Does USPAP Mandate The Engagement Letter?

[Terrel L. Shields]

Seems to me that there is a lot of emphasis upon the engagement letter and some boards demand that one be presented as part of a workfile...or at least imply it violates USPAP to not have one. Under what color of law does USPAP address the engagement letter...let alone require it?

 

[Don Clark]

Seems to me that there is a lot of emphasis upon the engagement letter and some boards demand that one be presented as part of a workfile...or at least imply it violates USPAP to not have one. Under what color of law does USPAP address the engagement letter...let alone require it?

Where in USPAP does it "require" an assignment or engagement be written as a letter,etc? Since the definitions are part of USPAP it merely states that an assignment is an agreement between an appraiser and a client. In law, there can be oral and written agreements. But, in real estate and as pertaining to real estate, any agreement concerning real estate to be enforceable, must be in writing. That is basic real estate law 101.

Now, it could be argued that an appraiser does not create an interest in real estate by appraising it. In most states you cannot file a mechanics lien against a property for payment of an appraisal as it is a personal service. That is also the case in the statement required by USPAP: "I have provided NO services as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three year period immediately preceding acceptance of this assignment."

I would believe that an appraisal assignment could be oral or written.

 

[Howard Klahr]

Nowhere within USPAP does it require the use of an engagement letter. Therefore, not utilizing one can not be a USPAP violation in and of itself. USPAP does however address certain issues/requirements that are necessary when being retained to performed an appraisal. Consequently it would be challenging to demonstrate conformance with those requirements without some form of engagement document.

 

[Restrain]

It can be a memo of a phone conversation, etc. But somewhere you will have written down who, what, when where, and why. That is sufficient.

 

[Peter LeQuire]

An engagement letter may not necessarily be required, but understanding about scope of work and other terms of the engagement needs to be there, whether it's in the form of an accepted engagement agreement, contract for services or whatever.

That said, there is probably a legitimate argument that a specific engagement document for GSE, FHA/VA or other work for which the requirements about what is supposed to be done is written and (hopefully) understood by appraisers and the clients for such work. But most of the GSE engagement/assignment documents I've seen are pretty terse, but those of you who occasionally post about assignments being pages long and specifying what color socks you're to wear probably have a different take.

Golly, Andy, another area where USPAP fails to provide guidance to those agencies that are supposed to apply it.

 

[Tom D]

haven't seen to many lenders sitting in the USPAP class to make sure they follow our forced upon rules. for residential, would not an offer for an appraisal to be done, with information on it needed for the appraisal to be completed, considered an engagement letter once accepted, or just given to you. do they need to spell out everything to a certified appraiser about how it is to be done for a standard FNMA, or FHA. do we ask for an engagement letter for a private estate appraisal, ehh, i haven't.

 

[Mike Kennedy]

"do we ask for an engagement letter for a private estate appraisal, ehh, i haven't."

On advice from Counsel, and my E&O insurer, I prepare an engagement letter outlining the SOW, Client, any other Intended Users and Intended Use of each report and require a return copy including a dated acceptance signature from each Client. Each work-file begins with that signed copy of an Engagement Letter and ends with an exact copy of each completed report (including a copy of the email forwarding same to each client/ designated party (Attorney, Trustee, CPA etc.). Any additional correspondence is also retained in each work-file.

 

[hastalavista]

haven't seen to many lenders sitting in the USPAP class to make sure they follow our forced upon rules. for residential, would not an offer for an appraisal to be done, with information on it needed for the appraisal to be completed, considered an engagement letter once accepted, or just given to you. do they need to spell out everything to a certified appraiser about how it is to be done for a standard FNMA, or FHA.

I see some of my clients' (their reviewers and chief reviewers) personnel in USPAP classes I attend. One of my client's review appraisers is a USPAP instructor, and I see him at many appraisal events.
Everyone of my regular clients for mortgage work has an engagement agreement that I must sign before I accept the assignment. Some supplement their engagement agreements with additional "appraisal requirements".
The trend (in my case) 10+ years ago was no engagement agreement. Now, they all have an engagement agreement.

...do we ask for an engagement letter for a private estate appraisal, ehh, i haven't.

Like Mike K., I have an engagement agreement for all my private-party assignments and I keep a copy of the email correspondence as well.

You are not alone; a lot of appraisers do not have engagement agreements. But I would encourage you have one (especially for your private party assignments) as they can provide clear reference/definition to the service you are providing, what you will and won't do, and how, if disagreements crop-up, you will handle them.

Good luck!

 

[Terrel L. Shields]

Some banks had letters of engagement since day one, often brief. By 2011, they all did, and many with detailed instructions & usually instructions to include in the report. But that is the banks requirement, not the appraisers. Generally, mine are email, except a more formal one for court cases

 

[DWiley]

The simple answer is that USPAP does not require a letter of engagement. USPAP does require certain identifications that are often addressed in a LOE.

I still remember ordering "Appraisal Order Forms" from Forms and Worms. They were designed for taking an appraisal requests over the phone.

As a business matter, having a formal LOE can help avoid confusion later on in an assignment.