Is a contingent SOW legal?

[AppraisrSteve]

I have found several AMCs that require scope of work terms that are contingent on my conclusions/opinions. For example, review projects that require that I provide additional commentary and comps ONLY if I don't agree with the report being reviewed. Or, for UAD reports, if I rate a property condition above a C4 (C5 or C6), I need to provide additional photos, commentary, and "cost to cure estimates" to bring the property to C4 condition. These types of terms seem inappropriate as they clearly put the appraiser into a biased position. It's my understanding that VA does something similar with purchase appraisals. If value is not meeting the purchase price, there are additional procedures required. I'm wondering, do these types of SOW terms, which clearly create biases, violate USPAP, HVCC, AIR statements, or some other industry guidelines???

Please advise.

Thank you in advance for your thoughts.

 

[Dublin ohio]

I have found several AMCs that require scope of work terms that are contingent on my conclusions/opinions. For example, review projects that require that I provide additional commentary and comps ONLY if I don't agree with the report being reviewed. Or, for UAD reports, if I rate a property condition above a C4 (C5 or C6), I need to provide additional photos, commentary, and "cost to cure estimates" to bring the property to C4 condition. These types of terms seem inappropriate as they clearly put the appraiser into a biased position. It's my understanding that VA does something similar with purchase appraisals. If value is not meeting the purchase price, there are additional procedures required. I'm wondering, do these types of SOW terms, which clearly create biases, violate USPAP, HVCC, AIR statements, or some other industry guidelines???

Please advise.

Thank you in advance for your thoughts.

You are over thinking it. Think in terms of assignment conditions. Most reviews "require" additional comps if you do not agree with value. Some require them if you do. As far as condition (by the way C5,C6 is actually a lower rating) Not unusual at all. Not sure where you are seeing a "biased" position. Unless you mean that ifn the review scenario. You would considered saying the value was OK to avoid providing additional sales or in the condition scenari. You would change your rating to avoid the additional work. If that is the case. I would change professions. Just sayin.

 

[CANative]

Most reviews "require" additional comps if you do not agree with value.

(iv) clearly and conspicuously:
• state all extraordinary assumptions and hypothetical conditions connected with the reviewer’s
opinion of value or review opinion related to the work under review; and
• state that their use might have affected the assignment results.
Comment: The reviewer may include his or her own opinion of value or review opinion related to
the work under review within the appraisal review report itself without preparing a separate report.
However, data and analyses provided by the reviewer to support a different opinion or conclusion must
match, at a minimum, except for the certification requirements, the reporting requirements for an:
• Appraisal Report for a real property appraisal (Standards Rule 2-2(a));
• Appraisal Report for a personal property appraisal (Standards Rule 8-2(a));
• Appraisal Review Report for an appraisal review (Standards Rule 4-2);
• Mass Appraisal Report for mass appraisal (Standards Rule 6-2); and
• Appraisal Report for business appraisal (Standards Rule 10-2(a)).

 

[Dublin ohio]

(iv) clearly and conspicuously:
• state all extraordinary assumptions and hypothetical conditions connected with the reviewer’s
opinion of value or review opinion related to the work under review; and
• state that their use might have affected the assignment results.
Comment: The reviewer may include his or her own opinion of value or review opinion related to
the work under review within the appraisal review report itself without preparing a separate report.
However, data and analyses provided by the reviewer to support a different opinion or conclusion must
match, at a minimum, except for the certification requirements, the reporting requirements for an:
• Appraisal Report for a real property appraisal (Standards Rule 2-2(a));
• Appraisal Report for a personal property appraisal (Standards Rule 8-2(a));
• Appraisal Review Report for an appraisal review (Standards Rule 4-2);
• Mass Appraisal Report for mass appraisal (Standards Rule 6-2); and
• Appraisal Report for business appraisal (Standards Rule 10-2(a)).

So what does the above have to do with my comment. In my experience. Most clients require additional sales if you do not agree with value.

 

[Michigan CG]

For example, review projects that require that I provide additional commentary and comps ONLY if I don't agree with the report being reviewed.

If you DO agree with the report why would you have to provide additional comps?

I can think of one example where the appraiser got to the "right" value but got there the "wrong" way. As in, a stopped clock is right twice a day. It may then be appropriate for the review appraiser to include additional comps.

 

[andrew81]

Is a contingent SOW legal?

yes

 

[J Grant]

I have found several AMCs that require scope of work terms that are contingent on my conclusions/opinions. For example, review projects that require that I provide additional commentary and comps ONLY if I don't agree with the report being reviewed. Or, for UAD reports, if I rate a property condition above a C4 (C5 or C6), I need to provide additional photos, commentary, and "cost to cure estimates" to bring the property to C4 condition. These types of terms seem inappropriate as they clearly put the appraiser into a biased position. It's my understanding that VA does something similar with purchase appraisals. If value is not meeting the purchase price, there are additional procedures required. I'm wondering, do these types of SOW terms, which clearly create biases, violate USPAP, HVCC, AIR statements, or some other industry guidelines???

Please advise.

Thank you in advance for your thoughts.

How does any of the above create bias? ...Why are so many goofy posts coming from California? )
The above are lender and client or FHA/VA/Fannie assignment conditions, the AMC is just the agent. USPAP says appraiser should fulfill assignment conditions unless the appraiser feels assignment conditions are unacceptable, in which case decline assignment. Of course you are free to decline lender work! But think for a moment from a lender/client perspective, they are the ones lending or insuring a loan, so they have the right to ask for certain things in the appraisal which will help them make a lending decision on the property. Fulfilling those has has nothing to do with bias.

 

[Elliott]

A review can be about 1.5 to 2.0 times the work of an original 1004. Some are easy some are nightmares. Its common for appraisers who are new to review work to try to out wrestle the bear, but once you've taken on bear wrestling, you have to wrestle it to the end.

 

[George Hatch]

IMO you're using the term "contingent" out of the context established the the MANAGEMENT section of the ETHICS RULE.

Virtually all forms of commerce involve compensation that is contingent upon performance of the service or delivery of the goods. Appraisal-related commerce is no different. What's unethical is agreeing to perform an assignment or engaging in an assignment that is contingent on the appraiser violating the basics of the ETHICS RULE, such as contingencies involving the reporting of or attainment of a favorable value or other assignment results that favor the client. The compromise of your impartiality and objectivity in order to get paid - that's what is unethical.

Meanwhile, the SOWR acknowledges the point that the SOW decision that counts is the one the appraiser ends up with, not necessarily the one they started with:

"Determining the scope of work is an ongoing process in an assignment. Information or conditions discovered during the course of the assignment might cause the appraiser to reconsider the scope of work. "

You rolling up to a subject property and discovering there's a cell tower onsite that nobody mentioned to you might cause you to do the bump WRT your scope of work (add another analysis). Or as you mentioned, doing a review and discovering you didn't agree with something in the report and going through to explain the reasons for that disagreement and provide alternate solutions. These are examples of you ending up with a different SOW than you started out with. And not only are these "evolving SOW" decisions acceptable, but they would be required in order to return the acceptable workproduct.

If you agreed to the assignment conditions when you accepted the assignment then shortsheeting them after the fact is what becomes unprofessional.

 

[CANative]

So what does the above have to do with my comment. In my experience. Most clients require additional sales if you do not agree with value.

I was agreeing with you and amplifying for the benefit of the OP.

If the reviewer's OMV is required and more comps are needed, SR2-2(a) kicks in.