Scope of Appraisal

[Jeff Horton]

I would like to start a discusion on the "Scope of Appraisal" I have read some on this recently and thinking that maybe what I state as my scope it to vauge? Maybe I cover myself somewhere else but I would love some input on this subject.

Below is what my standard Scope I put in my Letter of Transmital.

Scope of Appraisal The accompanying report is based on a site inspection of improvements, investigation of the subject neighborhood area of influence, and review of sales, cost, and income data where applicable for similar properties. This appraisal has been made with particular attention paid to applicable value-influencing economic conditions and has been processed in accordance with nationally recognized appraisal guidelines.

I will cover anything out of the ordinary in another paragraph in the letter. Such as if it is new construction, additions. REO ect.

 

[Fred]

Jeff,
I see no poblem as long as the statement is accurate. As you say,
"I will cover anything out of the ordinary in another paragraph"

BTW, I like your use of the word investigation and avatar of Sherlock Home - although a plaintiff might use that logo against you in a malpractice claim if it is in the report or advertising.

Sincerely,
Dr Watson

 

[Jeff Horton]

Steven, the aviatar is part of my Company logo. I am a home inspector and I have the little guy looking a cartoon house. It was to small when I reduced it down to use here so just used 'Sherlock" on here.

Since I am Registered Home Inspector I also put in a disclaimer stating that while I am an inspector I was not acting in the capity of such blah, blah.

But as my lawyer told me I can sue someone just because I dont like they way they look. Might be hard to win but ........ Fact is you can get sued for anything now days.

 

[Nancy in Friday Harbor]

Jeff,

As I understand it, the scope of work statement in the appraisal is your chance to tell the reader/user exactly what your assignment was and what, if any, other limiting conditions apply. Fannie will no longer accept supplemental conditions, so this is the place to put them--somewhat reworded, of course.

ie. The assignment was for a limited scope appraisal with exterior inspection. The assignment did not include field measurement of the subject property or inspection of the crawl space, blah, blah. The assessor's data for size, room count, plumbing fixtures and other amenities is used in lieu of a personal observation and the extraordinary assumption is made that this information is correct. etc. etc.

Plus what work you did -- like your statement.

I personally feel we don't do enough work or have a thorough enough understanding of the use and benefits of the scope of work statement. This is the place where we cover our behinds vis a vis USPAP, underwriter or reviewer questions, etc.

I know that McKissock has a class specifically covering scope of work -- unfortunately, I haven't had a chance to take it yet. Since I do a number of narrative reports for various other clients than lenders (divorce, land bank acquisition, conservation easements, estate planning & settlement), I really struggle with my scope of work statement in each report. Perhaps it'll get easier as I do more of them.

David Johnson had a beautiful scope of work statement in his review of Tom Hildebrant's appraisal in NC.

I'd really like to see us get into a good discussion of this. Thanks for starting the thread, Jeff.

 

[Red Blumenstock]

One of the items that was emphasized at the Instructor Certification course was that the scope of work can be a wonderful way of CYA. Initially, I had thought that the scope of work section could be boilerplate, but I learned that it cannot. It needs to be reviewed and changed, if necessary, in every assignment.

It is a great place to say not only what you did, but also what you did not do. I agree that it is a good place to cover yourself in the areas that fannie mae will not accept change.

Red Blumenstock

 

[The Bob]

Jeff,

The following may be of assistance. There in one paper that specifically addresses scope of work.



http://www.appraisalinstitute.org/resource...es/whtpaper.asp

 

[Nancy in Friday Harbor]

JimBob,
Thanks for the link. Have printed it and will take some time this evening to read it.

 

[Ross (CO)]

