Transaction Value Definition(s)

[Randolph Kinney]

Originally posted by Otis Key@Jan 6 2006, 11:43 PM
Soooooooooooo!!!!!!!!!! Does that now mean I can base my fee upon a percentage of the "Transaction Value" and not worry about being in violation of USPAP, because I'm not basing my fee upon a percentage of the sale price!?

<_<

Otis, yes, in a certain situation you can base your fee on market value. We had that example in class too. A probate referee is a court appointed appraiser and their fee is 0.1% of the market value (appraised value) here in California. Is that legal? Yes it is because it is defined by California state law and jurisdictional exception will trump USPAP.

We actually had a probate referee in class and she confirmed that she does very well with that fee schedule here in San Diego.

 

[Robert Anderson]

Originally posted by Greg Myers@Jan 7 2006, 05:40 AM
This would mean a Licensed appraiser would never be able to comply with USPAP. They will have PREDETERMINED the market value to accept the assignment.

Greg,

I hadn't thought of that. Like I said, you can count on the AQB to make a confusing situation worse.

Bob Anderson

 

[Robert Anderson]

Originally posted by Andrew Picarsic@Jan 7 2006, 06:10 AM
Actually, I think that is one of the few things that they have done correctly. Think about it for a moment and you will see that there is no debate anymore.

Andrew,

USPAP concerns aside, I would agree with you if it weren't for the non-federally related part of it. It would be nice if the AQB stated:

* Transaction value is defined as market value for all appraisals including those that are federally related and those that are not federally related.

* Defining transaction value as market value is not a violation of USPAP.

As an aside, a few states have alread defined transaction value as market value. So, if there is a question, the appraiser should contact their licensing board.

BTW, has anyone considered the impact of certification 23 on this issue? In the past, the use of transaction value made sense because it represented the amount at risk. By way of example, a licensed appraiser can do a $2 million property if the loan amount is $500,000. With certification 23, the buyer can rely on the appraisal to determine if the $2 million sale price is reasonable and this appraisal can still be done by a licensed appraiser.

Bob Anderson

 

[Randolph Kinney]

Originally posted by Robert Anderson@Jan 7 2006, 09:26 AM
BTW, has anyone considered the impact of certification 23 on this issue? In the past, the use of transaction value made sense because it represented the amount at risk. By way of example, a licensed appraiser can do a $2 million property if the loan amount is $500,000. With certification 23, the buyer can rely on the appraisal to determine if the $2 million sale price is reasonable and this appraisal can still be done by a licensed appraiser.

Bob Anderson

Bob, this is going to be a problem on the high dollar properties in California. Just imagine a situation where a refinanced home with the appraised value was just over $1 million dollars by an appraiser whose license level is just AL. What happens when the loan defaults? Or, maybe the borrower goes to sell his home and he can't sell it for more than $1 million?

Roy was asked why are the lenders accepting appraisals where the purchase price is over $1 million and the loan amount is less than 1 million by an appraiser who is licensed just an AL. His answer was that the lender wants the deal to go through and therefore they are not going to object on the first go around. After the loan goes into default, then whoever is holding the bag (loan) is going to look at the appraisal. It is a slam dunk the appraiser is going to be held responsible, if for nothing else, exceeding his licensure.

 

[hastalavista]

Originally posted by mike neff@Jan 7 2006, 08:34 AM



And there would be no limit, correct?

Mike-

I think you are correct and will have to drop that from my example list!

 

[Verne Hebert]

God Bless You Otis.....still trying to find a way to get some of that commission.

Reminds me of an old W.C. Fields joke.

W.C. is lying on his death bed reading the Bible. A buddy comes in to visit, notices W.C. reading the bible and asks him what he is doing? W.C. responds, "lookin' for a loophole".

 

[Mike Boyd]

We still have not determined the issue of PREDETERMINED VALUE. It would seem that ALs will not be able to quote a fee until they have completed the appraisal.

That might stop an AL skippy, theoretically or at least slow them down.

 

[Randolph Kinney]

Mike, I would suggest first of all, if the price is indicated on a purchase contract and it is $1 million or over, and the first pass for pulling comparable properties would or could support that value, it would be wise for the AL appraiser to get with an AR appraiser to make sure there won't be any problems.

If it is for a refinance, and if the AL appraiser can see that maybe just under $1 million appraised value can be supported from the comparable search, he runs the risk if he tries to sand bag the value to be under $1 million that could come back on him. If he goes over $1 million, he has exceeded his licensure limit.

If the property is near $1 million market value, AL appraisers would be wise to get with an AR appraiser to do the job.

I really don't believe a skippy appraiser is going to be stopped by a licensure limit. If they can distort (read that as "lie") the appraisal process to bring in the value, why would they be concerned about the law on licensure?

 

[Verne Hebert]

What is interesting that the deminimus and these value limits associated with the licenses now are over 10 years old, and have not changed.

Most markets have doubled to tripled in market value and loan values over this period of time.

Maybe the million limit should change to two or three million, there would less potential incidents with regard to licensing legality, and the enforcing agencies could better allocate their time to worthy activities for their monthly paychecks.

Certainly their are bigger and tastier fish to fry.

 

[Randolph Kinney]

Originally posted by Verne J. Hebert@ MFLA,Jan 10 2006, 12:15 PM
What is interesting that the deminimus and these value limits associated with the licenses now are over 10 years old, and have not changed.

Most markets have doubled to tripled in market value and loan values over this period of time.

Maybe the million limit should change to two or three million, there would less potential incidents with regard to licensing legality, and the enforcing agencies could better allocate their time to worthy activities for their monthly paychecks.

Certainly their are bigger and tastier fish to fry.

Verne, you might think that raising the value limit on the upper end of licensure would be considered. However, I learned at class that what is in the pipeline is to raise the de minimus to $500,000.

Think about what would happen if that change goes into affect with out raising the upper limit on licensure. AL appraisers away from the east and west coast, and major metro areas won't get any business. AL appraisers on the coast or in the major metro areas will have severely less work.