What would you do?

[Mztk1]

Prelim: 1004 Report to Fannie Guidelines, typical scope of work but lender requires comprehensive market analysis with two pending sales or listings if pendings are not available.

In the beginning of April I did an appraisal on a property that had a couple of possible structural issues.

The pole in front of the house was struck by a car and the wire which lead from the pole to the house was yanked and caused a shift in the roof and the eaves. Also, when walking inside the house it was noted that there was a slant downward from the center of the floor to both sides of the house; so the floor was bowed.

In addition, the house is in a market that is in decline by 30% for the year and it is located on a moderate through street across from a manufactured housing project. Finally, though the house was average for the market, it was cosmetically dated with need for painting and carpet and the kitchen may never have been updated, nor the bath, and the dwelling was built in the 50s.

I appraised the house for X, which is well below what the owner believes the house is worth, and requested that the dwelling be inspected by qualified experts, CB4ing the house for roof, electrical and strutural inspections.

Today I get an order to review an appraisal on the same house with an effective date 24 days after my inspection. It is actually going to the same lender but from the wholesale side with the new report completed for a mortgage broker. The interior looks the same via the interior photos. There is no discussion of the slanted floors or eaves/roof. I believe the roof was cosmetically repaired but never inspected. The appraiser spends about 4 paragraphs in the addendum on how she is not responsible for hidden defects, did not inspect the crawl space or attic, has made only an "observation", specifically states she is not an expert on foundation settlement, etc. and generically recommends the client get a qualified inspection but doesn't state any explicit concerns. She appraises the house "as is". In addition, she calls the market stable and does not make market condition adjustments, ignores the moderate road location and does not discuss the cosmetic nature of the house. Her appraisal is about 1/3 higher than mine.

Suggestions?

 

[Tudor]

Who better to review this then an appraiser that has viewed this property recently.

Do the review and then I would report them for having 2 appraisals done and ignoring the one that hurts their deal.


Actually since you appraised that property for that lender 3 weeks prior to this one just let them know to refer to that appraisal. 1) it will save them some money and save you time, and may earn you some brownie points. 2) it will show them how good your work is and some honesty (your not trying to gouge them), which may earn you more work.

 

[Mary Tiernan]

First, reanalyze the market as of the date of this appraisal and provide the appropriate commentary in the review.

Second, comment on the location. Did any of the comparables used by second appraiser have similar location issues? If not, provide one that does, and make an adjustment if the market so indicates.

Third, this is a field review of the subject. All data regarding improvements is assumed as reported by the original appraisal. If photos show dated interior, mention dated interior and try to find comps with dated interior.

Then, describe why the opinion of value as provided by original appraisal is not supported by the market evidence.

In other words, do the review if you can complete it without bias. If you feel you cannot complete it without bias, then decline the assignment.

And, consider yourself lucky that you may just be able to stop a skippy in their tracks by a competent review completed by a professional appraiser (you).

 

[Mztk1]

Don't you think it would be misleading to review the report as if the data about the interior - that is the foundation - were accurate when you know it isn't? The other LO stopped working with the borrower about a week or so ago, and the borrower was not about to spend money for the inspections at that time. So to correct the floor issue, which would require jacking it up, etc., would likely take longer than a week. Heck it might take a week to get the crew out there. So I know those floors were still slanted and I bet they are still slated right now. Why would I make an extraordinary assumption for something I know is not true?

I like the idea of calling the lender and telling them to simply refer to the prior appraisal. I am sure they have no idea the lender already has one.

 

[Tudor]

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Don't you think it would be misleading to review the report as if the data about the interior - that is the foundation - were accurate when you know it isn't? The other LO stopped working with the borrower about a week or so ago, and the borrower was not about to spend money for the inspections at that time. So to correct the floor issue, which would require jacking it up, etc., would likely take longer than a week. Heck it might take a week to get the crew out there. So I know those floors were still slanted and I bet they are still slated right now. Why would I make an extraordinary assumption for something I know is not true

I would'nt have made an extraordinary assumption, but just report what you saw on the date you inspected it. Also there was other pertinant information that could not have changed since that time (ie: location, market conditions) which the appraisal indicates differently.

 

[Mztk1]

Thanks guys. I followed your advise Tudor and gave the client their prior file number on the first report. Within 5 minutes it was cancelled.

 

[Mary Tiernan]

Here is a previous thread on this same subject, just for your information.

http://appraisersforum.com/showthread.php?t=137153

 

[oldschool]

Good advise all around!! remember, when you have seen something (recently) don't fear talking to everyone involved. You are the eyes of the client, even if the issue has been resolved, don't ever let your guard down. Using common since to resolve a possible problem will only make you look better. Professionalism, quality and honesty - Wow this should be part of USPAP? OS out.

 

[CANative]

Alright. My turn.

I have some disagreements and concerns.

Oly... While your post in the other thread makes for a humorous forum "idea" I don't think it's appropriate. To make a ridiculous EA is cynical at best and could be considered misleading by some lender who got burned.

determine the scope of work necessary to produce credible assignment results in accordance with the SCOPE OF WORK RULE; (note44)

Comment: In making the scope of work decision, the reviewer must identify any extraordinary assumptions necessary in the assignment. An extraordinary assumption may be used in an appraisal review assignment only if:

it is required to properly develop credible opinions and conclusions;

the reviewer has a reasonable basis for the extraordinary assumption;

use of the extraordinary assumption results in a credible analysis; and

the reviewer complies with the disclosure requirements set forth in Standards Rule 3-2(d) for extraordinary assumptions.

3-2(d)

state the opinions, reasons, and conclusions required in Standards Rule 3-1(d-g), given the reviewer's scope of work;

Comment: When the reviewer’s scope of work includes expressing his or her own opinion of value, the reviewer must:

1. state which information, analyses, opinions, and conclusions in the material under review that the reviewer accepted as credible and used in developing the reviewer’s opinion of value;

2. summarize any additional information relied on and the reasoning and basis for the reviewer’s opinion of value;

3. state all assumptions and limiting conditions; and

4. clearly and conspicuously:

state all extraordinary assumptions and hypothetical conditions connected with the reviewer’s opinion of value; and

state that their use might have affected the assignment results.

Right out of the box the scope of work decision was incorrect because you knew that there was not a reasonable basis for th EA. You alluded to this (an not clearly) by making a sarcastic notation that the extensive work was done in 3 weeks and strongly recommending inspection.

Mary...

The reviewer does not HAVE to make an EA that the information in the work under review is correct.

What I do when this comes up is to communicate to the client that based on my recent inspection of the property I can't make an extraordinary assumption that the information in the work to be reviewed is credible and request an upgrade to the scope of work to include an interior inspection. This is almost always approved. Sometimes the assignment is cancelled. Oh well.