Revision request vs update vs new appraisal

[Tom4value]

For those of you who are saying, "how can we tell if we don't do another appraisal?", come on! We still have common sense!

If I take my car to a mechanic and ask about a noise, he can say, "I can't tell until I get it on the lift" or he can say, "your fan belt is loose. Tighten it". He is trained to know things.

If a client asks if molding in the dining room, dark hardwood flooring instead of light and upgraded kitchen appliances are going to change the value, I can give a non-USPAP-violation, "no". If an addition, massive quality upgrades, changes in room/bath counts will change the value, I can give a, "Yes. How much? Don't know right now. I will need more comps so I will need a new assignment. Is this fee ok?"

 

[J Grant]

i think the poster asked the question to fast before understanding what he was looking at. it wasn't just changing the color scheme, or some upgrades. however, in this case if it was only the cost of the materials that went down and the cost to build went down. so how does that value change the same exact house, but now costing less to build value. you ain't gonna find any comps with that question, or changes answering it. so does the appraised value change, i see not. just replace the bid in the report. if it's a change in upgrades, and you think different, then new appraisal at a discount.

Terrible advice. An army of wimpy appraisers too frightened to simply tell a client since it changes the property characteristics it would impact value and thus need a new appraisal

IT is not a freaking bid to build, it is 50k additional optional upgrades or change orders the buyer approved and now they no longer want to pay for them.

reducing the upgrades and options by 50k changes the house quality, finish and appeal compared to comps that have those upgrades - assuming it is a price range below a million or so - they can find new comps that lack those upgrades - which is why a new assignment is needed for a fee for them to do so.

 

[Tom D]

Terrible advice. An army of wimpy appraisers too frightened to simply tell a client since it changes the property characteristics it would impact value and thus need a new appraisal

reducing the upgrades and options by 50k changes the house quality, finish and appeal compared to comps that have those upgrades - assuming it is a price range below a million or so - they can find new comps that lack those upgrades - which is why a new assignment is needed for a fee for them to do so.

i don't think anyone wimpy here is saying to do a free appraisal. the question is does it really change the value, if yes, then do you need new comps. or just an adjustment on the ones you have. if easy redo, easy reduced fee. but in a market where there are no new spec homes, how do you adjust for each upgrade gone.
so out the window go new construction upgrades comps. now this adjustment might be the time consuming process, fee consideration, in your though process and needed in your work file. i don't think the lender is expecting the same value. the lender goes with the sale price over a higher value if you can't figure that adjustment. that's my wimpy business opinion.

 

[J Grant]

i don't think anyone wimpy here is saying to do a free appraisal. the question is does it really change the value, if yes, then do you need new comps. or just an adjustment on the ones you have. if easy redo, easy reduced fee. but in a market where there are no new spec homes, how do you adjust for each upgrade gone.
so out the window go new construction upgrades comps. now this adjustment might be the time consuming process, fee consideration, in your though process and needed in your work file. i don't think the lender is expecting the same value. the lender goes with the sale price over a higher value if you can't figure that adjustment. that's my wimpy business opinion.

We don't have to adjust the line item for each upgrade, but rather the contributory value of the whole package that comprised the 50k of upgrades/options that are now gone.

The client asked a question - does it change the value - the OP does not know ( and neither do we), but it is substantial enough of a change that is very likely. I

Response to client: It is unknown how much the value would be impacted, but a 50k change in the upgrades and options likely would affect value and since it changes the property charactirtics a new appraisal would be needed to determine that."

Now the ball is in the client's court. If they agree to proceed the fee /any discount could be negotiated at that time -

 

[sputnam]

For those of you who are saying, "how can we tell if we don't do another appraisal?", come on! We still have common sense!

If I take my car to a mechanic and ask about a noise, he can say, "I can't tell until I get it on the lift" or he can say, "your fan belt is loose. Tighten it". He is trained to know things.

If a client asks if molding in the dining room, dark hardwood flooring instead of light and upgraded kitchen appliances are going to change the value, I can give a non-USPAP-violation, "no". If an addition, massive quality upgrades, changes in room/bath counts will change the value, I can give a, "Yes. How much? Don't know right now. I will need more comps so I will need a new assignment. Is this fee ok?"

