The third party

[Mary Caffey]

WE live in an area with resort homes and COUNTRY homes on acreage- with cows in the middle- so sometimes our comps are 20 miles apart- but then there is the "lake house" on pilings- we had a LO MB call with a concern about our comps and said one was not comparable to the subject because it was "way up in de aire" and she wanted additional comparables that were not.

We laughed until we cried but then had to explain that the subdv. has a mix of homes on pilings as well as blocks and pads and slabs and they are all comparable as they conform to what the market place IS .......


mary
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[Mike Garrett RAA]

Once I have completed the assignment for the "intended user" who was the "client named herein" my job is finished. If you want to hire me to do more...maybe, lets negociate! I am not required to change the name on the report period. Now if you are nice and ask politely and pay me a small administrative fee I will probably do it for you.

 

[Pam]

DEFINITIONS PER DEFINITIONS SECTION OF USPAP

Client: The party or parties who engage an appraiser (by employment -OR- [emphasis added] contract) in a specific assignment.

Intended use: The use or uses of an appraiser's reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, AS IDENTIFIED BY THE APPRAISER [emphasis added] based on communication with the client at the time of the assignment.

Intended user: The client AND ANY OTHER PARTY identified by NAME OR TYPE, as users of the appraisal, appraisal review, or appraisal consulting report, BY THE APPRAISER on the basis of communication with the client at the time of the assignment [emphasis added].


It seems clear from the above that the identification of the client and any intended users is the appraiser's responsibility. Further, it also seems clear that an investor is an intended user (i.e. identified by type) when the client is a loan broker. Additionally, the client relationship is formed either by employment or contract. This renders the contract law argument moot when the appraiser/client relationship is formed by"employment."

In any case, since the advent of the U.C.C. the gaps in contract terms have been filled by analogy to the "U.C.C. gap fillers." Since the responsibility is the appraiser's to identify the client and intended users, there is no legal ground in contract upon which to base an increased fee for completing the assignment to the satisfaction of the client (i.e. to the investor's satisfaction so that the loan can close).

 

[George Hatch]

Pam,

Nobody is disagreeing with you that the appraiser (either as an employee or a fee appraiser {hence the contract}) needs to exercise some reasonable care in identifying their clients and intended users and their needs. But honestly, how can anyone support the concept that appraisers be required to comply with standards that were not communicated to them when they were engaged? Implication and inferance don't count.

Is it then your interpretation that the client has no obligations in disclosing who their additional intended users are to the appraiser at the time of the engagement? After all, "These Standards are for appraisers and users of appraisal services". This is not a one-way street, with all responsibility and due diligence resting solely on the appraiser's shoulders. The users of appraisal services must accept some responsibility for communicating their needs in advance and being able to undrstand the work product that is delivered to those specifications. These clients and users may not have appraisal licenses, but USPAP does apply to them in this regard as well as to the appraiser.

Again, an appraiser should not be held to standards that are developed on the fly and after the fact, regardless of who the users are and whether they qualify as 'intended users' or not. Tell us what you want in advance. And no, "Make sure any lender I submit this to will be able to use it", or "We'll let you know what else we want after you submit the report" do not qualify as communicating a standard of care prior to the engagement.

Bottom line, the clients have an obligation, too. It's not all on the appraiser.


George Hatch

 

[Julio E. Sune Jr. (FL)]

I like George's phrase.

This is what I use=

USE OF THIS REPORT
This report including conclusions about the property value is intended for the sole use of the client. The appraisers’ obligations are to the specified client and no other intended users may receive the appraisal without consent from the named client. A party receiving a report copy from the client DOES NOT, as a consequence, become a party to the appraiser-client relationship. Any further distribution of this report is unintended and the appraiser assumes no obligation, liability or accountability to any party other than the client.

 

[Mike Garrett RAA]

You will not intimidate me! My obligation ends upon delivery of the original appraisal report...period! Any subsiquent use of the appraisal report is permissable; however, I am not responsible to change one damn thing!

Now, if you want me to do something additional, ask me. I most likely will agree but not without a fee.

End of discussion!

 

[Pam]

Perhaps the simplest solution would be for all wholesale lenders/investors to add this statement to their lending/selling guide:

[Insert lender's name] will not accept appraisals with limiting conditions which limit the intended user(s) to less than the named client (originating broker) AND its successors and assigns.

