Reviewing Sales Contract

[Anthem]

First off hi to all, I have been to busy with my new staff position to frequent the forum. But today is thanksgiving and I only had to do 2 appraisals this morning so I have some spare time.

I have an interesting question.

As per USPAP appraisers are supposed to review the sales contract when appraising a property for sale. Sometimes this is not possible so I have been putting the following statement in.

A copy of the current agreement of sale was not supplied for analysis. According to the listing agent there are no seller paid concessions in the current agreement of sale which is typical in the local market. The appraiser reserves the right to amend this report upon review of purchase contract should terms or conditions be different than information provided.

Now I don't know if this makes me compliant with USPAP ( probably not ) but I got to thinking that technically this is an EXTRAORDINARY ASSUMPTION and maybe if I title the above statement in my addenda as an "Extraordinary Assumption" I will be ok.

What do you guys think?

PS'

HAPPY THANKSGIVING! ! !

 

[Lee Lansford]

Some party to this transaction has a copy of the contract of sale.

What, the client does not have a copy of the contract of sale? This would be very hard to believe.

I've found that if the interested parties are aware that I'm not completing the appraisal assignment until after I have received a copy of the contract of sale (what if the contract reveals that the septic system has failed and the buyer is accepting the property "as is"...and everyone but you, the appraiser, is aware of this?) I do receive the contract.

So, yes, I can see that there may be circumstances where if the contract is not reviewed that it might by advisable to employ an extraordinary assumption. But it is much better to obtain and review the contract.

You have raised a good point and I wonder if this is something that all appraisers give thought to?

 

[Anthem]

When I was a fee appraiser it was simple, I didn't release the report until I got the contract. But as a staff appraiser with tight deadlines sometimes this is not possible so I am looking for a way to stay within USPAP compliance. I think I have got the right idea but wanted to confirm with this great forum.

 

[Richard Carlsen]

You ask for a copy of the P.A. early on. If one is not forth coming in a timely manner, you put a very simple statement like this in the report: "Subject reportedly under contract of sale for $79,000. No P.A. provided to the appraiser. Appraiser unable to comment on price and terms of the sale."

Just make it a simple statement of fact: you asked, nothing was provided, you cannot comment. No hypothetical involved.

If the UW comes back and asks for a comment, tell them you will do an addendum if and when a full copy of the P.A. is provided as requested. And that there will be an additional charge since it was not provided on the first go around.

We sometimes get the first page of a purchase agreement or the offering copy without all of the signatures. We refuse to comment on the P.A. in these cases.

As a side note, I've never had anyone come back and ask me comment on a P.A. when I've used the above wording.

 

[Anthem]

Just make it a simple statement of fact: you asked, nothing was provided, you cannot comment. No hypothetical involved.

FYI .. There is a difference between a hypothetical and an Extraordinary Assumption.

Anyhow I agree I am trying to keep it simple but more so I am aiming towards USPAP compliance. I work for the bank, so the LO is asked for the contract immediately unfortunately it is usually a few days after we have finished the report that we get the copy.

Thanks for your reply

 

[Terrel L. Shields]

Some party to this transaction has a copy of the contract of sale.

Not necessarily. Many private transactions are hand shake. I am working on one now. Even the bank did not make them sign a contract. Sale is 31 ac. for 68K oral. I just state the contract is oral and reported to me at X price w/ no concessions and no written contract was provided. I personally have never purchased a tract of land on a contract and never have used a realtor in doing so. Most were family transactions or neighbors.

Only a secondary market lender or Realtor assisted transaction requires such documents. USPAP can kiss its own hienie because not all transactions have a contract in all cases.

 

[Richard Carlsen]

FYI .. There is a difference between a hypothetical and an Extraordinary Assumption.

Thanks. I think I remember reading that somewhere.


I would not make an Extraordinary Assumption about a sales price and terms because #1 they are not directly related to you forming an opinion of market value and #2 if your Extraordinary Assumption is in error as to sales price and/or terms, you will be called upon to correct it later. This is time consuming.

Best make no comment at all or one as I suggested based on the absence of a P.A. or having been provided with a partial P.A. I've seen too many "offers" used as sales price when the final number was something entirely different. Unless I have copies of all of the purchase agreement with all signatures, I do not comment on the price and terms of the agreement. Not even as an Extraordinary Assumption.

Michigan works under the statute of frauds and all contracts must be in writing to be enforceable. However, I've seen sales between family members that were based on verbal exchanges. That is another reason why I use the term "reportedly" in describing anything other than a full copy of the P.A.

 

[Thomas Fiehler]

Preston-Other than reporting the sales concessions on page 1, what other changes would be made?

 

[Anthem]

A major change is unlikely, but if the contract revealed that a car was included in the sale or a large concession $10,000.

 

[Thomas Fiehler]

My point is that it should have no impact on the appraisal unless you are including personal property in the appraisal.