Engagement Letter--penalty Clauses

[Julio E. Sune Jr. (FL)]

Time is of the essence and it is imperative the appraisal report is delivered on time. Unless arrangements by separate written communication have been made to the contrary, late delivery of an appraisal report will result in liquidated damages at the rate of 2% of the appraisal fee per calendar day for the first 7 days and 5% per calendar day thereafter, between the due date and the date on which the appraisal report is received by the Bank Officer signing this agreement. If delivery of the report is 30 days past due, the appraisal engagement is cancelled by XXXX XX XXXXXX and your right to all fees associated with the assignment will be forfeited.

=======================================================

The above verbage has been received twice in the last month from 2 separate lenders.

The 1st lender that sent me one like the above always paid late (60+ days) so I inserted at the bottom of the engagement letter the following clause:

"The invoice of appraisal report is due and payable upon receipt. Invoices past due after 25 days will be subject to a penalty at the rate of 1% of the appraisal fee per calendar day or 5% per week the invoice is past due plus a $35.00 re-billing fee"

Agreed and accepted:___________________________Date:_____________

=================================================

Any thoughts???????

 

[Phil Rice]

I have not seen this before.

Why would you charge them 1% when they try to charge you 2% ?? It is a whole lot more complicated to complete an appraisal than it is for a bank to write a check. They have no excuse.

Did they sign your agreement?

They have a legit interest in getting things done on a schedule. You have an interest in being able to make a legit excuse, such as the homeowner did not return your call, or a hurricane, or even something as simple as your car broke down. If they want to deduct for late reports, you need to charge enough and get paid for the ones that are not late.

 

[Pamela Crowley (Florida)]

I've seen an order or 2 with something like that in it. I declined the order(s) since I can't possibly know ahead of time if something is going to turn complicated that will take extra time.

 

[Andy Taylor]

Why give them 25 days? Why not use their own 7 day term. I seriously doubt they would accept any terms.

 

[Elliott]

People, certin things are just the cost of doing business.
Price your product accordingly. How many assignments
do you need to lose to equal your lost interest of 1 or 2%?

Since the appraisal industry is a pdf/email world some things
work much better and are more efficient.

The following national AMC's/lenders routinely pay really quick.
They are Lenders Service, TSI (Quicken), Rels, and
Landsafe.

Lenders who are still in the 20th century, use end of monthly billing
and pay slowly are E*Trade, Chesapeake, and Quantum.

elliott

 

[CANative]

We've gotten a few of these over the years. They are always faxed back with the statement that we do not accept orders with fee reduction clauses and advise that they resend the request for appraisal with any fee reduction clauses omitted.

This isn't MacDonalds. The appraisal will get done when it gets done.

 

[Abester]

I only allow late penalties if there are early completion incentives.

 

[Steve Owen]

Let me guess: US Bank-- they've been doing this on their commercial engagements every since they consolidated.

I agree with Elliot. My first impulse was to take the same attitude that most of the rest of you have in this thread, and refuse to agree to such a clause. But I thought it over and decided it was better to do business with this client. I add some extra "fudge" time to evey bid and also increase the fee slightly for the contingency and the fact that they want three printed originals.

I had some heart to heart talks with the LO and he assured me that they didn't want to have to enforce that clause and would make exception for exceptional circumstances. Actually, they've turned out to be a pretty good client.

Concerning the late payment clause. I would do something like that with anyone who was chronically late. But, the normal course of business is to get paid when the loan closes, which is often up to 60 days. I just increase my fee slightly to handle that contingency-- if I get paid early, it's gravy.

 

[Bob Ipock]

But, the normal course of business is to get paid

when the loan closes,

Great Forum here...learn something new EVERY day.

 

[john snyder]

In the engagement letter I indicate that the appraisal can only be completed in a timely manner if we received relevant info needed for preparation.

I.E. I have a proposed subdivision to appraise with a appraisal contract dated 11-15-04 with a 30 day service time. Developer wanted to know why the report was not done and submitted to the bank- still have not received plans and specs, just some roughed sketch with no dimensions for 150 site sub.

I told both the bank and the developer to re-read the engagment letter re: relevant info and timely manner. Now the parties want to know why it will take an additional 30 days to complete the job. :blink:

Think I will send them a drawing with two boxes with no dimensions and ask the developer to give me a quote on building me a new home. :lol:


john