FIRREA ?

[Paul Ness MAI]

Steve and Jim, Lee Ann never said that the intended use for client #1 had ended before she was engaged by client #2. I assumed she meant two bidders for the same auction came to her. I agree that it is ok if the original intended use has been consummated, but I will stick to my guns that one should not do this if the original intended use has not been consummated.

IMHO, it could be an ethical violation not to disclose the first assignment, and Lee Ann's rather scary comment something to the effect that the only way an appraiser could get into trouble is if they disclosed the fact that they did the original report, sounds to me like she is in fact purposely omitting the information and the result is an intentionally misleading appraisal. Correct me Lee Ann if I am wrong. This Catch22 in effect proves why I believe this is wrong - you're in trouble if you disclose and you're in trouble if you don't disclose, so just don't do it. There's enough work out there that you don't need to charge twice for doing the work of one appraisal.

Further example - one of the auction clients is the winning bidder then wants to use the appraisal for the loan. You were originally engaged by the borrower, which precludes its use by the bank. If you change the addressee on the report without dislosing this, you are being misleading in an attempt to circumvent FIRREA. If you do disclose then the bank would have a FIRREA violation on its hands and shouldn't accept the report.

 

[George W Dodd]

Hate to agree with an MAI, but Paul has a good point.

And I am sure that all of us have had a 'client' who wanted that 'name change' without mention of the original client and when you explain to them FIRREA; either they've never heard of it before or "every other appraiser does it with out a problem".

One of the greatest pitfalls of being the industry umpire is that a lot of folks want you to look the other way for their benefit.

I've always believed that if something doesn't feel right then don't do it, even if it is legal.

 

[Farm Gal]

Good discussion: wish you all had been there WITH me :twisted: I came up with a buch of plaints, but you all are better at it than I was on day 3 of the seminars!

Paul and all, I didn't come up with that scenario, it was presented TO me. I threw rocks as fast and hard as I could! It looked 'sort of' bulletproof in terms of answers at the time. The certainty of the presenters when I very specifically challenged them to stand behind me (or in front) if I should be charged with an ethical violation as a result of following this advice was quite certain. I was a tad hostile. :lol:

In the case of the second client coming forth, the issue is disclosing for WHOM you did the first report (client confidentiality), this was bandied about in serveral variations... with the conclusion presented that you can or chose not to disclose the fact that you had been hired by another person to perform the appraisal. That is a business decision, not USPAP, if I remember correctly.

This becomes a discussion of intellectual property: the cleint owns the paper on which the results of your skullsweat are reported, you own the skull sweat, and can sell it again, and again. Others on this forum have presented this arguement better than I can.

There's enough work out there that you don't need to charge twice for doing the work of one appraisal.

That depends entirely on your market... spake a tad tartly!

With regard to Paul's second scenario, does not a release from the orginal client permit reuse by the bank? Assuming that you have NOT developed a value and value range intended to favor the cleint... IF you developed 'most probable price', it was your opinion! IF additional information comes along afterwards (I assume you mean that the value the property was purchased for differs from your estimate of "most probable price"? or am I muddying the waters? I don't entirely understand all the finer points of FIRREA, except as regurgitated to me in classes - or personally researched in answer to a specific issue.)

I guess I see the logic when there are small town situations it is a known fact that appraiser X is THE regional appraiser for Assignment Whatever... So if more than one person NEEDS to know the value of Assignment Whatever then as a public, business, fiduciary service the Regional Appraiser MUST be able to perform the assignment...
Since anyone else coming in to do the assignment would have to consult with Regional Apppraiser to competently perfrom the work!!! and they may not be comeptent unless Appriaser REgional holds thier hand all the way through - else Regional Appraiser is 'knowingly permitting another appraiser"- to do bad things!"... Some varients on this theme were discussed, but my rather comprehensive notes are not in front of me .

Me thinks the effort in part is to move the profession back to just that: profession... whether this is shooting the troops to find the bulletproof soldiers or not I am unsure. Heaven knows that some of the johnny-six-pack competition needs to find another way to make a living... I am just burnishing my sword and checking my bulletproof armor VERY carefully 8O I am thinking the Emporors New Clothes have many Achilles heels....

but then I tend to mixed metaphors and bad puns :roll: :wink:

 

[Paul Ness MAI]

Not sure how to respond to all the "muddy water" you have added in your last post, but with regard to FIRREA and getting a release from the borrower to then give the report to the bank, the bank should not accept it at that point anyway if they know you did it for the borrower... FIRREA specifically states that an appraisal completed for the borrower is not acceptable to the bank. If you readdress the report to the lender without disclosing your original client (the borrower), you are clearly being misleading to conceal a fact in order to circumvent FIRREA. Don't think OCC examiners don't compare dates of engagement letters with dates of inspection and valuation. They do, and this is one of their red flags at least in the commercial world.

