Phased assignment

[PropertyEconomics]

Send that client a copy of USPAP, with the Ethics page bookmarked that prohibits us from estimating any predetermined value in advance, including ranges, directions, etc.

Where do you see a predetermined value in the OP? And where does USPAP say an appraiser cannot provide a restricted appraisal report providing a range of probable values which may be realized during a full assignment?
I take from your post that you believe phased assignments are not ethical or allowed by USPAP?

 

[BobfromSalem]

For lending purposes, I would tread very carefully in doing a restricted report first for a lender. Personally, I wouldn't do it.

In my market area, more and more lenders are going with management companies.

When I have any doubts about USPAP issues, our office usually calls Stephanie Coleman with AI...She is a definitive source.

 

[Terrel L. Shields]

Not knowing what the "predetermined" value is .. there is no way the restricted appraisal report can be predicated on reaching that value.

It is the second report that violates USPAP. You do know what the "pre-determined" value is. You determined it with the restricted report. That is the goal of the "full" report. To get a lender acceptable report with THAT value on it. Any variation in THAT value is going to outrage them. They paid for THAT value and they want THAT value. Your "restricted" report (and I have to assume that it would also have a much more limited scope of work or the fee wouldn't be that much different from a fee for a summary or self-contained report) is expected to pre-determine the value, period. No other reason for it.

Therefore, I agree with Bob. In this case, the final report is CONTINGENT upon a satisfactory FIRST STAGE report. There are issues of producing drafts or partial appraisals, but as a means of "pre-comping" the "summary" report, this clearly would be an issue of contingency.

 

[PropertyEconomics]

For lending purposes, I would tread very carefully in doing a restricted report first for a lender. Personally, I wouldn't do it.

In my market area, more and more lenders are going with management companies.

When I have any doubts about USPAP issues, our office usually calls Stephanie Coleman with AI...She is a definitive source.

You didnt answer the question I see Bob .. hahahaha .... thats ok ... I understand.

 

[JSmith43]

Paul, I believe there is a legitimate need for a screening assignment, kind of like a level 1 environmental assessment. The client might be the loan officer. The reverse mortgage guys are forever looking at zillow, assessor valuation, etc, but have been flying ever more blind as they have discovered old rules of thumb like assessed value being the likely low end, are now out the window.

The SOW could be to develop a probable range of value for the LO to decide on work priorities, product selection, loan pricing, etc. The fee should stand on it's own. If the appraiser is indifferent as to whether to do restricted use desk top appraisals all day long as opposed to 1004, it would be hard for a witch hunter to make the case that there is contingent compensation. Heck, the 1004 stage might lower the profit. The SOW change for report 2, it should be pointed out to the client, means the results are only predictive and the EA covering interior condition makes it clear that there is no guaranteed result, only an improved likeliness that the result will fall within a range identified by the screening assignment. For all the appraiser knows, more money down is possible, etc.

Paul, there is one small problem in MN, if this involves a contemplated desk top assignment. Somewhere in the MN rules, it requires inspection inside and out, of property improvements. I have posted the relevant section before and can do so again, if asked. Bummer, all of those 2055's, exterior only. I know I did a few in the '90's-almost fell out of my chair when I read the MN rules carefully. That part should be deleted, IMO, but, so far, it has survived.

 

[Terrel L. Shields]

Somewhere in the MN rules, it requires inspection inside and out, of property improvements

I believe MN is a non-mandatory state, is that not correct? If not a FRT, no license is required.

82B.22 CONTINGENT FEES.

A licensed real estate appraiser may not accept a commission for an appraisal assignment that is contingent upon the appraiser reporting a predetermined estimate, analysis, or opinion, or is contingent upon the opinion, conclusion, or valuation reached, or upon the consequences resulting from the appraisal assignment.

What is a staged assignment if not a predetermined estimate?

 

[JSmith43]

I believe MN is a non-mandatory state, is that not correct? If not a FRT, no license is required. One state over (WI) has that set-up. In MN, if it is called an appraisal, a license is needed.
What is a staged assignment if not a predetermined estimate?

If an appraiser gets paid no matter the answer, for assignment number one, payment is not contingent upon result.

If there is a follow up assignment with a different SOW, and the appraiser gets paid no matter the answer, then that fee is not contingent upon the result reported.

What is a staged assignment if not a predetermined estimate?

It is an estimate of an estimate. The second estimate is more refined and there is still a reasonable risk that the estimate may fall outside the range of the estimate of the estimate. It is not predetermined, merely pre-estimated

These are my views alone. When there is chum in the water, the sharks may have a different take on the matter:laugh:

 

[Scott Lanz]

Mentor,

The Rule you are referring to is 2806.6000.Subpart 2 (L). I brought this up in a discussion at class last year. I read every case out of the Minnesota Dept. of Commerce and have not seen anyone sanctioned for this part of the rule, yet.

I agree with you that it should be removed as it would make every drive-by in violation of the rule.

To the Master of Disaster OP

I am going to do some research on this today with the powers that be in Minnesota.

 

[Howard]

As to the OP's original question, how does his lender's request differ from a mortgage broker asking me to drive 100 miles to BFE to do a "comp check" to support a value of $zzz,zzz? If I can find the comps, I can finish a report for them.

I still get those, BTW.

 

[JSmith43]

I read every case out of the Minnesota Dept. of Commerce and have not seen anyone sanctioned for this part of the rule, yet.

Scott, I read the summaries a few weeks ago and there was a case where the appraiser was cited for not inspecting & I suspected it was because of that provision.

I didn't complain to the State, but about a year after the 2055 Exterior orders started dribbling in ('97 ,98?). the local AI scheduled a class on properly filling out the 2055 and performing drive by assignments in general. Craig Harrington was the instructor.

At that time, I faxed them a copy of the rule so they would be sure and address the situation. There was some panic evident in the voice from someone that called me to say Craig was checking up on this.

Imagine all the REO drive by assignments? Contrary to state rules? It really stands out as a hinderance to useful and necessary appraisal activity. So, I hope your connections come through on this. Maybe they could issue a "get out of jail" letter to each and every appraiser performing an assignment where interior inspection is explicitly excepted in the SOW?