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Evals

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Virginiageneral

Freshman Member
Joined
Dec 3, 2016
Professional Status
Certified General Appraiser
State
Virginia
Who out there is doing EVAL work? If you are, how are you staying USPAP compliant? If you say it is not USPAP compliant, how are you staying FIRREA compliant? Just curious? These assignments seem very risky to me but can also be a good source of extra revenue. To date, I am not doing any of that type of work given the legal challenges.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I was actually contemplating opening a thread about these evaluations. One of my best clients has turned to a third-party, out-of-area appraiser that does these types of assignments. Though I'm lucky to still be busy, I believe that this is something that we are going to have to contend with in the future. I'd like to hear what thoughts/ experiences the other commercial posters have had regarding these evaluations.

OP-to answer your question, I tell the client that I can do a restricted appraisal. There is one client that requests evaluations and though I tell them that I will do a restricted report, they keep referring to the same evaluation terminology. Nonetheless, if you do a restricted report, you are still in the realm of USPAP. Their fee expectations in these cases seem to be lower than what I am willing to charge, so perhaps they will turn to someone else in the future, but I have found that in many cases, doing a restricted report doesn't really save all that much time relative to a standard appraisal report.
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
I've done several of these. We have one or two clients that order a lot of them, all for smaller owner/user properties that are typically in the $100,000 - $400,000 range. We use a modified format that is still a restricted report but omits basically all of the market analysis, neighborhood/area analysis, site/improvement analysis, etc. There’s pictures, certification, scope of work and then the value – generally sales comparison approach only.

On average fees are typically about 30% of a similar summary report and it takes about 40% of the time of that same summary report. So, on an hourly basis it’s not as profitable but it can work out ok to squeeze it in among larger jobs. The other big time saver is we contract a third-party to perform an interior and exterior inspection and provide photos. This is especially important if the property is some distance away where the opportunity cost of just driving there would make it completely unfeasible at the kind of fee the client is willing to pay. This is all disclosed in the SOW and the client is fine with it.

Overall I’m not really a fan of these types of assignments as I could do one summary report in the time it takes to do three of these and typically make more money.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I've done several of these. We have one or two clients that order a lot of them, all for smaller owner/user properties that are typically in the $100,000 - $400,000 range. We use a modified format that is still a restricted report but omits basically all of the market analysis, neighborhood/area analysis, site/improvement analysis, etc. There’s pictures, certification, scope of work and then the value – generally sales comparison approach only.

On average fees are typically about 30% of a similar summary report and it takes about 40% of the time of that same summary report. So, on an hourly basis it’s not as profitable but it can work out ok to squeeze it in among larger jobs. The other big time saver is we contract a third-party to perform an interior and exterior inspection and provide photos. This is especially important if the property is some distance away where the opportunity cost of just driving there would make it completely unfeasible at the kind of fee the client is willing to pay. This is all disclosed in the SOW and the client is fine with it.

Overall I’m not really a fan of these types of assignments as I could do one summary report in the time it takes to do three of these and typically make more money.
I agree regarding the use of only the sales comparison approach in cases where the other approaches are either not applicable or somewhat secondary, and that is something I've done in a few cases also. The problem arises when I feel that either or both of the other approaches are applicable and the condensed reporting IMHO doesn't change whether they should be included or not. In those cases, the property may not be any more complex than the one in which only the SCA is used, but the fee will certainly be a fair amount higher.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Who out there is doing EVAL work? If you are, how are you staying USPAP compliant? If you say it is not USPAP compliant, how are you staying FIRREA compliant? Just curious? These assignments seem very risky to me but can also be a good source of extra revenue. To date, I am not doing any of that type of work given the legal challenges.
Locally an MAI does them and he uses graduate students to sign them. He doesn't do them himself. They suck but without a license these evaluators do not answer to a state board.
 

PL1957

Senior Member
Joined
Jul 19, 2004
Professional Status
Certified General Appraiser
State
Illinois
"Eval" is a banking term that has no USPAP equivalent. An appraiser can complete a report with a scope that meets the client's need for an "eval" while remaining USPAP compliant. What the appraiser charges is between him and his client.
 

