Draft Reports

[PL1957]

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

Should I take umbrage at the quotes around "professional"?

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.

I agree with you 100 percent. Anytime an appraiser communicates anything to a client that could be perceived by the client as the value, it should be supported to the degree possible, whether in a report or in scribbled notes in the appraiser's file. I do think there should be flexibility in the process which permits a legitimate discussion of valuation data and issues by the parties involved. One way of providing this flexibility is by labeling a report "draft". I really don't care for going down the road of having multiple signed reports floating around with different values because of the information in the report changed. In the old days, it used to be a simple matter of making sure you got back all three signed originals before making changes - now with electronic delivery, you will never ever be certain you have all of the copies. When reports are labeled "draft" it becomes easier to distinguish between appraisals that are still in process and those that are completed.

 

[Lee Lansford]

PL1957,

I'm aware (I was present as a visitor) that this very topic has been a point of some discussion at a recent meeting of the IL Appraisal Board.

I'm also aware that during the ICAP seminars (Naperville & Springfield; I don't have the dates in front of me but I suspect that you can access the information) this summer that this topic will be presented (that is, at this moment it is scheduled) by a member of the board.

I don't know what it is that you communicate to your clients that are labled as a "draft" so I offer no opinion to your practice. What has become clear to me via my presence at some discussions on this topic is that some (many?) Cert Gens have the practice of communicating what they term as a "preliminary" report that may...or may not...be USPAP compliant (a.k.a: meet the requirements of Std. Rule 2-2, c).

I see that you have keen interest in this topic; you may want to be present at one of the ICAP seminars.

Lee

 

[PL1957]

PL1957,

I'm aware (I was present as a visitor) that this very topic has been a point of some discussion at a recent meeting of the IL Appraisal Board.

I'm also aware that during the ICAP seminars (Naperville & Springfield; I don't have the dates in front of me but I suspect that you can access the information) this summer that this topic will be presented (that is, at this moment it is scheduled) by a member of the board.

Lee, I think the IL Board, and all state board in general, have an uneviable job. The longer I am an appraiser, the more aware I become that there is no "one size fits all" solution to problems that are presented to me on a daily basis in my practice. Unfortunately, the State Board MUST adopt a "one size fits all" mentality to ensure enforcement of rules on a consistent basis.

I don't know what it is that you communicate to your clients that are labled as a "draft" so I offer no opinion to your practice. What has become clear to me via my presence at some discussions on this topic is that some (many?) Cert Gens have the practice of communicating what they term as a "preliminary" report that may...or may not...be USPAP compliant (a.k.a: meet the requirements of Std. Rule 2-2, c).

I provide many services or "products" to my clients - some of them traditional, others more non-traditional. Everything that I do, and everything that comes out of my office, is in compliance with USPAP and the applicable rules of the state in which the property is in, to the best of my knowledge.

I don't think any appraiser should ever be providing an opinion of value that he cannot support. I don't think that the value is something that should be negotiated with the client. I do think that the client sometimes is in possesion of information that may change the appraisers opinion of value. Often, the client is unaware of the true importance of the information until they see that it has not been included in the report. Providing a "draft" report offers the flexibility of this feedback without the inherent problems of having multiple signed reports floating out there with different values.

I think the whole "prelim" report issue has been horribly abused in Illinois. I think many of the appraisers who use them actually are unethical and do direct their values based on client requirements. I fully support anything and everything the Board can do to stop this practice. Unfortunately, I don't think that there is much they can do - unethical individuals will find ways around the most stringent rules. I am concerned that overly broad action, such as the prohibition against draft reports in NC and the prohibition against oral reports in MI will do nothing to stop abuses, but will catch competent, ethical professionals in their fine print.

I see that you have keen interest in this topic; you may want to be present at one of the ICAP seminars.

Lee

The problem I have with ICAP seminars is that by nature of the appraisal industry, they are geared toward residential professionals and professionals who appraise smaller commercial properties. The purpose of the seminars is (or should be) to provide the greatest amount of information to the greatest amount of appraisers in the best way possible. I think ICAP does a great job of that.

