The third party

[Blue1]

George,

Ditto everyone else!!!! :lol:

 

[Pam]

STATE ON APPRAISAL STANDARDS NO. 9

CONCLUSIONS:

A appraiser MUST identify the client and, to the extent practical, OTHER INTENDED USERS as part of the process of identifying the client's intended use of an appraisal, appraisal review, or appraisal consulting report, by communication with the client PRIOR TO ACCEPTING THE ASSIGNMENT [emphasis added].

In the case of a loan broker, the investor is always an intended user. The broker fully intends to submit the appraisal to potential investors as a part of a loan package. The investor is not a third party. The investor is "[an]OTHER INTENDED USER."


The review by the investor is just another step in the intended use of the appraisal, just as if the original client submitted the loan package to its own "loanh committee." Charging an additional fee for providing information requested by an intended user is inappropriate. And aspiring to provide the "minimum" required by USPAP, etc. probably does not complete the assignment you have accepted.

 

[Paul in bama]

I agree with that Pam. But in the case of the mortgage broker 'shopping' the package around to various investors, this statement means that the appraiser will have to add 2 more comps for this investor, then that doesn't work out and the next investor wants you to use 2 totally different comps that look more like the subject, then that falls through and the next guy wants you to use only comps that have closed in the alst 6 months. See what I am saying? There has to be a point when you turn in the appraisal to the broker that you don't have to keep making changes to the appraisal just to satisfy the 'intended user.'

As far as identifying the intended user before accepting the job, that is nearly impossible with some of these brokers who do not even know themselves who they will be working with on this deal.

 

[Paul in bama]

In all actuallity a broker should do their work before they order the appraisal. What I mean is, identifying the potential investor(s) and knowing what their standards are so that they can communicate this to the appraiser. Sadly, this is rarely the case.

If an appraisal was just an appraisal then this would most likely not be a problem anymore.

 

[Judy Whitehead (Florida)]

We have gotten into several of these lately - the problem is, all of these "extra" fees usually have to be collected from the borrower direct. That typically involves spending time even explaining to them "why" we need to be paid more. Another appraiser in my office has now completed FOUR (4) different manufactured home addendums, 3 additional text addendums and has spent countless hours of time on this thing. I kept telling him to tell them he was not spending another minute on it until they paid him more money, but I guess he felt sorry for the borrower or something.

The one I had, I went to high school with the borrower's wife and put
waaaay more time into it than I was paid. Too gullible, I guess!

 

[Pam]

Perhaps the statement, "The above presented comparable sales are the most recent, similar and proximate sales available for the subject as of the effective date of the appraisal," would be more to the point. Of course, the comps would have to ACTUALLY BE the very best comps available.

Ordinarily, when an investor asks for additional support, the investor has already identified comps that weren't presented or the report itself is inconsistent. If the house next door to the subject is a model match and sold yesterday, but it wasn't presented in the grid because it sold for $50,000 under market value because the buyer and seller fell in love during negotiations, just mention that in the report, so it doesn't look like you're ignoring a perfect comp because it was "under the sales price." If the nearest comps are 25 to 30 miles away because the subject is remote rural, don't say it's suburban. If you have the misfortune of appraising an anomaly for the area (the smallest house, the largest house, the first house completed in a new subdivision, the new house on a spot lot in an established area, etc.) just use the best comps from the area and include one comp from a competing area that has the anomalous characteristic. Three comps are a MINIMUM, not a maximum. I've been appraising for 26 years and I can count the number of calls I've had for additional information on my hands and have fingers left over. I answer their questions before they ask them. I look at that as an investment. Yes, I do more work than other appraisers, but I also save myself an enormous amount of grief and frustration.

 

[George Hatch]

Pam,

I would agree that aspiring to provide USPAP minimums as the sole standard of due diligence is probably insufficient in almost every case. But would not meeting the "Clients requested guidelines" (operative word being "requested") in addition to the other requirements be sufficiently inclusive? It's one thing if the client identifies every potential investor to the appraiser at the time of engagement, including a documented list of specific "extras" the other intended users may be asking for. If they did so, those extras would be included as their "requested guidelines", and hence the original disclaimer would still apply. The appraiser would obviously be beholden to meet every single one of those requests in their report. But if the identities of all the investors are not made known to the appraiser prior to the engagement, the appraiser is left with an open file that cannot close until everyone has had a shot at it to increase the requirements. Including investors that the broker themself may not even know at the time of the appraisal engagement and including investors who may eventually not even fund the loan. Why are we trying to make every appraisal comply with quirks from every conceivable investor in the country?

