I can't believe this engagement

[Steve Owen]

I got an appraisal order from a large bank last week that had this language in it.

Should the appraisal not be delivered by this date, XYZ Bank, reserves the right at its sole discretion to either cancel the assignment for cause without payment of the fee or deduct a penalty of one percent (1%) per business day until the appraisal is received.

We understand the you and all personnel associated with the assignment will be available to discuss any concerns we might have regarding the analysis and the value conclusions. XYZ Bank reserves the right to withhold payment if, at our sole discretion, the appraiser fails to address our concerns with the appraisal within ten working days of such notice.

I had thought I might just scratch out the objectionable language from the engagement and sign and return it. However, they had cleverly authenticated the letter with software, and posted a notice at the bottom that they could compare any changes with the original with the understanding that the agreement would revert to the original.

I thought about it for awhile and then this is what I did. I blacked-out the offending sections, signed the letter, and sent it together with the following fax copy:

I am returning your engagement letter with the portions to which I cannot agree blacked-out. They are as follows:

1. Owen Appraisal Service cannot agree to any late fee penalty at the sole discretion of another party; I would accept binding arbitration on this issue. Additionally, I cannot agree to any fee reduction for lateness caused by conditions beyond my control. As verbally discussed, one week is the minimum expected time for completion of this assignment because of complications caused by the location of the property; I require an additional week to be added to the engagement before late fees can even be considered. Additionally, it is common for borrowers, owners, or tenants to delay completion of this type of assignment by withholding needed information; I cannot accept any late fee for lateness caused by such conditions.

2. Owen Appraisal Service cannot agree to any third party having unilateral right to withhold payment. I would agree to accept binding arbitration on this issue (however, only if the arbitrators are knowledgeable of appraisal issues).

If you can agree to the engagement as altered, please initial and return this fax as soon as possible. As verbally discussed, having a chance to complete this assignment by August 23rd will be dependent on inspection of the property by Thursday or Friday of this week.

The loan officer immediately signed and faxed back my fax. Then he followed up with a phone call saying “it isn’t the policy of XYZ Bank to withhold payment or impose a penalty anytime there are reasonable circumstances causing delay.” (So, why did you put it in there?)

My question is this: Where are they finding the appraisal idiots that would be willing to sign such unilateral language?

 

[TEL2002]

Nice response.

I always thought we appraisers were responsible for every delay. After all I'm sure it is our fault that the RE Agent took over a week to fax a copy of the pruchase agreement. When the owner does not return our calls that is also our fault. (This is my biggest gripe. I'm tired of making call after call to the owner. I have now set myself a 3-4 call limit. The last call is something like, "Obviously you are having trouble clearing your schedule for an appointment. Just give me a call when you have a change."

I suspect tho that the lenders comments are there for one of a couple of reasons. 1. They hope to cut the costs on appraisals. 2. They have been 'burned' by some appraisers who are lazy...so they make a rule that hurts everyone.

 

[Richard Carlsen]

Oh Steve, some appraisers will do strange things just to get an order.

They will give free comp searches, drive-by to eyeball a property and call the lender back, print extra copies of the report at no cost, fill in a Manufactured Housing Checklist saying that the footings are below the frost line on the foundation and that the foundation is suitable for the soil conditions and designed by an engineer.

Yep, appraisers will do strange things. Even sign engagements like yours.

 

[Steve Owen]

Yeah, Richard. This client asks for three originals, too. I'm wise to them on that, though. I always bid up the price to cover it.

I don't do much work for them. They always have complicated assignments that they are trying to get a limeted appraisal, summary report for. Usually they want it yesterday, and if you can't meet that time frame, please bid your best return time. lol.

Anyway, I posted this as a kind of reminder to really read what is in that engagement letter. And also, FYI to newer appraisers that you don't necessarily have to sign it to get the job.

I repeat my question, where to they find appraisal dummies that are willing to sign this kind of unilateral garbage?

-----------

I am a great & sublime fool. But then I am God's fool & all His works must be contemplated with respect.

Mark Twain

 

[Charlotte Dixon]

Steve, I've never ever seen an engagement letter that bad.

My ERC requests list the guidelines and at the bottom it says:
"Failure to comply with guidelines could jeopardize payment"

I don't have a problem with that. If we can't read and follow directions, we should not be paid.

 

[Verne Hebert]

I recollect a couple of these over the years. Seems like it was ValueIT, or WaMu.

Anyways, I hear what you are saying. However, like any other profession there are alot of idiots in the appraisal profession.

I would do the same thing you did. Cross-out and sign the contract modifications to your likeing---------------or get rid of them!