Contract Analysis

[Joshua Plate]

I have a question about contracts. The situation is a contract was produced between buyer and seller (not signed by either party) but the price was to be determined after the property was appraised. The appraiser said he needed a price so a price of $430 was placed on the contract. The appraisal came back at $490 and so now they need the appraisal to be updated as the negotiation price came to $484K. The appraiser said that he has to mention the previous contract price even though the original contract was not signed which is raising questions with the lender. The question is Does the appraiser have to mention the previous contract price if the contract was not signed? I would consider the 1st contract as null and void because there were no signatures on it. Thoughts?

 

[Mike Kennedy]

hopefully, "the appraiser" is not you? per above -

If the appraiser accepted an order with any requirement to "hit a number" - USPAP Violation #1

Any active listing, binder, OR contract for the subject occurred during the prior year MUST be addressed in the report. Efforts to obtain a fully executed (signed and dated) Copy of Contract - if copy not provided/available, efforts to obtain same MUST be cited in the Report. In lieu of Contract, copy of Binder should be requested (if available) and cited in the Report.

In the absence of a Binder or Contract, there was no "Binder Price" nor "Contract Price as of the Effective Date of Appraisal. For the appraiser to require an arbitrary price because he "must have a price" is sheerly ridiculous and illustrates his Incompetency under USPAP - Violation #1.

Appraising to "hit the number" on an Active Listing, Binder, or Contract of Sale is misleading and represents violations of USPAP Ethics and Competency. If the appraiser revises the appraisal Value to match the clients request - USPAP Violation #2

Solution: no revision to the Value nor Effective Date nor statements in the appraisal report; appraiser re-opens file, adds Supplemental Comments, with revision date, in Addendum correcting / clarifying the above.

Comment: if the appraiser in this case is a trainee - his supervisory appraiser should turn in his/her license. the trainee needs to find a true mentor. if the appraiser in this case is licensed, and was/is unaware of the above, he needs to rethink his career and turn in his license.

Enough is Enough.

 

[Marcia Langley]

Joshua,

The original assignment was not handled properly.

If the transaction was a purchase, the appraiser needed a copy of the fully executed (that means signed by all parties) purchase agreement.

If a signed contract was not provided, the appraiser should have simply stated so in his report and not included a sales price. In the absence of a signed contract, no sales price exists as of the effective date of the appraisal and the assignment could not be called a purchase.

It sounds like the intended use of the original assignment was to assist the buyer and/or seller in negotiating a sales price. The intended use of the original assignment was not properly identified and neither was the intended user. These are basic assignment conditions and scope of work issues.

It sounds like there is now a fully executed purchase agrement that was not in effect as of the effective date of the appraisal. Only now could an appraisal be given the intended use of mortgage lending.

I think a new appraisal with a new inspection and a new effictive date is called for. I would not charge for it because the original appraisal had errors. Furthermore, I would correct the scope of work errors in the original assignment and re-submit it (carefully identifying the intended user and intended use.)

Some lessons are hard to learn.