At what point is it reasonable for an appraiser to expect to be able to develop and submit a reasonably appropriate work product, secure in the knowledge that some unnamed, unknown party later on down the line is not going to re-write the rules in mid-stream? If we are to be held potentially accountable for every conceivable user's whims, even those of whom we cannot be aware of let alone their specific extras, how can we even submit a single report to anyone?

I disagree with the notion that our clients should be allowed to change the guidelines they are asking for after the fact. If they fail to identify all of their other intended users, that's their failing, not ours. Hence the notice that if parties who are not specifically identified to the appraiser as intended users (who would in fact be 'third parties') are asking for things that exceed the original requested guidelines, they should be willing to pay for them. How the Client handles this is really their problem.

There are minimums in our appraisals that every client needs to have addressed. Minimums not specifically addressed in USPAP, but otherwise required by different user groups. Itt should go without saying that these needs must be covered, no matter what. There are also things that some lenders want, but in truth don't really need. Stupid stuff, like 'Our bank's name must to be listed as the Client". Not true; they can legally lend on the report with another bank's name on it. They may not want to, they may even have internal policies prohibiting it; but that's not the appraiser's problem, nor should the appraiser really even be changing client names.


Like I said, I've been using this notification for several years now and have yet to recieve a single request for stupid stuff from parties other than my clients, even though plenty of my reports have gone to different lenders and other users. I don't for a minute believe that my reports as written for a single client are universally acceptable everywhere. I simply believe that when push comes to shove that these different users know the difference between what they really need and what they simply want.

Of course, nothing we ever do will work every single time. There will be users who will ignore such notifications and ask for extras. Appraisers will have to choose between being 'right' and being 'good'. If I had a user that was asking for something reasonable, I'd be very hesitant to actually charge them for it.



George Hatch

 

[Pam]

AN APPRAISER MUST [emphasis added] identify the client and, to the extent practical, other intended users as part of the process of identifying the client's intended use of an appraisal, appraisal review, or appraisal consulting report, by communication with the client prior to accepting the assignment.

The statement says the APPRAISER MUST IDENTIFY...., not the client. It's not a huge inferential leap to identify investors as "other intended users" when the primary client is a loan broker.

 

[Paul in bama]

I guess we should just assume that anyone, anywhere could be the intended user and when we complete our appraisal we should just put a hold on all of the rest of the work we are doing that month so that we may be able to fullfil request after stupid request.

The certifications and education we are required to have to do our job seem meaningless when Jim Bob the underwriter from Utah who just last month was a used car salesman and now has his handy check list by his side can call us and ask for anything he wants and we are expected to comply to make our appraisal presentable to him.

Yeah Jim Bob, I'm saving all the GOOD comps for a rainy day.

 

[George Hatch]

Pam,

Again, I don't disagree that the appraiser has some obligations when entering into an agreement to perform an appraisal. One of these obligations is to exercise some reasonable effort to idnetify their intended users. I do disagree the notion that an appraiser, by virtue of agreeing to do work for a mortgage broker, is automatically required to comply with every single request that may come from every single investor group the broker is currently doing business with, has ever done business with, or may decide in the future to do business with.

Not only that, but it is a little understood fact that not every mortgage broker falls under the definition of being an "agent of the federally regulated lender". Thus, some appraisals performed for some brokers are ineligible for use in a federally related transaction because those brokers don't qualify as 'agents' for that particular lender.

Back to the subject at hand. It appears to me that you are suggesting that by entering into an agreement with a mortgage broker, that the engagement is automatically going to remain open-ended and is subject not to any standard that is agreed to in advance, but to a standard to be determined later. That every such engagement automatically has the potential to be insufficient, almost no matter what the appraiser does.

I don't see how an appraiser could ethically enter into such an engagement. When it comes to engagement of an appraiser, WYSIWYG. Standard contract law; if you don't specify, I don't have to comply. An appraiser enters into an engagement with the broker, who is the client, and maybe with whomever the broker identifies as their lender, if such identity is even known to the broker at that time. Actually, the lender can also be named as the client. The appraiser is subject to the specific standards, if any, identified by the client at the time of the engagement. No way should an appraiser be beholden to an uncommunicated and unknowable standard, nor can an appraiser reasonably be expected to comply with every possible known standard from every possible lender. The implications of such a wide ranging and undefined standard of care on an individual appraiser are simply too much for anyone to comply with, much less everyone.

Which, of course, begs the question. If an appraiser is working as a review appraiser for a lending institution or other investor group, is it ethcial that they demand a fee appraiser to comply with, or judge an appraiser by, guidelines and standards that fall outside of the original engagement? Especially when those requests don't involve minimum appraisal standards (read, 'wants' rather than 'needs')?


George Hatch