 

[George Hatch]

Pam,

An even easier solution would be if lenders apply a little more pressure to their 'agents' to disclose to the appraiser where the appraisal report is going when they engage them. Something like requiring that appraisals will only be accepted from a broker if the appraiser was notified in advance that it was going to this particular lender. That, plus having a readily accessible set of extra guidelines available, preferably online, for the appraisers to follow. Oh, here's a good one; how about it if lenders actually pay for the extras they're asking for instead of passing it along to their borrower or aking the appraiser eat the extra expense? Or even better yet, how about lenders skipping the wholesale 'package' concept and engaging their own appraisers? That way they can take responsibility for their appraisal process right from the beginning instead of sloughing it off on the brokers or even worse yet, having the appraisers fill in the blanks. After all, that was the original idea in FIRREA; lenders engaging the appraiser directly would cut down on the fraud and pressure on appraisers to make value or not disclose. How about if lenders go with the spirit of the law instead of just the letter?

Anything other than making the rules up as they go along and leaving it to the fee appraiser to pick up the slack for their laziness. Why are fee appraisers the only ones in this process who are tasked to be mindreaders?

Like you, I have no patience with appraisers that either fail to analyze or misrepresent the subject sales history (yep, that's a big one), or misrepresent the subject's physical condition, or ignore comparable sales that are located next door. These are all conditions that fall under the category of not doing the job properly the first time. They are not 'extras' that are not included in the original engagement; and at any rate, are not the kind of thing we were talking about when this thread started.

I'm sure you'll agree that sometimes some of these lenders can get pretty arbritrary about what they want, and that sometimes the lenders use their appraisal reviewers to unethically kill deals they don't want to make. Or use their broker system to control the flow of loan applications, resulting in fewer applications from minority neighborhoods and effectively discriminating against minorities. Or lenders who ask the appraisers to 'cover' their underwriting requirements so they can stuff properties into loan programs that they don't otherwise qualify for. Or lenders who will shop for complacent, ignorant, incompetent, and/or unethical appraisers so that their marginal deals can fund. Or lenders who will blacklist appraisers based on their 'attitudes' rather than their performance. And that doesn't even address what some of these lenders must be doing with their 'alternative valuation products' or their credit analyses to make some of these loans that they have no business making. To me, those types of activities are far more unethical than anything a fee appraiser can do. I do believe there's plenty of responsibility to go around.

How about asking appraisers who work on staff with a lender to persuade or demand that their employers insitute policies to participate more actively in state appraisal board enforcement activity by forwarding complaints about bad appraisals, instead of their current practices of informal blacklisting of appraisers? Or monitoring their broker networks better, disassociating from brokers that bring in bad loan packages and bad appraisals? That'll shape things up a lot faster than sticking the appraiser in the middle of an underwriting war and tasking them to come up with more gooodies so the process can be slowed down enough to give the lender time to catch up on their work load. There are a lot of ways the investor groups can help clean up the mess if they truly have an interest in doing so. The question really is, how sincere are investor groups about getting good appraisals? Integrity in the process should not have to begin and end with the appraiser; with none of the other participants being held accountable.

I would never stand up for a fraudulent and unethical appraiser, and I expect you would never stand up for an unethical reviewer or lending institution. That said, how about we all go by a set of conduct that encourages personal and professional responsibility instead of laying the entire burden on the appraiser?

George Hatch

 

[BarbaraNJ]

Perhaps we have all lost sight of Paul's original "rant".

It is my impression that he was not complaining about justifying or explaining his report and resulting valuation to another party. It seems his complaint was that other parties wanted additional work.

Yes, I agree that once a report is completed, any competent appraiser will gladly explain to anyone how value was developed.

I have personally spent many hours with a "tough one", where comps are much different and require significant adjustments or are many miles away. I did my very best with the information available, as do we all. Guess what?? Some underwriter wanted comps that were "closer", or "more similar". Haven't we all wanted to say : "I gave you the Second best comps and was really saving the Best comps for last, just in case you called??"

After all of our best efforts, one of us (like Paul, in this instance) is asked to supply more----and not necessarily better---justification.

Will I support my Original Report to any third, fourth or fifth party with no additional compensation? Absolutely.

Will I do additional comp work and research after MY client accepted my report with no question and a third or fourth or fifth client down the line who may be half the US away is not familiar with the local market ??

Absolutely not.

 

[Paul in bama]

Intended user: The client AND ANY OTHER PARTY identified by NAME OR TYPE, as users of the appraisal, appraisal review, or appraisal consulting report, BY THE APPRAISER on the basis of communication with the client at the time of the assignment [emphasis added].

Exactly. The mortgage broker's name is on the appraisal and I also include a statement that the purpose of the appraisal is blah blah blah...
also stating the client. The broker doesn't yet know who they will shop the deal to so there is no possible way for me to include their name on the appraisal. So the broker who's name is on the appraisal is the client, the intended user, period. The keywords here are: IDENTIFIED and TIME OF THE ASSIGNMENT.