

 

[Terrel L. Shields]

It has been the USPAP law now for the second year that you must disclose any prior assignment with the property. I know that it can be problematic to remember to add that since the software does not have an automatic check box for same in the URAR. But it is a fixed requirement. That in itself is not a big violation, but it matters. It especially matters if someone doesn't realize up front that the same appraiser did this property. Neglecting to report it isn't the same issue as neglecting to inform the client BEFORE the assignment is accepted which is the actual requirement. Simply reporting that fact AFTER you are done is not acceptable either.

I always wonder what else gets glossed over and it might be one to take to the board. But if you have attempted to reason with the appraiser, the board might side with the appraiser under the assumption (correct or not) that you are only trying to pressure them to change the report.

It might be best to simply "eat" another appraisal cost and get a second opinion from someone who hasn't appraised the property before and then see how far off the first appraiser was or wasn't.

 

[Smokey Bear]

I'm curious as to how you got the prior appraisal and when..... Did the appraiser give it to you?

 

[Randolph Kinney]

al66pine,

First, the appraiser has a duty to tell you before he accepts the appraisal assignment, that he has performed a prior service on this property. That also gives you the knowledge and the right to pursue the details of that prior assignment if it can be disclosed with out violating confidentiality. Ultimately, that becomes part of your decision making in choosing or rejecting the appraiser, for whatever reason.

As the buyer, how did you come to know or choose this appraiser? How many appraisers did you talk with before selecting this appraiser? What questions did you ask of the appraiser during the interview process?

If you don't have confidence in the appraisal, that it truly represents a credible opinion of market value, have you considered suspending the closing of your purchase until you get another opinion?

 

[hastalavista]

Al66pine:

I read your other posts.

I have a slightly different read than my esteemed collegues (Smokey and Terrel).

In regards to the prior service:
USPAP is clear. And, this new part of the ethics rule is intended to avoid the situation that you find yourself facing. The appraiser is required to advise the client prior to providing the service and then disclose the service in the report.

The term "client" has a very specific meaning as far as USPAP and appraisers (you obviously have read portions of USPAP; look up the definition of "client"). If you are identified as a/the client by the appraiser in the report, then you should have been advised of the prior service.

In my opinion, it really doesn't matter if you happen to like the value or don't like the value; in fact, the value is meaningless in this issue. Advisement is supposed to take place prior to acceptance or as soon as the appraiser realizes that a prior service took place, and again in the report. That did not occur; that is a violation of USPAP. Does it mean the value concluded is not credible? I don't know. It does mean that the report is not USPAP compliant.

Now, as to the other issues in your other posts:
A. Effective age differences is a non-issue in my opinion.

B. Lot size adjustments are based on market reaction; should the 1-acre comparable be adjusted for its lot size difference? Maybe. But, if not, I think given the intended use and users, the rationale should be explained sufficiently so that one can understand why (you may not agree with no adjustment, but you should understand why no adjustment was made).

C. Troublesome to me is what you mentioned about the report and the range of sales being the same as the last appraisal. What you are referring to (I believe) is found at the top of page two on what is called the 1004 form. The 1004 form is specifically designed for use by lenders in a mortgage-finance transaction and its intended user is a mortgage lender. Some might argue this is not significant but I disagree. It goes to the credibility of the appraiser's competence in communicating the results correctly to the client and intended users.

So, the adjustments (which may or may not be credible) are not the real issues as far as I'm concerned. The significant issues are:
A. If you were the client, you were not advised of the prior service.
B. Regardless if you are the client, the prior service is not noted in the report.
C. A & B are USPAP violations; a violation of a rule that is explicitly designed to eliminate questions of bias which are now being raised.
D. The reporting format, if reported on a 1004 form*, is not appropriate for this type of assignment.

(* I don't want to get too technical. If the report was communicated on the 1004 form and includes a signed, pre-printed certification which describes and identifies mortgage lenders/mortgage loans as intended users/intended use, then the certification is inaccurate which potentially (there may be some added-on statements that modify what is pre-printed... which can be an issue in itself) creates additional USPAP issues; an issue which would require the appraiser's regulator to ultimately decide).

You can argue with the seller that the appraisal is not USPAP compliant. They may or may not agree. How you resolve it, I'm not sure. If you can mutually agree to have another appraisal completed by someone who has not previously completed a service on the property, that might be best.
If it were me, I'd ask the original appraiser to give a refund on the fee to be used to pay for the new appraisal, since the appraisal that he/she completed is not USPAP compliant and (I'd argue) cannot be used for the intended use.


Others on this forum may disagree with my analysis.
I wish you good luck!


As an aside, I received two calls today from private-parties wanting appraisals. In each case we discussed the purpose, intended use, etc., etc. As is my practice, I quoted my fee and suggested that if they want to call around for other bids, they make sure that the appraisers they interview have experience and understand the difference between completing an appraisal for a mortgage lender (the vast majority of our residential business) and for a non-mortgage finance/private party purpose. I also tell such parties that my fee may seem higher than most (and it is), but that I'm writing the report to communicate to non-real estate experts how the value is concluded in a manner that can be understood without any expertise. It is more work to communicate the report to a private party than it is to a lender whose primary business is residential mortgage lending; therefore, I charge more for that additional work.
So, if you do get another appraiser, make sure you interview that appraiser and are satisfied that their level of appraisal competence is not limited to mortgage finance appraising only (and, share with them the experience that requires another appraisal; if it makes them shy away from the assignment, that's good for you.)

 

[al66pine]

Pay full fee? Write to st. bd?

Thanks for your comments to all.

I started 3 threads with related, but separate questions.
Maybe s/not h/done it that way, because some basic info is not in this thread.

We are cash buyers, so we understand we are the "client." No loan.

Yes, this may be nitpicky about failure to disclose prior appraisal.

Smokey Bear, This thread is not about "recovery" re prop value.

This thread and my first thread discuss--

----whether to pay him full fee? No fee? We placed order, don't know that title co. can/will/would/should pay him, without our approval.

----whether to write to st. bd, because of failure to disclose.

I see many appraisal issues are art-science-experience hybrid,
so are subject to appraiser's interp. & experience, and attention to "your market."
Many shades or degrees, and interpretation.

Written failure to disclose is clear cut, documented here.
No weaseling about it.

:icon_question:If there is no consequence for ethics rule violation,
---will this appraiser do this again to somebody else?
---will he think about how to prevent his doing again?
---will forum appraisers think about whether their offices have procedures in place to detect and identify prior appraisals, and prevent violations like this?
I don't want to have the appraiser horsewhipped, deported, put in exile, excommunicated, or run out of town on a rail, or guillotined.
I know this is serious stuff-- writing to a st. licensing bd. and I don't want to do it frivolously.

Hence the questions to you, his peers.

----------------------------------------------------------------------
My OTHER thread titled "Is this reliable, credible report?"
asks questions about RPT. CONTENT, that is, info and his ANALYSIS.
In combination w. failure to disclose, rpt. may be something to write st. bd about.

Those of you who have done reviews could undoubtedly provide comments or feedback about the rpt content and analysis in my other thread.

Thank you for taking time out to give benefit of your experience.

 

[Webbed Feet]

al66pine,

First, the appraiser has a duty to tell you before he accepts the appraisal assignment, that he has performed a prior service on this property. That also gives you the knowledge and the right to pursue the details of that prior assignment if it can be disclosed with out violating confidentiality. <.....snip...>

Just for any of the public that reads this far. Sure, you can "pursue" all you want. But the appraiser does not have to answer anything at all if the appraiser wants to just turn down the assignment. Even if the appraiser wants the assignment, all they are obligated to answer or disclose is that they performed a service prior and generally what it was. Nothing more.

Sample Disclosure: "I performed a prior service involving the property in the last three years, It involved appraisal practice."

That is it. The appraiser has no other obligations to disclose anything more. Or should we disclose more, it has not been defined nor disclosed to us in the USPAP that we must. However, it certainly has been included as a prohibition in the USPAP that we cannot disclose some issues, opinions, analysis, or conclusions.