Jeff(AL)'s stated scope is certainly short, simple and easily understood. It is almost a shame that we have to state "the obvious" sometimes just to protect ourselves. Seems that the scope issue is one where we, the appraiser, have to make the declaration of scope from what we interpret it to be or how we took on the assignment and resolved the appraisal problem. The recent column piece (pg. 28) in A.I.'s quarterly magazine was welcomed....the one about seeing more client / appraiser communication. I think the scope of the appraisal has a wonderful opportunity to root itself at the very start of any assignment, i.e. with the format of the order we receive from the client. Aside from the mom-and-pop who call and want to list their house after 35 years of living there and turn to us to help value the home for them.....we all know that our clients have "electronic" order media and we see them most of the time. What a wonderful place to see that the scope of the work is defined to a great extent there. It should have a Scope section, as in what we are asked to do (can be briefly stated), an Intended User section so we know just who will rely on the report, a Purpose of the Appraisal section (so I do not have to always ask the h/o what it is...even though this step may be more reliable and will continue to ask them the question everytime). What sections have I left out ? One section which the "Standard Appraisal Order Form" will NOT really need to have is a section devoted to what the client rep and the h/o already think the property is worth and what kind of estimate it should come in "at"......and none of the mumbo-jumbo about calling if their estimate is a "problem" before actually concluding the analysis and therefore holding an expectationof being paid for one's efforts. I am certain that the creators of the USPAP book, those who refine and rearrange its content and its expected interpretations, could also draft the ideal standard order form which allows for so much more to be understood as the assignmment gets started. This could be such a form where it is a "violation" for us to proceed with the assignment unless all and key sections are completed and understood clearly. Nice place to have clearer understanding is when we are limiting the information we are going to get or are allowed to acquire, i.e the Drive-By appraisal. This is one critical moment when we should be expressly told by the client how, why and for what reason we are to proceed, sight-unseen, with our best-effort at evaluating a property without specific pertinent information. Such information would exactly be the very reason why someone else may, or may not, ever want to buy that property....if it ever came down to forcing a sale. From what we see going on in market segments of the country, and affordability indices for property in certain large metro areas, and rural areas too, and rising foreclosures, it is time to create the standardized order form ! Since we have electronic signature capability, I see no reason why an order can not be legibly signed by the tech./admin. staffer as well as the L.O. /V.P. who sourced the task. It's all part of improving the communication.....and we all just, just, just want to get along.

 

[Rick Neighbors]

Jeff,
Thanks for starting this string. I was sitting here looking at something that I had printed out from the TALCB's website. "From the Investigators" Common USPAP Violations.
There are 10 items, and number 6 is:

"Not detailing the Scope of Work or the extent of the process of collecting, confirming and reporting data. (This needs to be as detailed as possible and specific to each assignment to include the degree to which the property is inspected; data researched and sources, and the type and extent of analysis applied to arrive at opinions or conclusions.)

I was trying to break this quote down and make sure that I was addressing each item inferred in my scope. I have always tried to give "just the facts" and not be accused of being overly verbose. However, it seems that some "verbosity" might be in order?

The other 9 violations are pretty interesting also.

 

[Neil (Texas)]

JimBob,

Thanks for the link. My "Scope of Work" seems to be in a constant state of flux... always feel that I'm leaving something unsaid or phrasing it wrong.



Here is my current Scope:

"SCOPE OF WORK:
This appraisal is based on information gathered by the appraiser from public records, multiple listing services, real estate agents, other identified sources and, the appraiser’s on-site investigation and observations of the subject property. The appraiser is not a licensed home inspector, engineer, surveyor, or pest inspector, therefore, information in this report was based on conditions readily observable by the appraiser. Should other information be required with regards to the subject property, users of this report are hereby advised to engage additional professional services from other sources. The appraiser does not warrant or guarantee the subject property in whole, or any part thereof.

While investigating the subject neighborhood and market conditions, observations were noted of those external factors which influence property values and are included in this report.

Research was conducted for comparable property sales and listings, and confirmation of pertinent data with respect to such properties was obtained from sources considered reliable and identified in the report; original sources of such information are listed first. Those properties considered most appropriate for this analysis were personally investigated and observations made with respect to the comparable property’s exterior physical, functional, and external attributes and influences. Real estate agents involved in the comparable transactions were queried as to conditions unobservable by the appraiser'e exterior observations. An investigation and analysis was also made of the comparable sale's terms, conditions, and financing, when available (Texas is a non-disclosure state and as such, actual sale price, terms, conditions of sales, and financing are not required for public record and, often go unreported).

The Cost Approach was based on information from Marshall & Swift Residential Cost Handbook, area suppliers, contractors, builders, and developers. Due to the age of the improvements and subjectiveness in estimating physical depreciation, the Cost Approach in this report is considered an unreliable value indicator.

The subject property is located in a predominantly owner-occupied neighborhood (approximately xx% owner-occupied per US Census Bureau 2000 data). Investigation of the neighborhood produced insufficient sales-rental data, therefore, the Income Apporach was excluded in this valuation.

After careful study of those factors considered pertinent to the subject's market value, a conclusion was reached as to the appraiser’s opinion of market value for the subject property."



Any and all suggestions would be grealy appreciated.

Neil (Texas)