Draft Reports

[Hamlet]

Is it just me, that every time someone calls our research, analysis and conclusions "products," there is something suspect in the logic -- because we don't sell "products."

Take your phrase "differing opinions on how things can be interpeted." And with someone less scrupulous than you, if "draft" means a copy of a report that will be shredded, the fact that the appraiser originally held the opinion that the property was worth one million, before the client's differing opinion turned that into "final" report stating three million for trial, is lost.

If you are disclosing you scope of work honestly, how do avoid disclosing how the client's review of the draft affected the process and results?

You can return or exchange a product. You can't do that with an opinion.

 

[farmguy]

I don't see any problem with the way you explained it. I don't understand your statement to be - I may renig on my number, or if you don't like it let me know, or when I finish collecting data then I will send you an official report that may be different from the first.

The way I understand what you are contemplating is that you have all the data needed to provide a value estimate of part of an assignement - say minerals or timber, maybe broiler houses or you have a bucket full of data and spread sheets that you have finished crunching numbers on and arrived at a final value, but you have not yet put together the narrative part of the report, etc.

There is nothing unethical about what you are doing, nothing misleading, I would imagine you are working with a client you are comfortable with, etc.

I do agree with many posts above that you have appraised it when you provide a number and you need all the documentation to support number, but I think it can be in a pile spread over your desk at the time.

I would also only do that for some one I knew. There would not be a big time lag from me telling him and him getting a report. Reading you pasts posts I gather you do a good bit of rural work. If you are like me I have worked with some of the same clients for a number of years. If I appraising a 300 acre place in country with a big house and I have analyzed a bunch of sales to determine the contribution of the house is $85/sf but I have not quite finished tweaking my land component and the client calls and says "Hey we need to know how much hazard insurance to get on house do you know where you are going to be on that? If I know my dwelling contribution is not going to change I tell him.

I am not sure if I violated anything or not, but I do know I didn't mislead the client, he is not asking me so he can mislead anyone, I didn't lie to him, I didn't tell him so I wouldn't have to provide it in written format later, etc. I just helped out a good client.

Understand I rarly do any work for mortgage brokers and I don't know what an AMC is. If I have any thoughts the client is questionable I didn't take the assignment anyway.

I am working on a deal now where there are a lot of preliminary numbers, acreages, etc. I am doing a partition of about 2000 acres of farm and ranch land in 6 parcels. We have been back and forth alot on how many acres in each piece, do you know what the barns are going to add, how much is grand ma's house contribute, etc. it wouldn't be possible to do it without providing some conclusions prior to the written report.

 

[PropertyEconomics]

Farmguy .. contiual development of the scope of work is fine. Your scope is quite different than finishing an appraisal, sending in a "draft", and then issuing the "real" report. Im sure your scope will discuss everything youve done with your client as you ahve gone along. Its quite a different animal you are doing .. your scope is very different.

 

[PL1957]

Is it just me, that every time someone calls our research, analysis and conclusions "products," there is something suspect in the logic -- because we don't sell "products."

I think whatever a person sells is a "product" - surely you've heard of "attorney's work product"? My professional opinion, and the report which communicates it, is my "appraiser's work product".

Take your phrase "differing opinions on how things can be interpeted." And with someone less scrupulous than you, if "draft" means a copy of a report that will be shredded, the fact that the appraiser originally held the opinion that the property was worth one million, before the client's differing opinion turned that into "final" report stating three million for trial, is lost.

I can't be the "scruples" police for everybody - if someone is intent on fraud, they will commit fraud, USPAP or no USPAP.

If you are disclosing you scope of work honestly, how do avoid disclosing how the client's review of the draft affected the process and results?

The client's review only affects the value or process to the degree that I think is appropriate. I take their comments into consideration and make my decisions and judgements as to what weight, if any, to give it. The review has as much effect on my report as any other piece of information that is provided during the entire process. The report and scope clearly discusses that one of the sources of data in the report is the client. I don't see what other disclosure would be necessary.

 

[PL1957]

I suspect that the presentations (both Naperville & Springfield) at the ICAP seminars by a member of the IL Appraisal Board specific to this very topic will be of interest to every licensed appraiser in Illinois.

The IL Appraisal Board sets the rules for completing appraisals in Illinois. While I have a tremendous amount of respect for members of the Board, their interpretation of USPAP only carries weight until you reach the state line. When I do work in IL, I comply with all of IL's rules and regulations - when I do work in MI, I follow that Board's interpretations, including their prohibition against oral reports.

Each State has its own interpretation of USPAP - it doesn't necessarily mean that the interpretation is correct.

Back to my question: does your communication of the "draft" to your client include an opinion of value (thus, communication of an appraisal)? This is a matter of some significance in this string of discussion.

IMO, my conclusion as to the opinion of value has not been reached until my report is "final". I think most of this is a matter of semantics. I am aware of the IL board's opinion and although I don't agree with it, I make sure that a signed certification is included with every "draft" report I issue in Illinois.

 

[PL1957]

I cant believe that what appear to be decent ethical appraisers are arguing the merits of delivering an appraisal but not calling it so. It makes no sense to me. We all know what the rules are ... and as I stated before if the client wants something changed and its reasonable and we agree .. its changed and we move on.