Vernon Martin

Senior Member
Joined
Jun 8, 2005
Professional Status
Certified General Appraiser
State
California
The OP implies that "evals" are inherently non-compliant with USPAP and FIRREA, whereas the FDIC and other regulators allow them and provide guidelines for their usage: https://www.FDIC.gov/regulations/laws/rules/5000-4800.html Almost half of my work consists of evaluations, and I like this type of work because the reports are shorter, but the fees are only slightly less. The client wants the same quality of analysis but also wants a concise, readable report that can be delivered quickly. They don't want the thick report that starts out by saying "Los Angeles is on the west coast of the United States of America in the western hemisphere of Earth, the third planet from the Sun."
 

DREA Dean

Sophomore Member
Joined
Apr 16, 2015
Professional Status
Certified General Appraiser
State
Pennsylvania
The OP implies that "evals" are inherently non-compliant with USPAP and FIRREA, whereas the FDIC and other regulators allow them and provide guidelines for their usage: https://www.FDIC.gov/regulations/laws/rules/5000-4800.html Almost half of my work consists of evaluations, and I like this type of work because the reports are shorter, but the fees are only slightly less. The client wants the same quality of analysis but also wants a concise, readable report that can be delivered quickly. They don't want the thick report that starts out by saying "Los Angeles is on the west coast of the United States of America in the western hemisphere of Earth, the third planet from the Sun."

Unless I am misunderstanding, you are doing restricted reports, correct? Per USPAP, you have to identify your report as either an "Appraisal Report" or "Restricted Report", and develop and communicate it in accordance with USPAP. Are you saying you can do something else (lesser) and call it an evaluation? Your description that "the reports are shorter, but the fees are only slightly less. The client wants the same quality of analysis but also wants a concise, readable report" pretty much sums up restricted reports. The same inspection, research and analysis is done, but communicated in a shorter report. And the fees are slightly less, but not 30-50% of a standard appraisal report - or "full-blown appraisal", as many clients like to call them.
 

DREA Dean

Sophomore Member
Joined
Apr 16, 2015
Professional Status
Certified General Appraiser
State
Pennsylvania
On average fees are typically about 30% of a similar summary report and it takes about 40% of the time of that same summary report. So, on an hourly basis it’s not as profitable but it can work out ok to squeeze it in among larger jobs.

Overall I’m not really a fan of these types of assignments as I could do one summary report in the time it takes to do three of these and typically make more money.

I don't see how you can conduct the same research and analysis and write a restricted report in 40% of the time it would take to do a regular appraisal report, let alone charge just 30%. I understand as a business you can charge whatever you want, but I just don't see how or why you do it. I suspect that clients ordering these types of "evals" don't really review them, so you probably get fewer calls and questions on the back end (which means you can cut corners to save time).
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
I don't see how you can conduct the same research and analysis and write a restricted report in 40% of the time it would take to do a regular appraisal report, let alone charge just 30%. I understand as a business you can charge whatever you want, but I just don't see how or why you do it. I suspect that clients ordering these types of "evals" don't really review them, so you probably get fewer calls and questions on the back end (which means you can cut corners to save time).

First off, I don’t have much control over the fee as I’m not the one bidding on these. If it were up to me I would either not do them or at least try to charge a higher fee. As far as the time savings – these are typically simple owner/user properties where we already have many of the comparables in our database. There’s rarely any question of H&BU or the need for anything but a sales comparison approach. In those cases where it turns out to be something different (had a supposed office building on a commercial site that turned out to be a mobile home that was rented to a family as a residence and the neighbor (borrower) occasionally parked some trucks on the back of the one acre site) then it either gets turned into a regular appraisal report or the SOW gets modified and the fee increased.

The shorter report format is a big time saver. I just looked at one I did recently and it was about 30 pages not counting addenda. A similar property I appraised a few months later with a summary report was about twice as long. Granted there’s some copy and pasting when it comes to the area analysis and parts of the market analysis but it takes a while to write up even basic information about the market, improvements, etc. The lack of inspection saves anywhere from an hour or two if it’s local, to pretty much a full day if it’s several hours away. Those more remote properties also have higher fees where it might be 50% of a typical summary fee.

In general it’s my understanding that these are properties that have a low loan to value of say 50% or less so yes, the review process is typically pretty simple. I like to think that I produce a good quality report and I’d say even with normal reports for mostly lender clients maybe 1 in 4 do I ever get any review comments or requests for revisions of any kind.

I do like the condensed format as I tend to waste time going into more detail than might be necessary on describing and analyzing the neighborhood, improvements, market, etc.

Ultimately not all of our clients need a 100 page appraisal report, especially if it’s a small owner/user property with a low loan to value. We can either utilize a reduced scope of work (and reduced free) and maybe get some of that work or cede it all to unlicensed people.
 
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