Review scope of work

[Fred]

If they want a value using data after the effective date, they should order a new appraisal report.

They did: from Denis.

 

[hastalavista]

I'm so sorry, but, we're probably gonna get divorced over this, Denis

Naw...
I don't think we are going to split-up over this one.

I agree with you that no appraiser can see into the future.

But I don't understand the "fair" part?
My client didn't order the appraisal. It is being sent to them by a mortgage broker. Sometimes these appraisals are 1 to 4 months old. My client advises the broker to get a more recent appraisal. The brokers are the ones who pay for the review. Is it my client's fault the broker decides to try to use an old appraisal in their loan submission? My client will be as happy as a clam if the report, as old as it is, is still credible (so will the broker).

I don't hold the appraiser at fault if the market has changed since they completed the original report; and neither does my client. Their quality could be excellent as far as that goes. But my client is making their decision now. Does anyone suggest that the lender, who is making the lending decision, shouldn't be able to verify the value before they make the loan? USPAP clearly states a review value as of a different effective date is acceptable appraisal practice.

This isn't some kind of game; this is real money being lent out. Who here would want to lend money if they couldn't verify what the collateral was worth to guarantee the loan contemporaneously with the making the loan?

If a fire burned the subject down after the appraisal, what would happen?
If the market changed and dropped 15% in 40-days since the appraisal was completed, is the lender stuck with the old appraisal?
Of course not.

It is clear that the submission of the appraisal after 30-40+ days to a lender isn't a very good idea. The appraiser didn't make that choice for sure. But neither did the lender.

Who's gotten the request for additional comps on an appraisal that's already 3-months old? I have, and I tell them the same thing most of you do; you need an update. Or, I tell them,
"Guess what; the market has dropped from 3-months ago; You're trying to use that appraisal now? It isn't going to work because it is no longer supported."

The problem isn't with the lender. And, the problem isn't with the appraiser. I've never heard anyone ever say that an appraisal was bad because the value supported 1-month ago is not supported today. And, I've heard (and have written in reviews myself) plenty of times that the appraisal is great, but the market has changed.
The problem is with the broker and/or loan agent. The longer the delay between effective date and loan decision, in this market environment, the greater the chance the value isn't credible.

In a rising market, a lender can be relatively confident that there is minimal risk the value has significantly declined due to market conditions; in other words, the shelf life of a good appraisal's opinion of market value is fairly long.
In a volatile market, the shelf-life of a good appraisal is fairly short. Who among us would argue different?

What am I missing here?

 

[Ms. Janet]

What am I missing here?

If your client was on the same page as you, I doubt you would be getting a hate rebuttal from the appraiser. You are providing them with an updated value; why would they need a rebuttal from the appraiser?

 

[hastalavista]

I don't care how carefully you craft your SOW to cover your own butt...IMO, the truth is the lender is only going to see that new value you provide.

My SOW is carefully crafted to disclose the steps that were involved in completing the assignment so anyone who reads it can understand the process.

The only time I provide an independent value is when I determine the value in the original report is not credible for its intended use as of my effective date.
Sometimes that has nothing to do with a change in the market; I would call those instances appraisal related issues.
Sometimes it has everything to do with a change in the market; I would call those instances market related issues.
The original appraiser has control over the appraisal issues.
The original appraiser has no control over the market related issues.

Let's make sure we don't confuse a quality issue (an assumed problem with the original appraisal report) with a non-quality issue (a difference in value opinion not related to the original reoprt).

If they want a value using data after the effective date, they should order a new appraisal report.

Sometimes that's the result.
Janet, if you have a disagreement on this, I don't think it is with the reviewer or the lender. I think it is with the fact that old reports are trying to be used to make current lending decisions. If the old value continues to be supported when the time comes to make the loan, the loan is made.
If the old value is not supported when the time comes to make the loan, the loan isn't made.

Believe it or not, I have used and continue to use what influence I have to try to get my clients to categorically reject an appraisal that is 3-months or older. I've told them that in my opinion, given the current market enviornment, it is not reasonable to expect these reports to be credible in terms of value as of a current date. I've suggested, at a minimum, their clients (the brokers) get an update from the appraiser. But, the best option would be to get a new appraisal. I've said that asking the orignal appraiser to argue a 3-month old value that was based on 4-9 month old data is not the best solution.

I haven't been fully succesful. But, I have seen some positive changes. I have seen two appraisal reports in the loan packages; one that was older and one that was more recent. It doesn't happen all the time, but I do see it. Usually, the recent appraisal is at a lower value; why? Because it better reflects the current market.

