Subject to the appraisal....

[Richard Carlsen]

In the past couple of days, I've received two orders for sales appraisals that condition the P.A. on the appraisal meeting or exceeding the sales price. I've been inserting the statement that the terms of the purchase agreement requiring a minimum value are not considered part of the appraisal process and are not considered when arriving at a final opinion of value.

Anyone have any thoughts on this?

 

[bradellis]

Richard,

If you accept the assignment, it does not automatically mean that there is a predetermined value; in fact, it is pretty clear that the value opinion is not predetermined, since it will be you who offers the value opinion, and their actions are contingent upon your opinion.

HOWEVER, this type of assignment is fraught with danger for you. I had it happen to me, and after the very firt one, I began to refuse such assignments- on advice from my lawyer.

By accepting it, even if you are very clear that the lender is your client- not the broker or purchaser- a court still may deem that you have a responsiblity to both of those parties. After all, yoiu KNEW that they would rely upon the appraisal.

My advice on this is to advise the lender that you will not and cannot serve two masters. If the purchaser really wants to know if they are paying the correct price, let them hire you directly. IF your opinion of value suits them, they can choose to proceed with the purchase. In that case, the lender can order a second appraisal from you. Nothing says you cannot use the same data and even the same report, with minor changes- like client, intended use/users, etc. and charge less for the second one.

Of course, if your value opinion is not to their liking, they may just walk from the deal and then you got paid for one and the second one will not be ordered.

Actually ticks me off when the brokers do this. They are just CYAing, or have not earned the trust of the client. I have explained this to brokers over and over again. Finally, I just tell them to send me my check and then I will begin the work and that the appraisal cannot be used for mortgage lending purposes.

So now, they just foist the responsibility on to your shoulders, with all the legal ramifications that go along with it. Think the broker or buyer won't sue you if they do not like what you find? Think again.

Brad Ellis, IFA,RAA

 

[Restrain]

This clause is very typical and used to be a part of every contract for purchase that I saw. What it is to the buyer is a bit of a hedge against the buyer not being fully informed by the broker, especially when the broker is representing the seller. It has no effect on you, is not binding on you, and does not represent any attempt to be an undue influence on you unless you let it. Basically, you do your job, which is to value the property. If the property value comes in low, it lets the buyer either renegotiate the sales price or walk away. Remember, the contract is only binding on those who sign it, not third parties. As an aside, such language is required for FHA/VA loans and is found in most such contracts.

 

[Ray Ohler]

I understand what Richard's question was. The sale agreement contains an agreed upon sale price. The agreement is contingent upon the appraisal meeting or exceeding that price. RStrahan's statement is correct, read the FHA/VA "clause" in a "NAR - Standard Agreement of Sale" why wouldn't it work for conventional loans? . Two distinct "contracts", the appraiser's contract with the lender to supply an appraisal developing the appraiser's opinion of value in which he will provide analysis of the sale agreement AND a separate contract agreeing to a sale price. In other words, I assume that it wasn't a sale agreement with a "blank" sale price to be agreed upon after the appraisal was complete. In that event, it COULD pose a problem for the appraiser. NOT definitely, but if it is blank, then it would seem that the contracts are "tied together" and if somebody feels slighted, SOMEWHERE there is a lawyer who will jump up out of the ground and blame it on the appraiser. Just an opinion, not based on "expertise" with contract law. If desired, a "COMPLETE" 42 page disclaimer will be provided.