i would love to stop doing comp check. but all my business is with MB and i get calls from them every day. i call it area sales range analysis. if i don't do it i have no work. what can i do? every time i go to any seminar i ask the same question. i always get the same response from the people there. you should not do it, it's a violation of USPAP. but after the seminar or at lunch i have at least 3-5 people come up to me and say that they do it as well. so what do i do...
Here is the issue in a nutshell:
A. As an appraiser, if you are going to provide an opinion of value in this context, it is always an appraisal. Therefore, it must comply with USPAP. This means keeping a workfile, producing credible results (given the intended use of the assignment) and having a signed certification.
B. You can do a desktop appraisal if you choose and charge whatever you like. The advice I give is to make sure that the engagement agreement and intended use are clearly identified. While not necessary in general, for this type of assignment I recommend one clearly puts in writing that the results of the desktop appraisal are not related to any other assignment and that another appraisal for a different intended use (such as a mortgage finance transaction) with a different SOW can return completely different results.
C. There are two very legitimate arguments (IMNSHO) against providing desktop appraisals.
The first is should the appraiser work for "free"? I think that depends on how much time it takes you to complete such an assignment and who you are doing it for. If you had a long-term client, you might be inclined to work for a half-hour on an assignment for them. If it is a prospective client, you may limit your time to about five-minutes. Naturally, this is dependent on your market and the specifics of the property itself. The average desktop appraisal I do takes less than 5-minutes. And, if it takes more than 10-minutes, I call the client and let them know that I cannot complete a desktop and they need to order the mortgage finance appraisal to get a value. Also, I do not do desktops on 2-4's or vacant land. I keep it simple.
The second legitimate complaint is this: Is their an implicit or explicit "quid pro quo" for value on the desktop vs. any subsequent order? In other words, if I conclude a value of $X with a desktop, does that imply the same value will be returned when I complete the mortgage finance appraisal? The fact of the matter, IMO, is that without taking the steps necessary to inform otherwise,
there is a reasonable inference by the client that the values should be the same. Therefore, to counter this and make it explicit that no
pre-determined value is implied, a statement like this should be used on the engagement form (for the desktop):
The acceptance and completion of this service does not represent, either express or implied, that the same or similar value will be concluded when completing another assignment for a different intended use such as for a mortgage finance transaction. We do not accept, and will not complete, any assignment that requires a predetermined value.
The greatest challenge here is for the appraiser to be able to tell the client up-front that the desktop valuation is only useful in analyzing the loan package by the agent/broker, and is not meaningful as far as estimating market value for a lender which is a different assignment, requires a completely different SOW and does not rely on the significant Extraordinary Assumptions that is part of the desktop appraisal.
My experience is this:
1. About half of the callers don't want to fill out my form which explains in detail what they are getting. They are shopping for a value, not trying to get a legitimate valuation for their loan package review.
2. Half of the remainder, once it is explained to them that there is no quid pro quo on the value, say thanks and don't call back.
3. The remaining group (about 25%) understand what I'm talking about and understand what they are getting. However, half of these drop out when I tell them that all mortgage finance transaction appraisals are COD at the inspection or before completion. They want to bill in escrow which we don't do.
D. This leaves roughly 10% who go through the full process. Of those, who actually orders? About half. So, of the ones that I pre-screen and get to this stage, we get about 50% of the orders, COD.
Finally, our values for the desktop estimate are expressed as a range. So, my value estimate may be $400k to $450k. I will get the occasional
"Well, it will work if you are at $440k or more!"
to which I respond
"There is no guarantee, and for all we know, if we complete the mortgage refinance assignment, the value could be less than $400k... and we require the assignments to be paid at inspection."
So, I join in with everyone else to say stop doing "comp checks".
I am definitely in the minority, however, by suggesting that an alternative is to do a desktop appraisal. And, unless you are very confident in your ability to write a detailed engagement letter and understand how to write your limiting conditions and Extraordinary Assumptions so that your report is consistent with what you actually do (your SOW performed) and is USPAP compliant, I'd recommend not doing them at all.
Good luck!:new_smile-l:
