"purpose of the appraisal"?

[Hugh Griffith]

Still struggling with "purpose" as opposed to "use" of the appraisal. USPAP 2005 only addresses "Intended Use" with no reference to "purpose" in index. Fannie Mae when offering fix to Cert#23 refers to "Intended Use" being subject to "Scope of Work"(note caps), purpose of the appraisal(no caps), reporting requirements of this appraisal report form(generalized-no caps), and "Definition of Market Value"(caps again). Being as Fannie allows no variation in wording, I assume that the emphasis(caps) has a purpose. Perhaps "Intended Use" is to be prominently displayed; whereas "purpose" can be worked into "Intended Use" or some other section at the appraiser's discretion. Why not just refer to "Intended Use/purpose" and use some wording to include both? Any comments? Any wording suggestions? Thanks!

 

[Fred]

Still struggling with "purpose" as opposed to "use" of the appraisal. USPAP 2005 only addresses "Intended Use" with no reference to "purpose" in index.

"Purpose" has no formal defintion and some folks use purpose to mean use.

There is nothing wrong with saying the appraiser's purpose or objective is to estimate some type of value, or to estimate some type of value for a specified property on a specified date. All that is very common. Intended use is something the client does, not the appraiser. And like I said, some foks straddle the line and say 'intended use is mortgage purposes.'

 

[Pamela Crowley (Florida)]

Purpose: To form a USPAP compliant opinion of market value as defined within the appraisal report.

Use: Depends on the client.

Use for mortgage lenders: For the named client and/or the funding lender to make decisions regarding the subject property that is being used as collateral for a mortgage loan.


I'm very sure I will be corrected if anybody finds anything in these they believe is not quite right.

 

[Mike Kennedy]

Purpose: assist the Client and/or Intended User(s) stated herein evaluate a subject property (as defined herein) for the specific Intended Use below.

Intended Use: determine the subject's current market value (defined herein) as of the specific effective date of appraisal as collateral in a mortgage financing transaction.

(replace mortgage financing with specific use for non-lending assignments.)

IMO - 2 distinct elements in SOW for each assignment.

 

[Fred]

Intended Use: determine the subject's current market value

To me, that intended use statement confuses what the appraiser seeks to determine or estimate with what the client seeks to determine. The intended use belongs to the client and the client is not the one who determines or estimates value.

The demand for appraisal services arises because someone has to make a property decision; and property value is a key element of that decision. The intended use(s) includes the decision(s) that the client (and others) will make in reliance on the assignment results. Notwithstanding the pervasive and problematic assumption on this forum that all assignments are mortgage assignments - the client’s “use” of a mortgage appraisal is:

• to decide whether the real estate in question should be accepted as collateral (i.e., correct class of real property, presence of detrimental conditions, hazards, etc.).
• to decide how much to lend to the prospective borrower.

As I posted, "purpose" is not defined in USPAP. However, the report will make more sense if "purpose' belongs to the appraiser and "use" (as indicated by USPAP) belongs to the client.

 

[Hugh Griffith]

As I posted, "purpose" is not defined in USPAP. However, the report will make more sense if "purpose' belongs to the appraiser and "use" (as indicated by USPAP) belongs to the client.

Thanks for the response! I like the above to view the difference; and Pamela's for a canned wording for purpose. I think I will combine Intended Use/purpose in the same explanation, but with different statements for each. Much simpler than having separate headings for each unless the form requires it. Have a good weekend!

 

[Marcia Langley]

Hugh,

Steven and Pam both gave good information. As Steven said, 'purpose' is not defined in USPAP, rather, it is used only in the general English dictionary definition of the word. The thing is to not use it in such a way that it would be confused with the USPAP definition of the term 'use'.

 

[Neil Anderson]

Maybe I’m wrong but I believe that when we differentiate an appraisal from an appraisal report, the answer is clear. An appraisal is the act of appraising while the appraisal report is paper or .pdf version of our findings that we give our client.

What is the Purpose of the appraisal? The purpose is (a variation of) developing an opinion of value.

What is the Intended Use? I view Intended Use as the function of the report – what the client is going to use the report for. So an example of the intended use for a mortgage finance transaction is “to assist the intended user in mortgage underwriting decisions.”

 

[Pat Butler]

I had the same problem as you did- "use" and "purpose" were practically interchangeable. You know why? Because USPAP made up their own definition of what "purpose" meant and it didn't mean anything like the typical definition you'd find in a dictionary.

USPAP used the word "purpose" to mean "type and definition of value." It was so screwy that they decided in 2005 to remove the word "purpose" from USPAP and replace it with the aforementioned definition.

If you look in the front matter of USPAP 2005 you'll see where they mention this signficant revision and where they also state that the word "purpose" had varied intended meanings.

So now you can just ignore having to address the purpose of the appraisal and just talk about the intended use. Of course, you still have to mention the 'type of value' which is typically market value.

I thought this was a pretty significant change, yet it wasn't even addressed in the USPAP update course I took at the time.