 

[Ms. Janet]

a non-quality issue (a difference in value opinion not related to the original reoprt).

That is what I am talking about. A non-quality issue unrelated to the original appraisal. I know we can do a lot of things and still be in compliance with the USPAP. But, I sure don't like this one.

I have never been asked to update a value inside of a review of an acceptable appraisal report. I don't know that I would accomodate that request. I agree, an old report is being used for a current lending decision and somehow it ends up the original appraisers responsibility to rebut this "review".

Pretty Stinky..

 

[hastalavista]

If your client was on the same page as you, I doubt you would be getting a hate rebuttal from the appraiser. You are providing them with an updated value; why would they need a rebuttal from the appraiser?

That's simple. Because unless the original report is of such poor quality that no one knows what to make of it (which doesn't happen that often), it is assumed by the lender, by me, and certainly by the broker that the origination appraiser is in the best position to explain and support the value.
The only reason the review provides an alternative value is because the original report didn't adequately support its original value (And as a reviewer, you know how much work it is to write a credible/alternative review value). The client (lender) and its client (outside broker) both think the origination appraiser should be given the benefit of the doubt and have an opportunity to respond if he or she chooses to do so. Not all review differences get rebuttals. And, not all review values remain unchanged once an item is addressed in a rebuttal.
I think the origination appraiser should be given the benefit of the doubt too! I list what I looked for and couldn't find in order to support the original value, and then lay out my own case for my alternative value. I want the original appraiser to see what I think is missing, and then to provide it if possible. That's the reason for the "rebuttal".

So I think my client and I are on the same page. This isn't about who's right (reviewer or originator), its about making sure a sound lending decision is being made. My involvement in this process is to make sure my client has my opinions about the report it is using to make a lending decision; and, my opinion may include my own value.

 

[Ms. Janet]

Wait a minute, Denis!!! I thought we were talking about an appraisal that had a supported value opinion as of the effective date...but the data between the effective date of the appraisal and the effective date of the review led to a different value.

 

[hastalavista]

Wait a minute, Denis!!! I thought we were talking about an appraisal that had a supported value opinion as of the effective date...but the data between the effective date of the appraisal and the effective date of the review led to a different value.

We were, and I got off tangent. Sorry, let me re-address your specific below:

I agree, an old report is being used for a current lending decision and somehow it ends up the original appraisers responsibility to rebut this "review".

Pretty Stinky..

I think the original appraiser should refuse. I've posted in another thread within the last week that my client requires me to make recommendations as a reviewer that if I received as the originator, I wouldn't complete.
Here's what I'd write if I was on the other side:

"The review appraisal is using data not available as of my effective date and has concluded a value after the effective date of my report. My original SOW requires me to conclude a value as of my effective date. I have been requested to address the review recommendations. I cannot do so in the context of the original assignment's SOW and engagement as to do so requires me to complete another valuation as of the renewer's effective date; this second appraisal was not part of my original assignment."

There. That's the appropriate response (IMO). If the review is an after the fact request, don't address it. If the review has a effective date issue, address it.

There is nothing "fair" or "unfair" about this.

 

[Ms. Janet]

Here's what I'd write if I was on the other side:

"The review appraisal is using data not available as of my effective date and has concluded a value after the effective date of my report. My original SOW requires me to conclude a value as of my effective date. I have been requested to address the review recommendations. I cannot do so in the context of the original assignment's SOW and engagement as to do so requires me to complete another valuation as of the renewer's effective date; this second appraisal was not part of my original assignment."

There. That's the appropriate response (IMO). If the review is an after the fact request, don't address it. If the review has a effective date issue, address it.

Which is pretty much how the appraisers are responding, right?

Most of the hate-rebuttals I get back are complaints that it is unfair for the review to conclude a value using information after the effective date of the original report.

Don't worry Denis, I'm going to let it go...right, after I do my happy dance I don't have your client

 

[hastalavista]

Don't worry Denis, I'm going to let it go...right, after I do my happy dance I don't have your client

OK, do your rain dance.

Which is pretty much how the appraisers are responding, right?

I wish they did respond like that. Because in my suggested response, there wasn't a fair/unfair, good/bad, he can't do this, that's not right argument.
The response boiled down to USPAP issues like assignment engagement and Scope of Work....... Gee, just like the Review Process.:new_smile-l: