Subject Prior Sales / Transactions - Underwriter Request

[TekJ42]

Greetings Appraisers -

We recently did a standard 1073 on a higher end unit on the first floor end unit of a mid rise building on the bay across the street from the gulf of mexico. The unit appraised for significantly higher than the prior sale, but the prior sale was 2 months outside the 3 year window so we did not include the sale or an explanation of the ratio in our analysis.

Underwriting came back with a revision mentioning the prior sale specifically (in the language of the revision request) and asked us to specifically state that the prior sale was 2 months outside the 3 year window. The revision request made us a little bit uncomfortable because it almost seems as though the underwriter is intentionally mentioning the prior sale amount in order to influence the intended use / intended user.

My questions are as follows:

1. What is the official USPAP requirement for providing revisions?
2. Can / should specific language be redacted from revisions if the appraiser feels the language is designed to influence the intended use / intended user?
3. Is it appropriate to report perceived attempts to influence intended use / intended user, even if the person making the perceived attempt IS the intended user?

We are usually pretty compliant and diligent about providing revisions when requested, but this one struck us as strange, and my supervisor suggested I request another perspective from the very seasoned professionals in this community.

Thanks in advance for your thoughts -

 

[J Grant]

I can not see why an assumption is made about influencing an intended user by addressing a prior sale? An intended user can easily look it up themselves and see it sold much lower in 2015, so how is your addressing it going to influence them?

...USPAP cut off date for required addressing of a prior sale is 3 years, however USPAP is minimum standards and if appraiser feels it might be relevant to a report, they can reference a prior sale of subject older than 3 years.

In this case UW sees the sale is just a bit older than 3 yeas and your OMV is significantly higher, so they are asking for more information.-a PITA but if a high value property can understand the concern.

Imo makes sense to address it ,however is up to your supervisor as they are the cert signing and I assume it is their client ?

 

[JTip]

Most recently I have started including the subject's assessment card in the report.

If a prior sale is shown, 3 years and 2 months ago, then my report should offer some reasoning as to the market conditions or renovations/updates to the subject. I'm not addressing any reference to the prior sale, but telling the story (with comparable properties) to support the final opinion of value.

Intended user/use really doesn't come into play in this situation.

 

[TekJ42]

I can not see why an assumption is made about influencing an intended user by addressing a prior sale? An intended user can easily look it up themselves and see it sold much lower in 2015, so how is your addressing it going to influence them?

...USPAP cut off date for required addressing of a prior sale is 3 years, however USPAP is minimum standards and if appraiser feels it might be relevant to a report, they can reference a prior sale of subject older than 3 years.

In this case UW sees the sale is just a bit older than 3 yeas and your OMV is significantly higher, so they are asking for more information.-a PITA but if a high value property can understand the concern.

Imo makes sense to address it ,however is up to your supervisor as they are the cert signing and I assume it is their client ?

Yes supervisor's client. Our concern is primarily should the underwriter's opinion regarding what should be included supersede the appraisers opinion of what should be included? UW's specific mention almost red-flag's the prior sale point and frames the fact that it was not included or explained.

 

[J Grant]

Yes supervisor's client. Our concern is primarily should the underwriter's opinion regarding what should be included supersede the appraisers opinion of what should be included? UW's specific mention almost red-flag's the prior sale point and frames the fact that it was not included or explained.

IT is up to appraiser what to include as long as they do not violate USPAP with what to inlcude/exclude . However, the UW represents the client so it is up to them f they want if they are questioning an appraisal to ask for more information.

They might just be wondering, or had a review done.

Keep that for high value assignments/jumbo loans,some lenders order 2 appraisals and the "other appraiser" might have addressed the prior sale.

I can not see a downside to addressing it, what is the hesitation?

 

[DWiley]

Greetings Appraisers -

We recently did a standard 1073 on a higher end unit on the first floor end unit of a mid rise building on the bay across the street from the gulf of mexico. The unit appraised for significantly higher than the prior sale, but the prior sale was 2 months outside the 3 year window so we did not include the sale or an explanation of the ratio in our analysis.

Underwriting came back with a revision mentioning the prior sale specifically (in the language of the revision request) and asked us to specifically state that the prior sale was 2 months outside the 3 year window. The revision request made us a little bit uncomfortable because it almost seems as though the underwriter is intentionally mentioning the prior sale amount in order to influence the intended use / intended user.

My questions are as follows:

1. What is the official USPAP requirement for providing revisions?
2. Can / should specific language be redacted from revisions if the appraiser feels the language is designed to influence the intended use / intended user?
3. Is it appropriate to report perceived attempts to influence intended use / intended user, even if the person making the perceived attempt IS the intended user?

We are usually pretty compliant and diligent about providing revisions when requested, but this one struck us as strange, and my supervisor suggested I request another perspective from the very seasoned professionals in this community.

Thanks in advance for your thoughts -

In my old firm we did all that we could to reduce post report delivery inquiries. For that reason, in the situation that you describe in the OP, we would have addressed the prior sale in the original report. It is far easier and far more efficient to do so while writing the original than it is to come back and add it later if requested. But, we always reported the prior sale of the subject, regardless of when it occurred, if we had the info.

 

[TekJ42]

IT is up to appraiser what to include as long as they do not violate USPAP with what to inlcude/exclude . However, the UW represents the client so it is up to them f they want if they are questioning an appraisal to ask for more information.

They might just be wondering, or had a review done.

Keep that for high value assignments/jumbo loans,some lenders order 2 appraisals and the "other appraiser" might have addressed the prior sale.

I can not see a downside to addressing it, what is the hesitation?

Only that the UW wants something included that is not required to be there - that the UW is essentially altering the content of the report. Not really difficult to state in the addendum that the prior sale was not included or analyzed because it did not occur within the 3 year window and that USPAP does not require analysis of sales or transactions that occur prior to 3 years - more like - that fact seems very obvious and that the UW wants to make sure its in the report anyway. I appreciate the responses - the conversation is theoretical now my supervisor is convinced. Thank you for taking the time -

 

[DWiley]

Only that the UW wants something included that is not required to be there - that the UW is essentially altering the content of the report. Not really difficult to state in the addendum that the prior sale was not included or analyzed because it did not occur within the 3 year window and that USPAP does not require analysis of sales or transactions that occur prior to 3 years - more like - that fact seems very obvious and that the UW wants to make sure its in the report anyway. I appreciate the responses - the conversation is theoretical now my supervisor is convinced. Thank you for taking the time -

The property sold three years ago and now you are appraising it much higher than what it sold for previously. Put yourself in their shoes. Would you not be curious?

As I said above - I would have expected/anticipated the question and addressed it in the original report. There is nothing magical or sacred about three years

 

[J Grant]

For "regular " properties I tend to stick with analysis of a prior sale per USPAP 3 year back unless I determine there is reason /relevance to address an older subject prior sale.

But for complex/high value properties I often will address an older than 3 year sale because it is more relevant-to assignment these properties tend to be unique and thus prior sales more reflective of market reaction, even if prices are quite different 3 years out

 

[TekJ42]

The property sold three years ago and now you are appraising it much higher than what it sold for previously. Put yourself in their shoes. Would you not be curious?

As I said above - I would have expected/anticipated the question and addressed it in the original report. There is nothing magical or sacred about three years

I was curious - the borrower bought it cash from an estate and it was a wreck. The reason for the increase was market appreciation over 3 years, total interior renovation, and that it sold for less than market value at the time of the prior sale. The UW didn't ask about the ratio though, they asked about the exclusion and included the date & sale price in the request. I was under the impression that 3 years WAS the magic number, but I think moving forward I will do as was suggested in this thread: include the tax record sales history and make some comment / analysis regarding the prior sale outside the USPAP required 3 year window if the ratio seems unusual in any way.