Let me ask another question - if you readdress the report for the bank and the lender asks you specifically if you originally did the report for the borrower, what would you say? Would you lie? I hope not, so why "lie" by attempting to mislead on paper?

This all goes back to my point about intended use being consummated. Until such time, you have a confidential relationship with the first client - so you are right that disclosing the previous client would violate confidentialty. But not disclosing it would be misleading - both are ethical violations, so I personally wouldn't do either.

Sorry to get on a soap box, but this is a hot button for me, since I lived through the S&L crisis of the late 1980's and heard all the blame that appraisers received (some justly and some unjustly). All this really stems from the abuses of that time.

 

[Farm Gal]

Paul:

I wouldn't lie, but I might take the option of not answering directly: I would prefer not to answer that, why do you want to know? Would be my first question in return!

What is to prevent me a lowly residential appraiser (who deals not with the lofty issues you MAI's must wrestle) from getting the cleint's permission to disclose?

The S&L crisis was to a minor the result of borrowers shopping Made As Instructed reports: NOT a slang on your designation- don't shoot!

The residential borrower however should have the option to ASK the bank if they can accept the appraisal recently completed, for which they might have to sign a release to use it. (My preference) Anyway they paid for and used the information from the first appraisal in making their buying decision.

If the bank will ot accept it for any of a number of reasons! The prospective borrower has to pony up an additional appraisal fee for someone elses work. Where is the problem?

Median house price say $120,000 fee $300. We are talking .25% of sale value...MAXIMUM...
I don't HAVE any fiduciary responsibility to the cleint once I collect my fee and deliver the goods. Ethics we can argue. But the translation of the ethics I got was it is not MY problem!

 

[Jim McGrath]

Paul:

If the bank will ot accept it for any of a number of reasons! The prospective borrower has to pony up an additional appraisal fee for someone elses work. Where is the problem?

Median house price say $120,000 fee $300. We are talking .25% of sale value...MAXIMUM...
I don't HAVE any fiduciary responsibility to the cleint once I collect my fee and deliver the goods. Ethics we can argue. But the translation of the ethics I got was it is not MY problem!

Lee Ann, if and when I do a second appraisal, I always view the property and review the data, and make changes as needed. So when I complete it, it is in essence, a new appraisal. This is necessary, because between the original, and the second appraisal, the property could have burned down, or changed in many ways. It does the cya for me and allows me to put a new effective date on the appraisal The effective date should always be the last date it was viewed, unless you a doing a retrospective appraisal.

There are too many people that will tell you that you can't be sure of the correct time, because it is different in different time zones, when you ask them what time it is.

Jim

 

[Farm Gal]

Jim,

In all honestly I would prefer to do a walk-though myself for the very reason(s) you cite.

However in leiu of that opportunity I can see doing a retrospective citing the original effective date and a new signature date and feel preety good about it - I WOULD address the limiting cond---errr SCOPE rather heavily in my report however, and insure that the client was OK with this!

which brings on another rant:
Anyone have a PROBLEM :twisted: (besides me) with the compound word "walk-through" 8O besides me if used in ANY other connotation than strolling through a house you had personally and recently 'inspected'???

 

[Charlotte Dixon]

This is a very interesting thread and I salute you all for your candid and well thought out responses.

Now, Lee Ann.....Walk-through.....In our neck of the woods, that's what the buyer does with the Realtor an hour or so before settlement. "Walk-Through"....in my opinion, is not to be associated with the appraisal process. I prefer "appraisal observation" vs. "appraisal inspection" and have noted that on my appraisal form template. I have definitely never used "walk-through"...

 

[Mike Garrett RAA]

If a bank calls me and says....you did an appraisal on such and such property for such and such owner. We would like you to name us as client on that appraisal AND you have the permission of the owner of the property to do so, then I have no problem doing that.

It is not my job to baby sit the bank and their portfolios. I get this all the time from mortgage brokers too. You did the appraisal for zzz now we are moving the loan to YYY can you change the report to reflect the new lender.
"Yes I can, IF I have a signed letter in my file from the first client saying they are no longer the intended user of the appraisal report." I still believe in stating somewhere in the report that it was originally prepared for zzz who provided me with a signed release.

What about PMI removal??? Do you do the appraisal for the owner of the property or for the mortgage holder? Who hired you? Who paid you? Who is the intended user of the appraisal report? Who is on first?

 

[Mike Garrett RAA]

Now I am really on a soap box.

Inspect.....

Walk thru......

Visit......

Examine.......

please define all of the above.

I personally inspect the property. I know, I know, might be confused with a home inspection. So what? What does your certification say???? Mine says "I have personally inspected both the exterior and interior" yada yada yada. Thats good enough for me.

I used to cringe when my administrative assistant would call to set an appointment and I would hear her say..."we would like to visit the property on ........" Ugh...too politically correct for me!