Recert or Update? They want an update at recert price

[rcwessel]

I keep getting requests for "recerts."

When I tell the AMC they really need an update - because their client wants a current value, pictures, etc. - they get all excited, as in, "I'll have to discuss this with our chief appraiser and the lender and see what they want to do."

What I send them follows:

"Got your fax. A recertification is not appropriate in this situation. Please see the following.

The following is taken from Statement on Appraisal Standards No.7 (Smt-7):

Clarification of Nomenclature

"Various nomenclature has been developed by clients and client groups for certain appraisal assignments. The development of this Statement on Appraisal Standards is a response to inquiries about several types of appraisal assignments, and it is appropriate to clarify the meaning of these terms for future reference.

The term "Letter Opinion of Value" has been used to describe a one-page letter sent to a client stating a value opinion and referencing the file information and experience of the appraiser as the basis for the opinion. This type of service does not comply with USPAP and should be eliminated from appraisal practice. USPAP recognizes that the results of any appraisal assignment may be presented in a letter format, provided that the content items in one of the three report options under Standards Rule 2-2 or 8-2 are addressed. The Restricted Use Appraisal Report is the minimum report format; it replaces the concept of the Letter Opinion of Value.

The term "Update of an Appraisal" is defined as an extension of an original Complete or Limited Appraisal and report relied on by a client for a prior business decision. The Update of an Appraisal changes the effective date of the value opinion. See Advisory Opinion AO-3 for a further discussion and description of this type of appraisal assignment.

The term "Recertification of Value" has been mistakenly used in lieu of the term "Update of an Appraisal" by some clients. A Recertification of Value is performed to confirm whether or not the conditions of an appraisal have been met. A Recertification of Value does not change the effective date of the value opinion."


I believe your client may be asking for an update. This requires us to reinspect the property and analyze current sales data. It is therefore a new appraisal and our regular fee would apply.

Please tell me how to proceed.

Thanks, "



How do others handle this? I know I'm not alone.

 

[Bobby Bucks]

RC
I’m had a couple requests since the rates dropped again. I get very few because I try to deal with
“real” banks. If they come from them, no problem, however, if they come from a mortgage broker
watch out.....they rarely know what they want....recertification, update.... all they know is they
want it fast and cheap (or even free)...all they’re concerned with is their commission. Searching
the archives there are hundreds of posts on this problem and it is most definitely a problem since
the subject keeps returning. A buddy of mine claims to have the perfect solution. His rate for a full
1004 is $325. A recertification is $400 and an update is $400. End of problem.

 

[George Hatch]

Let us not confuse minimum required conduct (from USPAP) with the business aspect of conducting an appraisal practice. No, I'm not suggesting that you allow one to interfere with the other, but rather that you are dealing with two different issues.

Your use of the term 'update' is correct and I urge you to maintain this usage and educate your client as necessary. Whether the update assignment requires an inspection is a decision that the appraiser should make, and depends on a number of factors. For instance, why is the update being requested; does the appraiser have reason to believe that the subject may have changed in some way; is the time period too long to make any assumptions, etc.. Please note that it is possible (USPAP-wise) and in some cases perfectly acceptable to issue an update to the original appraisal without a physical inspection, assuming the appraiser believes the inspection to not be necessary. If you can justify why you wouldn't require an inspection then you can go ahead and do the update without the inspection. Of course, there is more risk involved when there is no inspection because the appraiser is working off an assumption. Many appraisers will insist on a physical inspection for all updates, and they are within their rights to do so. Judgment call.

As to whether you should quote a full fee, half fee, or no fee for your services, that is a separate issue. I'm sure your client is requesting a "Recert" because they mistakenly believe it will save them some money. There is nothing that prevents you from doing the update for free, other than the fact that we don't want to work for free. But this is a business decision, not a USPAP decision. The only portion of this part of the dispute where USPAP comes into play is the notion that some folks have that the amount of the fee is related to the degree of due diligence required.

So in answer to your question, I would tell your client that you don't feel confident enough that there has been no change to the subject in the interim, so you'll need to inspect. Time is money, so the re-inspection and the update will not be free. Or not. Judgment call.

George Hatch

 

[Jo Ann Meyer Stratton]

As I have offered many times in the past, I will email a pdf file of two sample "Update to an Appraisal" letters. But the final decision of whether I do an Update to an Appraisal letter or an Updated Appraisal report or a completely new appraisal report is mine and I base it on if there has been any changes to either the subject or the market or both. If something has changed or I think the time frame is too long for that specific type of property in that specific market, then I will insist on doing a new report. If the changes are minor I might do an Updated Appraisal report. If no change of any kind, I might do an Update to an Appraisal letter. All options involve visiting the subject property on a new effective date of opinion of value, review the information regarding the market and the subject, research of current market data, etc (all the typical due diligence regardless of report form). All variations are appraisals, just the form of reporting changes. The fee is also my decision based on what I think the time involved will be and what I determine would be appropriate. If the client doesn't like my decision, they are free to contact another appraiser--I even provide the phone numbers of other appraisers in my market. So if anyone is interested email me at jmstratton@aznex.net

Also how many have read the proposed changes to 2003 USPAP? Not only the term Recertification of Value will become obsolete so will Update to an Appraisal. They will all become new assignments that might be able to be referanced back to a previous assignment. So the terms might change again in the future---but the end product will determined by the appraiser.

 

[Tim The Enchanter]

Thanks for the template info Jo Ann. It's greatly appreciated.
So much semantics. :roll:

 

[Tim Hicks (Texas)]

George,

USPAP does not require a new inspection, but FNMA does. So it would benefit the appraiser to re-inspect the property to be within FNMA guidelines. See FNMA appraisal guidelines section 201.