When is Effective, Retrospective

[Ricky LaFleur]

I am needing some clarification on exactly how it is determined that an effective date is either "Current" or "Retrospective".
Of course, if a Date of Death of 5 years ago is chosen, that is easy to determine that it is not current. What about when you previously inspected a property, say anywhere from a week ago to one year ago, and that date was chosen for the effective date?

AO-34 states line 15 "Current appraisals occur when the effective date of the appraisal is contemporaneous with the date of the report......"

USPAP FAQ #155 states "Contemporaneous means arising, existing or occurring during the same time period. In this context contemporaneous is not intended to mean simultaneous. Because the time period may very well differ from assignment to assignment, one single specific time period cannot be provided that can be used for all assignments. However, for an assignment to include a current appraisal opinion there must not have been a significant change in the property characteristics or market conditions between the effective date of the appraisal and the date of the report." (My underline added for emphasis).

This sounds as though there is not a single correct answer, but in rapidly changing markets, the difference between an inspection/effective date and date of report cannot be months apart, or it would no longer be "Current" by this understanding.

AO-34 line 18 "Retrospective appraisals (effective date of the appraisal prior to the date of the report) may be required for property tax matters....." etc.

 

[Ricky LaFleur]

There are several reasons for the "why":

For a lender client, we previously appraised a property for a purchase transaction. About a year later the property was being sold again, and the same lender was needing another appraisal completed. They asked if we could use the same inspection/effective date so that no new market analysis would have to be performed to save on the fee. It was argued that it would still be considered "Current" market value as sometimes, say in condemnation appraisals, that the inspection/effective date may be months apart and are still considered "Current". (I have no idea if this is true as I am unfamiliar with that type of appraisal problem).

As this previous appraisal was one year prior, I believed using that previous inspection date for an effective date would mean the value would be considered "Retrospective". USPAP FAQ #155 stated above that significant change in property characteristics or market conditions would mean it is not "Current". For the intended use of a mortgage lending decision, is it even appropriate to use a Retrospective date? Would this in any way be misleading to the intended users? Any input is appreciated.

 

[Meandering]

There are several reasons for the "why":

For a lender client, we previously appraised a property for a purchase transaction. About a year later the property was being sold again, and the same lender was needing another appraisal completed. They asked if we could use the same inspection/effective date so that no new market analysis would have to be performed to save on the fee. It was argued that it would still be considered "Current" market value as sometimes, say in condemnation appraisals, that the inspection/effective date may be months apart and are still considered "Current". (I have no idea if this is true as I am unfamiliar with that type of appraisal problem).

As this previous appraisal was one year prior, I believed using that previous inspection date for an effective date would mean the value would be considered "Retrospective". USPAP FAQ #155 stated above that significant change in property characteristics or market conditions would mean it is not "Current". For the intended use of a mortgage lending decision, is it even appropriate to use a Retrospective date? Would this in any way be misleading to the intended users? Any input is appreciated.

It should cost you your license to proceed in this manner.

your client is playing games with you. Don't get suckered in.

They are not going to drop the interest rate or down payment requirements because it would "cost less".

And it is absolutely a violation of 12 cfr 1026.42 - you know, one of them there laws that apply to the assignment. And you would violate USPAP by first accepting under those conditions and then by producing a misleading report.

condemnation appraisals and their requirements or not, have nothing to do with lending appraisals and their requirements or not.

But USPAP is still applicable to both, depending on the state you are in.

.

 

[J Grant]

I am needing some clarification on exactly how it is determined that an effective date is either "Current" or "Retrospective".
Of course, if a Date of Death of 5 years ago is chosen, that is easy to determine that it is not current. What about when you previously inspected a property, say anywhere from a week ago to one year ago, and that date was chosen for the effective date?

AO-34 states line 15 "Current appraisals occur when the effective date of the appraisal is contemporaneous with the date of the report......"

USPAP FAQ #155 states "Contemporaneous means arising, existing or occurring during the same time period. In this context contemporaneous is not intended to mean simultaneous. Because the time period may very well differ from assignment to assignment, one single specific time period cannot be provided that can be used for all assignments. However, for an assignment to include a current appraisal opinion there must not have been a significant change in the property characteristics or market conditions between the effective date of the appraisal and the date of the report." (My underline added for emphasis).

This sounds as though there is not a single correct answer, but in rapidly changing markets, the difference between an inspection/effective date and date of report cannot be months apart, or it would no longer be "Current" by this understanding.

AO-34 line 18 "Retrospective appraisals (effective date of the appraisal prior to the date of the report) may be required for property tax matters....." etc.

 

[CANative]

Tell them to go away until they come to their senses.

