Phased assignment

[Caligirl]

Are appraisers responsible for a client's future misuse of a report if the SOW is based upon the client's stated intentions and not their actual or future intentions?

Never mind-

 

[Lee Lansford]

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Im just always amazed at those that dont understand what USPAP says with regard to restricted use reports but rather how they wish to interject things that are not found within the document, nor found within the assignment.

You are 100% correct.

 

[Howard Klahr]

As previously mentioned your description addresses reporting options of an appraisal not scope of work. A restricted report is to contain the same level of detail and analysis as would a summary report or in fact even a self contained report. The differences are in the appraisal report.

What you really meant in regard to a phased assignment is for different levels of scope of work and yes these can be performed in a manner compliant with USPAP. The level of research, inspection and analysis may be performed at different levels to meet your clients request. Keep in mind however that if engaged to perform the next phase the value may not necessarily be the same since you may discover some information that would alter your opinion.

As an example, your could perform an income approach analysis on a property without doing any inspections, being provided only a rent roll and operating statement. That would result in one value subject to appropriate extraordinary assumptions and hypothetical conditions as appropriate. When performing the next phase you obtain copies of leases, inspect the property and research other data. At this point you note that the rent roll does not correspond with the lease documents and when inspecting the property several tenants reported to be in occupancy are no longer there. Obviously this would result in different values.

And yes this type of assignment is performed fairly regularly.

 

[Caligirl]

I personally do not feel comfortable with a phased assignment which includes a RUR when the Intended Use is for lending, per the OP's description.

It is not a lecture at anyone who chooses to do them. I simply do not, for a variety of reasons.

As Howard pointed out from a USPAP and methodology standpoint, this all makes perfect sense.

However. Practically speaking. Imagine only reviewing the rent roll and a couple sales. You write up the RUR. All appears well and the re-fi looks good. The client is happy, the LO is happy. You are given Phase II.

You now inspect the property. You discover newly vacated spaces. Exterior condition is superior to interior. The borrower forgot to mention a couple things. Etc. You deliver the appraisal. Now you are the devil. The LO who didn't want to pay for an appraisal, "now has an appraisal they can't use". The client is furious.

Isn't it just easier to avoid these types of situations? Easy solution: provide one appraisal appropriate for the intended use.

 

[Lee Lansford]

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Isn't it just easier to avoid these types of situations? Easy solution: provide one appraisal appropriate for the intended use.

And, upon delivery of the report of the appraisal, the client is PO'd with you!

Can't win, eh?

 

[Caligirl]

And, upon delivery of the report of the appraisal, the client is PO'd with you!

Can't win, eh?

No, but can minimize hassle and repeated phone calls, screaming, the inevitable 'why did you charge us for two reports', trying to collect on both, possible complaints, etc.

It is what it is the first time.

As I pointed out in a much earlier post, working with direct lenders was a whole other ballgame (in my experience, at least). In fact, I used to see many local LOs in USPAP course. They were concerned with the quality of their loans and understood the role a quality appraisal played in that. Things have changed.

 

[PropertyEconomics]

No, but can minimize hassle and repeated phone calls, screaming, the inevitable 'why did you charge us for two reports', trying to collect on both, possible complaints, etc.

It is what it is the first time.

As I pointed out in a much earlier post, working with direct lenders was a whole other ballgame (in my experience, at least). In fact, I used to see many local LOs in USPAP course. They were concerned with the quality of their loans and understood the role a quality appraisal played in that. Things have changed.

There is no charging for two reports in a phased assignment. The first half payment is either collected up front as a retainer or it is billed in one bill at the time the second phase is not necessary. If the second phase is necessary the appraisal is billed completely at the end.

Its apparent not many here have done phased assignments thus it stands to reason why most are so uncomfortable with them. The ones that I have done have not been for lending but for other purposes, litigation, financial planning, etc.. I think you will find there are others, Boston, for example who has had the same experience I have had with phased work. Phased assignments have their purpose in the field of appraisal.

 

[Lee Lansford]

No, but can minimize hassle and repeated phone calls, screaming, the inevitable 'why did you charge us for two reports', trying to collect on both, possible complaints, etc.

It is what it is the first time.

As I pointed out in a much earlier post, working with direct lenders was a whole other ballgame (in my experience, at least). In fact, I used to see many local LOs in USPAP course. They were concerned with the quality of their loans and understood the role a quality appraisal played in that. Things have changed.

Caligirl, I understand your thoughts, but my perspective differs: Any client who would engage me for such an assignment would be well aware that the results of the first assignment does not indicate that the results of the 2nd assignment would be the same.

Lee

 

[Caligirl]

Caligirl, I understand your thoughts, but my perspective differs: Any client who would engage me for such an assignment would be well aware that the results of the first assignment does not indicate that the results of the 2nd assignment would be the same.

Lee

Of course-I did not mean to imply otherwise.

 

[Webbed Feet]

Anyone do phased assignments for bank clients?

Lender wants restricted report to see if borrower is 'in the right ballpark' to refinance (does not want to pay full fee).

Will turn out as a full fee summary report assignment (depending on the results).

To me, it looks like there is pressure to arrive at a predetermined conclusion in order to ensure a higher fee.

Am I right or can this be ethically done?

To start, the element of determining if a request for "Restricted" form of reporting should not have a thing at all to do with determining an appropriate fee for the work involved based on a "Form" think fee idea. (edited as I realized I didn't word correctly) This trade has to reject this "Pricing by the Form" going on. The "Restricted" format of reporting does not at all remotely mean completeing any assignment using that reporting format is going to be fast or cheap.

Second, it is perfectly acceptable to take an appraisal assignment with one SOW, and follow that up with a later different appraisal assignment that employs a SOW different than the first. The matter of if these two assignments are completed under two separate engagement contracts, or one single engagement contract is not relevant to an Ethics concern as you are thinking it may be. In fact, clearing up the parameters of a phased assignment, up front, in one single engagement contract for what amounts to two separate real estate appraisals .. should be EXACTLY what it takes to dispell any appearance of any lack of impartiality or ethics concerns.

You clear the matter up in the engagement contract of the client agreement, in writing, that the first phase and second phase may have completely different results and that the first phase is NOT any warrenty that a following second phase will be equal to or greater than the first. Expressly because the SOW between the two is not the same and may cause unexpected results...

And I rather bet your lender wanted a "Desk-Top" appraisal, not a "Restricted" report. Somebody has it in their head they are the same thing, when they are not.