I'm glad that you know what the rules are. I think the USPAP FAQ I cited said:

"USPAP does not explicitly define or address drafts of reports. When clients, other intended users, and appraisers use the term “draft,” they may mean many different things, from preliminary spreadsheets to a written document that contains all that will be in the “final” report except it is labeled as “draft” and does not contain signatures. Report drafts have traditionally been part of certain types of appraisal practice but have never been considered acceptable in other types of appraisal practice."

Apparently you are far more certain of the rules than the writers of the rules themselves.

 

[Terrel L. Shields]

Well, this went about as I expected....especially the residential guys. Equating it to comp checks was pretty funny

A few questions. How does the state determine WHO violated USPAP when the report is unsigned? DUH!!! Are you all thinking a form report with your logo provided on the letter head? And if its no more than an oral summary ["oral" in testimony can include writing, as in unwitnessed]

If providing "oral" testimony don't you expect your lawyer-client to know the answers to the questions BEFORE you are asked? Do you think he wants some nasty surprise?? Did you scribble them down on a sheet of paper? Is that a "report"...no its oral testimony.

Isn't that like the Q & A where you cannot produce a report if there is no client.

Is an oral report illegal? I think a bunch of you need to reread USPAP. It doesn't say you have to have an ORAL report in WRITING prior to presenting it.

This has nothing to do with letting the client vett the values estimated.

It may have a lot to do with legal issues that are being pursued at the same time. You have a very limited time to present values to the IRS when submitting an estate tax return. Frequently (especially in mineral rights) discovery of the estate property is on-going during the process. I have one reaching criticality and found that there were two similar but not identical legal descriptions provided in the title opinion. The tax cards indicate a single property. One legal is one of those "from the NE corner of Sec 12 west to the old Military road, then south along the road for 1320' to the big tree next to creek, then East 1200' along same creek...
The other is "all that part of section 12 East of the old Military road and North of Big Creek..." So...are we appraising 4 tracts of 345 acres? or 3 tracts of 224 acres. The tax card totals 241.....One legal saids 117 ac. One legal said 100 more or less acres...

So you refuse to work on a report knowing that the IRS will hammer your client if they don't have a defensible number to present at the proper time?...Guess who gets sued then.

Also, an estate may be 20 parcels. Some held in names of ancestors who were unprobated. So the estate has to cure title by probating the former generation, while trying to set values of the remaining parcels.

Frankly, if USPAP strictly prohibits an oral appraisal then my copy of USPAP is wrong. FAQ 193, FAQ 194...etc. And if provided orally, the appraiser is obliged only to create the workfile necessary. That workfile is complete. Its the report that is awaiting what is or isn't going to be included.

PL and Farmguy seem to understand the problem better. Writing the final draft of a report may take several days, time that is not available to the client to make a decision. The client may need the numbers to proceed. Each expects the final product to be finished, but that can be finished later. Lots of examples but just a common one.

A Hangar is scheduled to be sold on the court house steps. The buyer calls the appraiser two days before the auction and asks "how much is it worth? I'd like to have it but I don't want to pay more than market."

The appraiser may have the answer. May be able to generate the information. But writing the report and delivery to the party bidding ain't gonna happen in 2 days....

Form monkeys sitting on a mortgage brokers lap...heavy sigh

BTW, thank you PL - You are DEAD ON...

 

[PL1957]

BTW, thank you PL - You are DEAD ON...

I always think more clearly after a couple of adult beverages - that's why I have such troubles before 9AM.

 

[PropertyEconomics]

I'm glad that you know what the rules are. I think the USPAP FAQ I cited said:

"USPAP does not explicitly define or address drafts of reports. When clients, other intended users, and appraisers use the term “draft,” they may mean many different things, from preliminary spreadsheets to a written document that contains all that will be in the “final” report except it is labeled as “draft” and does not contain signatures. Report drafts have traditionally been part of certain types of appraisal practice but have never been considered acceptable in other types of appraisal practice."

Apparently you are far more certain of the rules than the writers of the rules themselves.

PL,

Given some of the past answers to FAQs .. its not really surprising the writers of the rules dont have a clue what the rules say. They seem to not even answer this question honestly, however, I remain convinced that if you deliver a complete report to your client with a value conclusion, even if you call it a draft, it is an appraisal and must meet the requirements of USPAP. If you read the above answer its not really an answer at all. It appears they simply dont know. I will say perhaps it best to err on the side of safety and have a signed certification any time you send a draft report to a client and include it with the draft.
And as Steven points out, it would be also a requirement of your scope of work to fully disclose providing the draft and what your clients recommendations were prior to issuance of the completed appraisal.

 

[Fred]

I think whatever a person sells is a "product" - surely you've heard of "attorney's work product"? My professional opinion, and the report which communicates it, is my "appraiser's work product".

Except one was created by unique law and the other created your "professional" opinion.

I can't be the "scruples" police for everybody - if someone is intent on fraud, they will commit fraud, USPAP or no USPAP.

I agree, but my point had nothing to do with making you the police for anyone. My point is that the standards-makers through defintiions like "assignment" and "assignment results" and the definition of "appraisal" have created - as they should - a system in which there are no non-appraisal appraisals or non-report reports. There are no distinctions. At any and every point you communicate results developed as a consequence of an agreement with a client, the development and reporting requires for that "product" are in full force - as the FAQ you cited indicates. Otherwise, there is a loophole so big, that the standards become inkblots.

The report and scope clearly discusses that one of the sources of data in the report is the client. I don't see what other disclosure would be necessary.

Maybe there aren't.