Contract Price Change After Effective Date - Client Wants It In The Contract Section

[AMC guy]

I have seen countless threads on this - but no solid answers.

USPAP Standards 1-5 says
a) analyze all agreements of sale, options, or listings of the subject property
current as of the effective date of the appraisal.

BUT

2015-16 USPAP FAQ 137 "Does changing the sale price result in a new assignment?"

Question: I recently completed an appraisal for mortgage financing purposes in a purchase
transaction and delivered the report to my client. My opinion of value did not
support the pending sale price. As a result, the purchase transaction was not
consummated. However, one week later the buyer and seller entered into a new
purchase agreement where the sale price coincided with my appraised value. My
client asked if I can provide a revised report that includes the analysis of the newly
agreed-upon sale price. To provide a revised appraisal report, must I consider the
client’s request as a new assignment?

Response: If the client does not require a more current effective date, USPAP would not mandate treating the
request as a new assignment. However, if the client does require a more current effective date, the
request must be treated as a new assignment.
In this example, regardless of whether the effective date is changed, the date of the report would
have to change to accurately reflect the appraiser’s consideration of the newly obtained agreement
of sale. Because the new purchase agreement was obtained after the date of the first report, the
revised report would need to have a date of report that is the same as or later than the date the new
purchase agreement was obtained by the appraiser.
In addition, the new report would also need to reflect the appraiser’s analysis of the prior
agreement of sale. In the development of an appraisal, an appraiser is required under Standards
Rule 1-1(b), to not commit a substantial error of omission or commission that significantly affects
an appraisal. Since information about the prior agreement of sale is known

If I'm not missing something - USPAP 1-5 is saying one thing (analyze everything up to the effective date), and the FAQ is saying another (analyze changes after the effective date - it's not a new assignment).

So - given that it appears that the FAQ opinion is that the effective date isn't the hard boundary that the USPAP Standard would make it appear - what prevents the contract section from being updated when there is a contract change? The answer I keep seeing is "the effective date". The FAQ seems to indicate otherwise.

 

[PushinValue]

I have not read this before. I used to just write in the text addendum "an addendum was provided after the effective date stating X; no changes have been made to the report other than noting the review of addendum"

Looks like changing the contract price is ok w out a new effective date from above...

 

[gregb]

Subject is inspected 1-1-16, that is effective date of appraisal. Signing date of appraisal is 1-5-16.
Revised contract is dated 1-7-16.
Revised appraisal with new signing date of 1-8-16 is submitted.
Question is, how is the new revised contract treated in the appraisal, since the revised contract is after the effective date of the original appraisal?

 

[Randolph Kinney]

Question is, how is the new revised contract treated in the appraisal, since the revised contract is after the effective date of the original appraisal?

And after signing the initial report too. It can't affect the value conclusion since it was not known or knowable at the time of the effective date and signing date.

 

[Deleted member 80407]

I have never changed the contract price on page 1 of the report because the contract price was as of the effective date. However, I have provided verbiage within the additional comments, that contract price has changed and the new contract price was within the indicated adjusted value of the comps presented.

 

[AMC guy]

I have never changed the contract price on page 1 of the report because the contract price was as of the effective date. However, I have provided verbiage within the additional comments, that contract price has changed and the new contract price was within the indicated adjusted value of the comps presented.

If you revise the report, and USPAP appears to allow you to analyse contract change after the effective date without considering it a new assignment (see FAQ above), than aren't you creating a misleading report if you don't change the contract section - but instead bury the new/true contract price somewhere in your 35-50 page report? Wouldn't it make more sense to change the contract section and explain the series of events in the addendum?

 

[gregb]

If you revise the report, and USPAP appears to allow you to analyse contract change after the effective date without considering it a new assignment (see FAQ above), than aren't you creating a misleading report if you don't change the contract section - but instead bury the new/true contract price somewhere in your 35-50 page report? Wouldn't it make more sense to change the contract section and explain the series of events in the addendum?

In some cases, the original report results in the revised contract.

 

[Peter LeQuire]

"...if the client does require a more current effective date, the
request must be treated as a new assignment."

I read this as being permissive - IF the client wants an effective date on or after the date of the revised appraisal, changing the effective date can be done, which would require the appraisal to be revised, etc. It seems that the "new" contract would have to be analyzed, that analysis being incorporated into the "new" appraisal.

"Question is, how is the new revised contract treated in the appraisal, since the revised contract is after the effective date of the original appraisal?"

The appraiser creates a "new" appraisal with an effective date the same as or after the date of the revised contract. It's certainly the client's/lender's prerogative to want the appraisal to reflect the appraiser's analysis of the contract upon which the transaction will close. (And I can understand a lender wanting the revised contract to be reflected on P.1 of the URAR: again, we're less and less being asked to present page after page of explanation, cogent analysis, or any of the rest of it - we're asked to present a compliance document that lends itself to non-human review.

 

[CANative]

Another example of people mixing USPAP with client/assignment conditions.

The GSEs require their correspondent lenders provide the appraiser with revised contracts to "give the appraiser the opportunity" to analyze it. If the result of that analysis does not change the conclusions or opinions then the appraiser is not required to comment further. Of course, the entire point is for the appraiser to acknowledge that the clients obligation has been fulfilled so all that needs to happen is writing a comment in a dated addendum acknowledging receipt.

This is not a new appraisal assignment. Just issue a revised report with a new report date.

 

[J Grant]

An updated revised contract does not change original effective date of appraisal, nor is it a new assignment. Imo it can be put in the contract section on page one, explain on addendum the original price on terms you had on the effective date of appraisal and when you received new contract addendum, made the change etc, it creates a new signature date.

The latest executed change to a contract whether of price, terms or both, IS a new sales contract. Meaning the former contract is no longer enforceable;no longer a valid contract. Perhaps from client point of view, if we leave the original contract info one page one, they have a problem as that "old" contract" is in fact no longer an enforceable contract, it has been voided by newer date addendum executed with new terms / price change.