My concerns relate to properties/reports/issues that 95 percent of the audience has no expertise in or exposure to - I couldn't expect them to wait patiently while my questions were answered and I would never expect the Board to address those issues in a broad meeting because they would be wasting most of their audience's time. When I have questions or concerns, I have always found the board very responsive and forthcoming. I don't always agree with them, but that's life.

 

[Caligirl]

In my experience, government clients are the main recipient of so-called 'draft' reports, and in fact expect to receive them.

However, the main issue is that the debate rages on with the individual state boards as to this practice being allowed. My state has made no 'official' ruling that I am aware of but I have been watching the developments in other states.

 

[George Hatch]

It seems to me that the main difference between one of these "draft" reports vs. a final version is because one or both parties anticipate identifying and correcting errors, or they anticipate that additional requirements may be added to the scope of work.

In either case, I would think that acknowledging the initial report may be subject to correction of minor errors and/or expansion of the original SOW would contribute to explaining why there are 2 or 3 versions of the same report. I would go so far as to say that if the SOW being used includes a client's preliminary review that review is an assignment condition that should be reported. That preliminary review would definitely be of effect on the assignment results in at least some of those assignments.

Regardless of whether the initial report "should be" signed, if it doesn't include disclosure of these expectations then a reader would be left to wonder why there are 2 versions of the same report anyway.

The decision by appraiser and client to keep an open mind about the SOW in an assignment would logically fall under the category of "assignment conditions". That assignment isn't finished until the final SOW decision is finalized and the final results of the SOW decision are completed. "Assignment results" and "appraisal report" are not synonymous, even if the assignment in question consists of an appraisal and appraisal report. There's no reason an assignment can't include 2 or 3 or a dozen appraisal reports before it's completed; each standing on its own based its SOW and each being in compliance with USPAP.


The infamous "verbal opinion of value given at a backyard BBQ" scenario is considered an appraisal. Verbal value opinions in the guise of "comp checks" are considered appraisals. We hold appraisers accountable for all applicable requirements in USPAP for those services. That being the case, I fail to see how the argument makes sense that a report entitled "Summary Appraisal Report" is somehow not an appraisal or is beyond the requirements of USPAP by virtue of applying a "Draft Report" stamp on it.

It's not a logical argument. The initial report may not be the final report, but it's still an appraisal. It may be stamped "Draft Report", but it's still an appraisal. It may say "but I really don't mean it", but it's still an appraisal.

We assert appraisal standards as being applicable based on the role of the individual providing them and based on activities being performed. We specifically disavow the idea that applicability is based on the nomenclature or labels being used. The only reason for having appraisal standards is to apply them uniformly at all times, so that when an appraiser expresses a professional opinion it always means something.

We cannot abide an environment where appraisers only mean what they say when they sign a report. If we create or tolerate a loophole for one category of appraisers we lose the moral authority to hold any other appraiser accountable under that standard.

 

[Terrel L. Shields]

if you deliver a complete report to your client with a value conclusion, even if you call it a draft, it is an appraisal

what if it's incomplete? Back to one of my questions....what if there is no name on it???? just the summary sheet consisting of one page with numbers??? How can the state ever prove you provided it? They cannot except the rarest of situations. Most of it is oral.

[Government is]

the main recipient of so-called 'draft' reports, and in fact expect to receive them.

exactly....in fact, require them.

there is no "one size fits all" solution to problems that are presented to me on a daily basis in my practice. Unfortunately, the State Board MUST adopt a "one size fits all" mentality to ensure enforcement of rules on a consistent basi

Amen, Bro PL - you're preaching to the choir here. Waaayy too much of what the state does is oriented towards servicing the mortgage broker slash residential fannie mae form appraiser and NOTHING else.

Today I am looking at an appraisal...a fair market value is reported. Are the appraisers registered in this state? No. Are they licensed as appraisers? no. Are they certified as appraisers? No. Are they even aware that when valuing mineral rights in Arkansas the AALCB has jurisdiction? I doubt they even know such a board exists. They are Reg. Prof. Engineers specializing in reserves calculations.