Per USPAP, ANY statement of value regarding a specific property is an appraisal. That includes a point value, a range, a direction of value, agreement or disagreement with a value, or whether there has been a market change that would impact the subject's value. Whether it's a revision or a new assignment depends on the details.

Your Client doesn't really care whether you call it a revision or a new assignment. They want to spend less money. Even if you insist that it's a new assignment, that does not necessarily mean that you have do a brand new appraisal from scratch. Scope of Work governs what you need to do. It also doesn't mean that the new work will require you to charge your Client a full appraisal fee... and that is really what they care about.

 

[BRCJR]

USPAP 2024 AO 13 line 82 has an incorrect amount related to Evaluations. The publication still references 250,000 as the threshold (above that transaction amount required an appraisal). It has been 400,000 for residential and 500,000 for commercial loan amounts for at least a couple of years, now.

The IAEG has not been updated, either.

Edited for character count for posting.....

12 CFR § 225.63 - Appraisals required; transactions requiring a State certified or licensed appraiser.​

(a) Appraisals required. An appraisal performed by a State certified or licensed appraiser is required for all real estate-related financial transactions except those in which:

(1) The transaction is a residential real estate transaction that has a transaction value of $400,000 or less;

(5) The transaction is a business loan that:

(i) Has a transaction value of $1 million or less; and


(ii) Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate;


14) The transaction is a commercial real estate transaction that has a transaction value of $500,000 or less; or


(b) Evaluations required. For a transaction that does not require the services of a State certified or licensed appraiser under paragraphs (a)(1), (5), (7), (14), or (15) of this section, the institution shall obtain an appropriate evaluation of real property collateral that is consistent with safe and sound banking practices.


(d) Transactions requiring a State certified appraiser—(1) All transactions of $1,000,000 or more. All federally related transactions having a transaction value of $1,000,000 or more shall require an appraisal prepared by a State certified appraiser.

(2) Commercial real estate transactions of more than $500,000. All federally related transactions that are commercial real estate transactions having a transaction value of more than $500,000 shall require an appraisal prepared by a State certified appraiser.

(3) Complex appraisals for residential real estate transactions of more than $400,000. All complex appraisals for residential real estate transactions rendered in connection with federally related transactions shall require a State certified appraiser if the transaction value is more than $400,000. A regulated institution may presume that appraisals for residential real estate transactions are not complex, unless the institution has readily available information that a given appraisal will be complex. The regulated institution shall be responsible for making the final determination of whether the appraisal is complex. If during the course of the appraisal a licensed appraiser identifies factors that would result in the property, form of ownership, or market conditions being considered atypical, then either:

 

[Sadie]

I was using lawyers as an analogy, no hope in heck we could charge by the hour or minute -

When does the word Hello cost $500? When you attorney answers the phone

 

[Tom4value]

Per USPAP, ANY statement of value regarding a specific property is an appraisal. That includes a point value, a range, a direction of value, agreement or disagreement with a value, or whether there has been a market change that would impact the subject's value. Whether it's a revision or a new assignment depends on the details.

Your Client doesn't really care whether you call it a revision or a new assignment. They want to spend less money. Even if you insist that it's a new assignment, that does not necessarily mean that you have do a brand new appraisal from scratch. Scope of Work governs what you need to do. It also doesn't mean that the new work will require you to charge your Client a full appraisal fee... and that is really what they care about.

Yeah, I know that. So where are you disagreeing with me? I have all the information in my file to determine if a value change is necessary. Where is there a USPAP issue?

 

[sputnam]

12 CFR § 225.63 - Appraisals required; transactions requiring a State certified or licensed appraiser.

The citation is a federal regulation applicable to federally related transactions. Your state can be more restrictive.

 

[BRCJR]

The citation is a federal regulation applicable to federally related transactions. Your state can be more restrictive.

A federally related transaction has to do with appraisals. My comments are about Evaluations and USPAP. It is an incorrect statement in the 2024 publications regarding the threshold. My point and only point.

Aside that, replying to your comment, states can only be more restrictive if they have codified restrictions on Evaluations.

I am not aware of any state that prohibits anyone from doing an Evaluation. The Interagency Guidelines do not prohibit anyone that has competency to do an Evalution from doing so.