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Development in lawsuit/Want 442 to say its OK

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larryhaskell

Senior Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Nevada
Please correct me if I'm wrong. I completed an appraisal that was subject to because there is an ongoing lawsuit involving the development. The lawsuit was included in the purchase agreement. I made it subject to a review of the lawsuit. The LO calls today & wants a 442 because she has a document that the UW says makes everything OK. I respond, if the UW is satisfied why do you need anything from me? The LO says a report can't go forward with the subject to checked. I says, it can if you have documentation that the lawsuit is not a problem. The LO says well I just have the UW call you. I'm now going to get a call from the UW.

My view is, I'm not a lawyer. Even if I read the document, I'm not willing to say everything is hunky dunky. Beyond my level of experties. Am I wrong to believe that the report can go forward checked subjec to providing it is accompanied by the document that says everthing is OK?

Thanks in advance.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
If the lawsuit was over something factual and could be verified in public records, like a zoning change, then I would not see a problem. But if the UW is looking for you to approve the attorney's opinion, then I'm with ya on that one..... nope. I'd tell them to use the attorney's document, I ain't signing nuttin about releasing or okaying legal stuff. If that is the case, it sounds to me like the UW wants you to share in the blame IF something went wrong.
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I would also say the same, "no thank you, I am certain your underwriter or another legal counsel can determine if everything is o.k.". The subject-to remark always draws the appraiser back into the resolution role at a later time. While expected and normal for some situations, like traditional new construction several weeks from completion, its fine. I am inclined to always complete other reports "as-is", with clear and possibly repeated addendum comments that point out where the client may have the obvious role of further research of their own or inquiry to make, and I will disclose what may be lacking, or with whom they may want to speak. Recent Forum posting had comments about the infinite data pieces we may be inclined to (be expected to) include in our reports, the continual requests for more info and more fulfillment and for sure more liability or responsibility that others assume we are to accept. Incorrect, IMHO, there are appropriate decisions for u/w's and lenders to make....which are outside our realm of the appraiser's expertise, and they have to step up to the plate now. This shared-risk concept is not a game we are obligated to play.
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
I had one that was similar, though not a lawsuit.

I told the underwriter to send me a letter, on their letter head, that stated they had reviewed the material in question and found it to be satisfactory for their needs. I then issued the 442 with the attached letter as the justification for releasing the condition.
 

Rich Heyn

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Michigan
Extraordinary Assumption - Major Disclaimer
 

Larry Lyke

Senior Member
Joined
Feb 2, 2002
Bill has the right angle.

In cooperation with the UW, you can get the improvements cleared, which is what you are about to do. The land problem should have been addressed in the appraisal, but not as a "subject to" issue. "Subject to" regards structural completion kind of stuff.

The lawsuit won't go away regarding the land squabble necessarily -- maybe for a longtime.

As you've kind of alluded to, there's ongoing sales activity in the subdivision. Why is your subject so different. The difference is in the way the Appraiser handled the issue.
 

larryhaskell

Senior Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Nevada
I followed Bill's advice and the UW is happy. However, this situation raised a second ? for me based on my discussion with the UW. Her view was that the only issues that be checked subject to are for a home that was under construction or some physical defect that can be corrected & then rechecked. She believe that a 442 could only be used as a followup to these two conditions.

My view is that an appraiser can check the subject to box for any condition(s) they want brought to the attention of the UW. By the same token, I believe the 442 can be used to indicate that any subject to condition has been addressed.

Please feel free to take a side.
 

larryhaskell

Senior Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Nevada
The story continues. Just got a call from the selling realtor. The UW has had 2nd thoughts. She won't send me anything in writing saying the lawsuit is not a problem. She just wants the comment removed and the subject to box unchecked or they will have to do something else. The realtor wanted to know if the contract could just be redone & remove the statement about the lawsuit. Both realtors, the owner and buyer would agree to a new contract without any mention of the lawsuit. I said no to that option. I did call our state board & our director agreed with my position. We'll see what happens.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Larry

I'm not sure you did the right thing in making the report subject to a review of the lawsuit. By doing that, you interjected a requirement for a satisfactory outcome to the legal proceedings before the subject to condition could be taken off the report. This to my way of thinking is generally beyond the scope of an appraisal report.

Perhaps it would have been better to note the problem in the report but limit the scope of the report to addressing value only and making no judgment as to the effect of the suit or requiring any outcome to the lawsuit. This limitation to a value only approach would be based on the fact that determining what a satisfactory outcome of the suit is, is beyond the qualifications of the appraiser and therefore, beyond the scope of the appraisal. This is, as Rich said, an Extraordinary Assumption which you would document, explain and insert a disclaimer (or maybe several at various places within the report).

Unless the assignment was to specifically appraise the property with the cloud of a lawsuit attached, I think you would have been better to stay away from it altogether by simply limiting the scope of your report.
 

Larry Lyke

Senior Member
Joined
Feb 2, 2002
larryh --

1. Read my post above again.

2. Then, try to get the UW to let you remove the "subject to" and the lawsuit blurb in an ADDENDUM. That way you can say...

3. "Subject to" is removed because there is no physical repairs needed. AND, something akin to "the lawsuit matter will be handled separately by the parties thereto..." Something like that that you two can agree upon.

IT'S NOT AN INSURMOUNTABLE SITUATION. THE LAWSUIT REALLY IS A SEPARATE ISSUE. GOSH, IF THE UW WANTS TO GO FORWARD AND YOU DON'T GET BLAMED FOR IT, AND YOU CAN INSERT YOUR WORDING INTO IT VIA THE ADDENDUM -- LIFE DOES GET ALL BETTER AGAIN.

Best o'luck.
 
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