New USPAP Q & A October 2009

[Tom Watson]

Tres - new client of something you appraised last week. You didn't know the house burnt down but your E&O is ****ed - huh? New identifier-client, new SOW. Changing the name of the client doesn't release you from liability for due diligence

 

[Carnivore]

As much as they screw us and/or beat us to death about fee's, why would you try and make it easy by putting yourself in a compromising position. The rule is pretty clear. The lenders as usual are just trying to muddy up the waters.

 

[DWiley]

I'm sure I will get blasted, but why would the scope of work be so different from one mortgage lender to another.

For an FHA assignment, there should be similarity in many regards. The potential issue is those pesky requirements that exceed the 4150 that most lenders seem to have these days. If "Lender B" is identified as the client, then the appraiser takes on the responsibility of identifying, and complying with, any assignment conditions that might be imposed by "Lender B." Even if there are no additional assignment conditions, the appraiser is obligated to find that out, and that takes time.

I'm all for getting paid as much as I can, but I just don't feel right about charging the borrower for a second appraisal when at the end of the day all that is being done is cloning the same report.

The lender has the option of using the original report. If they choose not to do that, why should the appraiser be required to cover the cost associated with that choice?

The lender is the client, and the lender is typically the one being charged. If the lender chooses to pass the cost along to the borrower, that is a business issue for the lender, not me as the appraiser. I feel for borrowers too, but no so much that I will work for free. My company and my family count on revenue from the work I do.

Even if the appraiser decides the original SOW is basically sufficient, time is required to produce a new report, and there is cost associated with creating, delivering and storing a new report. The appraiser is also exposed to the liability of an additional assignment. All of those things clearly warrant additional fee.

One of the biggest issues appraisers face right now is that too many of us do not make sound business decisions. For years many lenders have beat appraisers into submission with regard to fees. That is why so many appraisers are pursuing non-lender work as their primary base of business.

 

[William K]

I'm sure I will get blasted, but why would the scope of work be so different from one mortgage lender to another. Why should a new appraisal be required when one was just done within a short time frame (say less than 30 days). I'm all for getting paid as much as I can, but I just don't feel right about charging the borrower for a second appraisal when at the end of the day all that is being done is cloning the same report. If the date is being changed which would require a new inspection then that is different, but even then in most cases it will still be the same, unless a new comp or better comp has closed.

MY BOLD

Tres,
I think your question has some merit. However understand these basics.

We are paid for our Time, our Experience and our Exposure. In essence when these things increase so should the compensation/fee charged.
While your Time to make just a name change is only minimal, and your Experience to change the name is not needed (anyone who can type can do it), your EXPOSURE has almost doubled with no additional monetary benefit.

 

[Carnivore]

For an FHA assignment, there should be similarity in many regards. The potential issue is those pesky requirements that exceed the 4150 that most lenders seem to have these days. If "Lender B" is identified as the client, then the appraiser takes on the responsibility of identifying, and complying with, any assignment conditions that might be imposed by "Lender B." Even if there are no additional assignment conditions, the appraiser is obligated to find that out, and that takes time.

The lender has the option of using the original report. If they choose not to do that, why should the appraiser be required to cover the cost associated with that choice?

Danny,

Good point. I ask why lenders have additional requirements on appraisals for FHA Insured loan. It seems to me that if they meet the requirements, where is the risk to them?

In an FHA the appraisal is portable for a period of time. That means if a new lender is involved ther ewill be no extra charges to the borrower. That means to us as appraisers that we can charge the lender and not have to feel sorry for the consumer.

Like you said, the lender is making this decision for there own reasons, not because HUD requires it. They should always pay for our extra time.

 

[LI-Appr]

Just like they should pay for the AMC services they decide to use. Now they outsource their due diligence to an AMC and have us pay for it. What a crock.

 

[Terrel L. Shields]

I just don't feel right about charging the borrower for a second appraisal when at the end of the day all that is being done is cloning the same report.The lender has the option of using the original report. If they choose not to do that, why should the appraiser be required to cover the cost associated with that choice?

So rather than cost the borrower a couple hundred extra, you would prefer to starve not only yourself but all the other appraisers who have superficially similar requests that require a lot more work and are told, "But Tres does that for free." You can hurt a lot more people than just costing the borrower $50-200 extra and like Danny noted, Lender B can (and usually will) come back and stip you to death...all for free. The decision to do this is the lenders and they CAN accept your report as is. It is they who are deciding that the borrower gets hosed, so why are you letting the lender get off the hook?

 

[CANative]

1. The lender can't charge the borrower for a second appraisal. If they want another appraisal they have to eat the cost. This is in several of the HUD handbooks.

2. It doesn't matter if the SOW is the same or different (it can't be the same if the client has changed... by definition). But it doesn't matter anyway. The problem is in the language of the mortgagee letter. Stating that the SOW is limited to changing the name of the client implies that all other SR's have been ignored for this new assignment.

HUD has to amend the language in that ML.

 

[Mike Garrett RAA]

Why won't FHA do as VA has done for a number of years now...Name the client as "Any Approved FHA Lender". This would put a stop to the change the name BS for good.

 

[rcsone]

Why won't FHA do as VA has done for a number of years now...Name the client as "Any Approved FHA Lender". This would put a stop to the change the name BS for good.

....too complicated.......no lobbyist hired to support and explain yet.......rs