Request For Addendum Letter

[Debra]

Hello!

Well, I was half way expecting this one. The current owners purchased the property last May for $232,000. I appraised it on May 4, 2005 for $227,000. The home owner told me that the property was worth at least $275,000 - $285,000 now. So, what now??? How do I respond to this? I would have to comp it for a year ago to see if they paid too much for it then. I did notice that in the MLS sold information, the Realtor last year had advertised the property at 3000 +/- Sq.ft. It was actually 2681 Sq.ft. I included 4 good comparables on this. Three comparables from the immediate neighborhood and one from a competing neighborhood. It was a new house when they bought it...they haven't done the landscaping yet, just grass. Anyways, how should I handle this request for an addendum letter commenting on why the purchase price exceeds current value????

 

[DTB]

You have no idea of the 2004 value, as you didn't appraise it. The value that you opined is as of may 2005.

If they would like a retrospective appraisal you would be glad to receive that order.

 

[Wally Jones]

(Who is asking for the addendum letter? Homeowner? Lender?)

"Thank you for your request to explain the difference in our May 2005 opinion of value of the subject property and its purchase price in May 2004. Our assigned task was to arrive at an opinion of current market value for this property. In developing this opinion, we try very hard to focus on current market data of sales of properties which are similar and proximate to the subject. In addition to recent sales, we also research active listings and pending contracts. We also develop a replacement cost estimate which, in this case, supports our opinion of market value. Once our analysis is complete, we review the "bottom line" opinion of value and research other reports we have completed of similar properties as another way of checking our work and then publish the results.

Whether a current opinion of market value is above, below or equal to a previous selling or current offering price has no actual relevancy. Market conditions change, (sometimes up - sometimes down) and we strive to provide the most current, accurate valuation possible. Perhaps a query concerning the appraisal accomplished at the time of the 2004 purchase would provide insight into market conditions during that period.

If you have information that might support a value different than expressed in our report, we would be happy to review the data to see if any changes are warranted.

Thank you for your business!"


Or.....the coastal version: "Hey, Dude! It is what it is!"


Were your comparables current (three-four months)? Do pending sales, active/withdrawn/expired listings indicate increasing/decreasing prices? Are days on market excessive in the area?

Just review the data you have available and if you're sure you're right, sleep well and go on the next one.

(The long response above was obviously an over-exaggerated example, and for those who know me well, just a tad sarcastic. But the client would never know it. Maybe.)

 

[Otis Key]

Debra - WHO'S YOUR CLIENT? Who did you appraise the property for? If it's for a lender, then you shouldn't even be talking to the HO/borrower. USPAP!

Now.........what to say? "Then you don't really need me now because you already know what the value is and have prepared a report, so take that to the bank and they'll be more than happy to take care of you. I'll just call the LO and let them know that you've canceled the order!"

Residential Borrowers May Receive Copy of Appraisal

December, 1991 amendments to the federal Equal Credit Opportunity Act, known as 12 USCA Section 1691(e), require a lender to provide, on written request, a copy of the appraisal report to any person who applies for a residential mortgage.
The text of the section reads: "(e) Each creditor shall promptly furnish an applicant, upon written request by the applicant made within a reasonable period of time of the application, a copy of the appraisal report used in connection with the applicant's application for a loan that is or would have been secured by a lien on residential property. The creditor may require the applicant to reimburse the creditor for the cost of the appraisal.".
Important Notes
• This law applies to nearly all real estate secured residential mortgage lenders, including banks, S&Ls, credit unions, mortgage bankers, mortgage brokers, mortgage originators, etc.
• Rules promulgated by the Federal Financial Institutions Regulatory Agencies allow borrowers a 90 day period during which to file the written request for a copy of the appraisal.
• The lender must supply a copy, not the original appraisal report.
• The residential borrower, or potential borrower, must obtain the appraisal copy from the lender, not the appraiser.
• Only the residential borrower, or potential borrower, has a right to receive a copy of the appraisal from the lender. Sellers, brokers, and other parties who are not the borrower have no right to obtain a copy of the appraisal.
• The lender who ordered, accepted delivery and based a business decision on the appraisal is the appraiser's client, regardless of who paid for the appraisal, or when, or how. The appraiser must comply with the client confidentiality provisions of the Uniform Standards of Professional Appraisal Practice.
• The appraiser has no obligation to discuss the appraisal with the borrower, or proposed borrower. The borrower is not the client. The appraiser must comply with the client confidentiality provisions of the Uniform Standards of Professional Appraisal Practice.
The appraiser may not reissue, retype, re-certify, update, transfer or otherwise pass an appraisal report prepared for one lender/client to another lender/client. The second, third, etc. lender/client needs to order a new appraisal. See AO3, AO25, AO26, and AO27 for additional information of USPAP ( http://www.appraisalfoundation.org ).

 

[The Warrior Monk]

I did have one occassion where a lender (who was the client) requested that I explain in writing why there was a difference in value between my (current) appraisal and an appraisal performed by someone else a year earlier.

I told him that I couldn't comment on the market value conclusion of someone else without at minimum performing an appraiser review on the other report, which of course I would have to charge for. He simply cancelled the request. He was a nice guy, but I suspect a newbie at his job.

 

[Debra]

No, I didn't discuss value with the ho. I just let him talk-that's it...it went in one ear and out the other. He even asked me if I wanted to buy it and laughed nervously. I got the impression that he had borrowed more than he should have and might cause me trouble some how.

The addendum was requested by the client/lender. So, from what ya'll have written here, I'll just email them back and say a combination of your replies and not give them an addendum for the appraisal report.

Thanks!...your replies were very similar to what I expected. That's very good!

 

[The Matrix]

Tell the homeowner: If they have comparable sales which are more representative of the subject's value than the sales used in your appraisal report, you will be happy to review them. Comparable sales submitted must be the same style home as the subject, be located in the same neighborhood, and must have occurred within the past six months.

 

[TEL2002]

Don't give them an open invitation to send you 20 potential comps. Tell them if they have better comps to send you the two best.

 

[Terrel L. Shields]

Tell them, I don't know. I did not appraise it then.

 

[Otis Key]

Last month, last year, 5 years ago, in the next 10 years.............Bobby, give up that crystal ball. I didn't do it then, can't comment. I'm not the new Zelda, can't comment. Use the appraisal you've got. Good night.