Scope of Appraisal

[George Hatch]

Scope of work goes both ways. Not all intended users and intended uses require the same scope of work. For instance, if you wanted to do pre-comps for a client without benefit of a physical inspection, you could write up a scope of work that identified the user and use, and the steps that you followed to produce that opinion of value, as well as disclosures as to what you didn't do (like inspect it, for example). If you wrote it properly (and also did what you said you did), your exposure would be minimized because you are disclosing what you and your client agreed upon prior to the engagement. The trick is to determine the necessary degree of work required in relation to the use/user, while complying with the minimums in USPAP.


Obviously, the requisite degree of due diligence in any appraisal is going to be different depending on the intended use and intended user. You would go to somewhat greater lengths if you are going to testify as an expert witness in court or as a state investigator chasing crooked appraisers than you would if the appraisal and report were going for a $25,000 home equity line of credit. The whole concept of disclosing scope of work and identifying the use/user is a mechanism to communicate to the reader the conditions under which the work was developed. There are those who say that a properly written scope of work will eliminate the need to invoke the Departure Rule, but that's a different topic for a different day.

If anything, I try to avoid overly simplistic scope of work descriptions because they're too easy to misconstrue. Boilerplate is bad only to the degree that it is abused. Careful use of well written boilerplate, with modifications as necessary, shouldn't present a problem. It all comes down to whether you did what you said you were going to do.

I'll probably take some heat for saying this, but here goes. As long as we observed Competency, there isn't any reason an appraiser couldn't develop a limited appraisal from their desk, without benefit of a physical inspection, and present an economical alternative to AVMs. And still comply with USPAP. All they would have to do is get the client to agree, write the scope of work up properly and then follow through with it. Done properly, such a product would likely be more accurate on average than an AVM because a geographically competent appraiser would be able to draw a tighter set of parameters and verifications, and would more often recognize when more information was necessary or if such a valuation can even be completed based on the data at hand. There would be a lot of limitations as to the utility of such a product, but no more so than for an AVM. I don't think I'd be interested in doing these and I imagine the E&O carriers would throw a fit if someone tried, but from a USPAP standpoint it could be done.


George Hatch

 

[Richard Carlsen]

I like to put mine in the FIRREA/USPAP Addendum. It looks much like yours but I do go into a little more detail on approaches to value, data sources, etc. Basically, I think that yours covers it. Most people wouldn’t know what they were reading anyway. I agree that the Scope of the Appraisal is a CYA.

 

[jtrotta]

Everyone has noted some info., but I think there is excessive information required at this time. Have ya'll noticed over the years that we keep having to write in for new stuff, but the request for Fee's - keeps diminishing ? We have become responsible for everything.

When I first started off in the business, there were a few simple tasks we had to account for; as new ones kept getting added, my old boss & I started writting caveats for each new one, by year (3) with him we had added nealry 5 pages to CYA material. I have since reduced it to (3 pages) and still use the write ups provided by the software company also and when the report is done there are approximately 22 pages of information, of which approximately 18 are intended to CYA - to me that seems excessive. And when you go to court, attorneys attempt to define exactly what "IS" - is and that means to me there is too much excessive language. Simply put our job is to "Estimate a Value" based on the markets reaction for the area in which we work. Beyond that (in my opinion) becomes "legal ease" to which we should not become involved in, as we are not practicing attorney's and/or legal aids.

It would appear to me that with all the highly educated people within our industry, "simplicity" is a word no one understands. In the sales field there is an understanding of the myriads of problems that exist when you attempt to become to creative and lead to the development of the; KISS methodology - Keep It Simple Stupid and it has worked well for many, actually it's been in existence for over 25 years that I know of. Perhaps our industry needs to reconsider why we need to be the brunt of everyone else's problems. We understand that USPOOP will always be under construction, but why should it be; that in itself display's the lack of understanding and interpretation the writers of the Rules have themselves. Is there really a reason for continual revision of interpretaions of ones writing's?? It seems similar to "software developers" that need to get out a product, but have failed to properly "sniff" out all the bugs - before it's release.

Just a $.05 worth - inside the snowglobe it's always blustery

8)

There is no Finish line

 

[Richard Carlsen]

Here is an old 15th century Russian saying that I just made up:

<span style='color:green'>"The amount of CYA in an appraisal report is directly proportional to the value of the rear end being covered."</span> ©

 

[Nancy in Friday Harbor]

Amen, Brother Richard!!