 

[J Grant]

Technically, unless we finish the appraisal and the report and sign the report that very same date day as we inspect ( if inspection date is effective date), then all effective dates are retrospective to report date signed - whether the effective/inspection date was yesterday or last year . Of course the effective date need not be the same as inspection date , the effective date is actually the date for valuation reference IT is answered below :

USPAP AO-34 states line 15 "Current appraisals occur when the effective date of the appraisal is contemporaneous with the date of the report......"

USPAP FAQ #155 states "Contemporaneous means arising, existing or occurring during the same time period. In this context contemporaneous is not intended to mean simultaneous. Because the time period may very well differ from assignment to assignment, one single specific time period cannot be provided that can be used for all assignments. However, for an assignment to include a current appraisal opinion there must not have been a significant change in the property characteristics or market conditions between the effective date of the appraisal and the date of the report." (My underline added for emphasis)

For this reason, we need not refer to the eff date as current unless it is .The eff date stated lets reader se how far back it was (or near present, or forward for a prospective value )

For credible results, if the market conditions/time period around the effective date have no change mainly stable even if eff date is a year ago, the eff date is contemporaneous with current condition despite the months/days elapse, But in a significant /rapid market change, such as effective date was last week and this week a storm or covid or other made a huge market shift, then the effective date is no longer contemporaneous with market conditions even if the eff date in physical time was 7 days ago. - which is why we address it in a in narrative and adjustments and rely more on pending and listings/interviews to show the most recent and current market conditions.

So if we have a comp that sold 3 months ago prior to a huge market change, and a comp that sold 2 months ago and the 2 month old sale occurred in the more current /changed market conditions, we have to analyze it that way even if both sales are relatively recent.

 

[Ricky LaFleur]

They are not going to drop the interest rate or down payment requirements because it would "cost less".

So very true.

And it is absolutely a violation of 12 cfr 1026.42 - you know, one of them there laws that apply to the assignment. And you would violate USPAP by first accepting under those conditions and then by producing a misleading report.

What part is a violation of the CFR? How is it violating USPAP specifically? Because a Retro effective date would be misleading to the intended users? Asking so I better understand. I really appreciate your input.

For the record, we turned down the assignment and lost that client, and I have slept very comfortably ever since. BUT I would like to know this subject better so I'm not left guessing if I'm following existing regulation or simply "adding to it".

 

[J Grant]

There are several reasons for the "why":

For a lender client, we previously appraised a property for a purchase transaction. About a year later the property was being sold again, and the same lender was needing another appraisal completed. They asked if we could use the same inspection/effective date so that no new market analysis would have to be performed to save on the fee. It was argued that it would still be considered "Current" market value as sometimes, say in condemnation appraisals, that the inspection/effective date may be months apart and are still considered "Current". (I have no idea if this is true as I am unfamiliar with that type of appraisal problem).

As this previous appraisal was one year prior, I believed using that previous inspection date for an effective date would mean the value would be considered "Retrospective". USPAP FAQ #155 stated above that significant change in property characteristics or market conditions would mean it is not "Current". For the intended use of a mortgage lending decision, is it even appropriate to use a Retrospective date? Would this in any way be misleading to the intended users? Any input is appreciated.

To answer this specifically, the client is asking you to perform a misleading appraisal ( and thus grounds to turn it down )

 

[Meandering]

So very true.


What part is a violation of the CFR? How is it violating USPAP specifically? Because a Retro effective date would be misleading to the intended users? Asking so I better understand. I really appreciate your input.

For the record, we turned down the assignment and lost that client, and I have slept very comfortably ever since. BUT I would like to know this subject better so I'm not left guessing if I'm following existing regulation or simply "adding to it".

being that USPAP requires you to comply, among other things, with the laws applicable to the assignment you need to read the 12 cfr 1026.42 for yourself so that you can certify that your work is in compliance with USPAP, since, it applies to all residential lending assignments for primary homes, and that is the work you do.

And being that USPAP also requires your work to comply with the regulations applicable to the assignment, you also need to read the IAEG which is applicable for all regulated lender work.

And last, but not least,
you need to read page 1 of USPAP,

WHERE it says that FAQs and AOs are not USPAP, are not interpretations of USPAP and do not set new USPAP standards. Then you need to understand, you are held to USPAP and USPAP is what is enforced. Consider it all the while, knowing that page 1 of USPAP says that FAQs and AOs are not USPAP.

And when you have an issue,
here's what you do with it.

https://www.FDIC.gov/consumers/assistance/protection/mortgages/appraisals/index.html

 

[J Grant]

USPAP says not to be misleading. The misleading part is not doing a retrospective appraisal to a year past effective date., which can be done

The misleading part would be "skipping market analysis "-(to save on fee as excuse what a sleazeball client ).

The more serious misleading part is skipping the market analysis deliberately to construe that the effective date a year old is current/contemptuous with recent market conditions ( when it may not be true )