Predetermined Value USPAP

[Terrel L. Shields]

To me this is a non-issue and if it is the only potential bit of attempted influence you receive in your career

To me, the issue central to the problem remains 2 factors. That anchor bias that people mistakenly believe they can ignore, and the simple fact that should this blow up into a complaint or a lawsuit, then it is evidence that you might have "bumped" the value to favor the borrower/lender. That is especially true if the complaint centers not around the idea the value wasn't high enough, rather that you over-valued the property and the plaintiff now has buyer's remorse. That was the case in the lawsuit I was involved in those oh so many years ago. They argued I appraised the property for the sale price upon the behest of the bank. In reality, I was sent out to appraise the property after the property had closed for X amount. Four days had lapsed between the closing of the loan and my report. the recorded deed was actually in my report. The bank only discovered their own error at the closing table. Although they were supposed to have the appraisal remember this isn't FNMA or FHA, it did not stop closing. When confronted with the sale price on a complex property, and have sales to support it, it is hard not to come up with the MV that is equal to the actual sale price. But a stated price means you either come up with some price that is contrary to the low side to that stated, or you give the appearance of having done the bidding of the client. Whether you actually are unbiased or not does not matter, what matters is can you prove you are unbiased?

 

[J Grant]

Part of the competence, and ethics, of an appraiser is knowing which information to consider and which to discard and of the info considered, how much reliance to put on it. A sales contract is a piece of market information and thus merits considering (USPAP requires review of contract , if contract is available ). How much to rely on a sales contract price as a value indicator, or not to rely on it can depend on the analysis of the terms/conditions and via comparison to other prices. A recent prior sale of a subject is market information handled via analysis as well.

A buyer, seller, RE agent , builder/other communicating how much they think a house is worth/what they "need" for a loan is not market information- it is parties trying to influence for their own gain. Which we can understand as such and mostly ignore. That said, there could be kernels of information within these discussions , which an appraiser can filter out and see if useful.

A lender /client communicating a value they want or need is a different story, due to cert 18, appraiser independence, the HVCC prohibiting ordering/communication between a loan officer and an appraiser for this very reason. Which is why posters are differentiating it from the norm of attempts to influence from the like of agents and owners, (some of which are so clumsy as to be laughable. ).

 

[Elliott]

So if a HO says, "I'm thinking its worth $400,000." or "This has to be at least $400,000 or this won't work and I'm not going to pay for the appraisal." what is the appraiser suppose to do?

Most of us hear these little intimidations from time to time. Goes with the territory. Not that hard to deal with it or deflect it.

 

[J Grant]

Just a side note...what adds to this problem is when parties who either paid for appraisal or have a vested interest in outcome assume you are doing the appraisal "for them", - Even though the appraisal says they are not an intended user .

I have RE agents call me and say things such as " You are working on an appraisal for me, when will it be done?" I politely correct in reply I am doing the appraisal for the client, and will submit it when finished. I can understand why an owner who paid for an appraisal, even if it is explained to them they are not the client, gets upset that the appraiser did not "help" them.

 

[J Grant]

So if a HO says, "I'm thinking its worth $400,000." or "This has to be at least $400,000 or this won't work and I'm not going to pay for the appraisal." what is the appraiser suppose to do?

Most of us hear these little intimidations from time to time. Goes with the territory. Not that hard to deal with it or deflect it.

Again, that is different than coming from the lender/client. And most times can be ignored. But it depends on degree of aggression from a HO and a bully move such as will not pay for an appraisal or other threat might make me give assignment back. Though with lender work now the borrower pays upfront to lender so that is not a threat they can make anymore. In a private assignment i tell the person over the phone my job is to opine MV and not to advocate for any party or reach a $ target, are they okay with that? Have the conversation before go to the property.

 

[George Hatch]

One thing being aware of the borrowers' hopes and dreams does for me is notifies me when I need to go on offense in disproving its reasonableness if/when that's the case. It becomes a gimme. Not an incentive.

I don't run into ROVs nearly as often as most of you, but that doesn't alter how I handle those situations. I don't believe in ignoring the question and hoping the ROV or other challenges won't surface later. I don't play those odds just to save the little time/effort it takes to address the question directly. I always proceed under the assumption that those hopes and dreams die hard, and that they will surface later if I don't curbstomp the life out of them in my original report.

When I have a recent listing or a sales contract I reference them directly in my sales comparison and make the comment that I DID consider them in my analysis, but no moreso than any of the other sales data. If/when necessary, I have no qualms about commenting that the contract price is completely outweighed (or amply supported) by the comparable sales, or that the recent prior sale appears high (or low) in relation to the other sales at that time.

 

[Zoe]

From what I can tell it comes from the bank and the AMC writes a few things on it and emails it to me.

That's okay. That's why they want an expert.

 

[Zoe]

Doing an appraisal to arrive at a predetermined value (or value direction ), is an appraiser issue, not a client directed issue. This is stinky of the client and I am not sure they are allowed to do this. But they did it, so if you accept assignment, just know a client this low in their standards might challenge results below 450k.

Also know that with this client is probably a sleaze that gets audited, (and writes targets on orders ), so your appraisal might be challenged in a review at some time. So whatever $ amount MVO you opine, support it well and comment that you reviewed additional sales as well as the comps used in the report.

A statement I often put in appraisals regarding additional sales reviewed : (example)

"The appraiser reviewed other sales in addition to the comps used on the grid. There are properties that sold for higher amounts and properties that sold for lower amounts in the area. The higher priced sales tend to be larger, newer and have a pool or lake view. The lower price sales tend to be smaller, older, and of inferior upgrade houses. The comps on the grid are the more similar to the subject."

A client trying to influence value is what we have here... which is not the same thing as the appraiser shaping their appraisal results come to a pre determined value or value direction . But again, the fact that the client expressed a value they expect adds another level of possible scrutiny to this assignment.

I don't agree. Just consider the fact that you don't know who on God's green earth gave the estimate of value and reconcile it all and complete your service. Think of other professionals. They don't guarantee their services. They are not Jesus. Does a doctor guarantee you that you will be healed after their service? Does a lawyer guarantee you will win your lawsuit? Does an appraiser guarantee their OV will be effective after effective date?

 

[Zoe]

So if real estate agent or homeowner or whoever tells you they think property is worth "X". You resign? Where it was sticky, was mortgage brokers and others telling you that they won't send more work if you don't meet value or they didn't tell you that and just quit sending you work.. Does that still happen? Most likely. Different avenue. AMC's.

 

[J Grant]

So if real estate agent or homeowner or whoever tells you they think property is worth "X". You resign? Where it was sticky, was mortgage brokers and others telling you that they won't send more work if you don't meet value or they didn't tell you that and just quit sending you work.. Does that still happen? Most likely. Different avenue. AMC's.

Clearly you did not read, or understand the posts, since nobody including myself say they resign simply because an owner or agent etc tells what they think a property is worth. The specific reasons for a decline are in the posts if you read them for context