How many insurance adjusters are licensed as appraisers yet they appraise? On and on. Our state boards are on a fool's mission to regulate such.

USPAP is pretty plain that a "draft" does not imply letting the client vett the report and twist your arm to modify it.

we lose the moral authority to hold any other appraiser accountable

USPAP never had any "moral" authority. No one is arguing that a person is not responsible for the values that they submit. But the whole stupid "set up" that is more tradition than law about how appraisals are prepared, on what forms, in such manner, what certifications are forced upon us, etc.

The infamous "verbal opinion of value given at a backyard BBQ" scenario is considered an appraisal

Not to quibble George but AO 21 where the Backyard BBQ example is found gives a guide to bypassing the question and to quote from it...
"if he relates the data to a specific property..." So you have in hand a handwritten page with six numbers. Is it a sheet from the report? Is it an appraisal? Or a draft page from the report? And of course, AO 21 never tells us how anyone will be the wiser. Will the neighbor record your voice answer? Ask you to write it down? I'd never admit I spoke on the subject to begin with. You could only face sanction by actually having some evidence that in fact you said what was said... USPAP dreams on if it thinks there is any liablility.

That old urban tale about the golfing buddy suing someone over a land deal??? I'd like to see the proof of that too.

I would argue that if those numbers change under the duress of the client, then I admit you've violated USPAP. But if those numbers are in the final report, all the client has is an unsigned sheet of paper. Tie it to the appraiser.

 

[Fred]

Should I take umbrage at the quotes around "professional"?

Go ahead. Or maybe those who disagree should take umbrage at the implication that their opinions are unprofessional.

really don't care for going down the road of having multiple signed reports floating around with different values because of the information in the report changed.

That's the downside of transparency - management and record-keeping. If you are subpoenaed, you are likely to be facing someone who has a copy of what the client received. I understand you are not pulling a fast one, but put yourself in the shoes of the investigator - the client as a report with one value, but you don't have a copy of that, only a copy of another different report with a different value for the same property. Even though you are honest, that is exactly what an investigator would find if an appraiser were dishonest.

I would think that acknowledging the initial report may be subject to correction of minor errors and/or expansion of the original SOW would contribute to explaining why there are 2 or 3 versions of the same report.

Those would be different reports, probably with different dates.

 

[Caligirl]

Does anyone else see the irony in the fact that one arm of the government expects/demands draft appraisals, and another seems to want to 'outlaw' them.

It really is hard to work in this environment.

 

[Lee Lansford]

...
My concerns relate to properties/reports/issues that 95 percent of the audience has no expertise in or exposure to - I couldn't expect them to wait patiently while my questions were answered and I would never expect the Board to address those issues in a broad meeting because they would be wasting most of their audience's time. When I have questions or concerns, I have always found the board very responsive and forthcoming. I don't always agree with them, but that's life.

The portion of the seminar that has as a presenter a member of the Board IS geared toward Cert Gens who communicate "prelims" to their clients. I suspect that for some who will be present, their eyes will be opened.

I have to add this: I am not aware of the specific content of the presentation that I have referenced above (I believe the content to be a work-in-progress). I do know the presenter but I am only aware of in a general manner what will be presented. From what I have gleaned, there appears to be a significant problem with what some consider to be acceptable as communication ("prelims") to clients vs. what is considered as being USPAP compliant.

 

[George Hatch]

With respect to the 2 or 3 or 12 prior versions:

Those would be different reports, probably with different dates.

Even if they all had the same date, leaving a paper trail from version 1.0 to version 3.2 would provide ample disclosure of what happened along the way.

Even with a legal case, I don't see what harm would occur as a result of an appraiser openly acknowledging the complexity of a problem or the initial uncertainty of some of the underlying facts in their appraisal report. I would think such disclosures would add to the credibility, not detract from it. It's the getting caught adding CYA after the fact that cuts into credibility.

If an opposing counsel asked an appraiser how many versions of the report they completed prior to the final version, wouldn't it be better for that response to match the disclosures in the report they're looking at?