SOW question

[William Rightsell]

Just to add...

Your scope of work is not necessarily dependent upon what the report will be used for. Example - even with mortgage work the intended use is always to obtain a loan; but the scope of work can vary drastically depending on WHO the client is and WHAT they want. Same intended use - totally different scopes of work.

As for the issue of the client telling you it is for mere curiosity, take him at his word. The referral source is third hand, you answer to your client and try to accomodate his request with a scope of work deemed appropriate. If he tells you something that is incomplete or misleading; so be it, just do your job accordingly and thoroughly.

As for forms, you can write it on a napkin if he says he "merely curious". As long as it meets std 2.

I would probably ask though, to avoid future disagreements and pitfalls, what he "really" wants it for and express to him that if he intends to use it for any "official" type purpose they may have certain requirements that I need to be aware of. They normally come clean then. If he still says its for "curiosity", I usually give them a narrative report as I can direct the flow and content of the report.

The SOW and report format are pretty much up to you when working with private individuals.

Collect the fee up front and be diligent as I'm sure you always are. Congratulations on finding some pressure free work!

todd

 

[Robert Hronek]

I think it is important to know the true reason for the appraisal. If it is truly out of curiousity then fine but if it is for another intended use you can tailor the report to meet those needs. A good example is an appeal of the tax assessment.

I do work each year for the county on tax appeals. The owner could submit any appraisal for consideration in the appeal. Recent sale or refinance appraisals were usaully given more leaway since if they were biased they were biased in to the high value. Appraisals for other uses, particularly those prepared for a tax appeal were looked at more closely as many of them were clearly biased to a low/below market value.

If you are doing an appraisal for a tax appeal I would stress that you heavily document your findings on quality and condition with numerous interior pictures. When reviewing these reports I wanted to know that the appraisal was accurately describing the property and selecting the appropriate comps. Also the person reviewing the appeal my be a licensed appraiser and have access to MLS as a means to review data on comps. I would assume most MLS systems have the ability to include up to 10 pictures per property. This comes in very handy in reviews to see the quality and condition of the comps.

Many times the assessed value is wrong because of errors in assessor records. The GLA maybe wrong, the home may not have basement finish, bathroom count, etc,. If you are doing the report for the tax appeal then compare your actual findings to the assessor data. If there are discrepencies point them out and document them carefully, again pictures help.

In my state the date of value is 1/1/current year. So the value date is 1/1/08 and the assessment protest period was the month of June of 2008. An appraisal done for protest should of had a date of value of 1/1/08 and comps used would have been from prior to 1/1/08 - comps from 2007. It made me question the competency of the appraiser when they had a date of value other than 1/1/08. An appraisal does not automatically get the assessment changed.

These are some of the reasons you would want to know that the report was going to be used in a tax appeal.

 

[chicago guy]

Thanks all.

 

[JMFla]

Get enough info to nail down the type of value and effective date.
Restricted appraisal
Intended Use = Internal decision making purposes by the prop owner.
What they use report for is their biz - taxes, estate, etc.
The value may come in higher than they anticipate, and they won't use the report at all for the tax appeal, but may ship it off to their accountant, etc.
You have covered your SOW & USPAP responsibilities with this intended use.

 

[Peter LeQuire]

Anon - We're also required to state the intended use of the appraisal.

 

[Terrel L. Shields]

You need to check with the taxing authority to find out what they need for tax appeal appraisals.

jump'n the gun.

We're also required to state the intended use of the appraisal

It is not our job to second-guess a future intended use. Don't ask - Don't tell....

But if you insist, then ask if they are going to use it for that reason. If you do, then the SOW will state so and the Board will throw your report out for being "made as instructed"....If they think the appraiser did the report for another reason, they are much more likely to accept the report at face value.

 

[AnonApprsr]

Peter, the Intended Use and User: Market Value as of Effective Date for the Homeowner. This report is not intended for any other use or user.

Now if the owner wants to admit he's using it for Assessing appeal, than you'd have to find out what the local Assessor bases their values on (some towns around me go back two years) and that's a new Intended Use/User and SOW.

 

[Mister Ed]

Peter, the Intended Use and User: Market Value as of Effective Date for the Homeowner. This report is not intended for any other use or user.

By not asking a few more questions and digging further with our client, we are doing a disservice to our client. Like someone said, most people have a reason beyond, "I just want to know what it is worth."

By knowing what their need is, we can develop an appraisal and report it meeting the needs that need to be met. If they need it for a tax appeal, then certain criteria need to be met. If they need it because they are considering setting up a living trust, then other needs must be met. If they need it because they are considering selling, then other needs must be met. The clients' need to be met often makes the difference in the reporting format. Hence the first step in appraising: DEFINE THE PROBLEM.

We may not develop an adequate SOW without asking those questions up front. If we are used to doing mostly mortgage work, the general intended use, remains constant from assignment to assignment.

As I branched out more and more into non-lender work, I discovered just how little I really knew about the other various needs and had to learn to ask the right questions to do the job. First, and foremost, question is, "What is your purpose for this appraisal?" The second is, "Okay, why do you need to know the value?" From there, you start asking more direct questions based on their individual needs. You can find out very quickly if you are getting in over your head. But also, that helps you develop the needed SOW to do the job right.

 

[PropertyEconomics]

I think Id have a tendency to appraise the property for the exact purpose my client told me they needed it. Im not going to second guess them. If they find out they have ordered the wrong product, then I will charge them again to provide them with exactly what the taxing authority needs for that purpose, which they didnt disclose to me in the beginning.
I would ask again, and make it clear that in my report I am going to state the purpose of the appraisal. IF the client again says they just need to know what they are worth, Id tell them just what they are worth as of the date I inspected them. I would tell them that the appraisals will not be able to be used for financing purposes, and make sure the client knows that, but beyond that, I am not sure I owe an obligation to put them in the chair and find out their deep dark secrets. I would draw up an engagement letter, exactly telling them what Im going to do in accordance with their request, and have them sign it.

PS .. for whatever its worth ... I would not make any taxing authority an authorized user of my report. IF its for that purpose, the owner will aruge their value and will either win the appeal or fail at it. In either case I dont think the taxing authority is a user of the report.
If the taxing authority ordered the appraisal that woudl be a different story, but the user of the report is the homeowner, just as in estate tax appraisals, the user of the report is the estate not the IRS.

 

[Lee Lansford]

... When talking to potential client he said he "just wants to know what they are worth".

My memory may be failing me, but I don't recall ever having a client want to pay for a couple of appraisals merely to learn "what they are worth".