Withdrawing an Appraisal Report

[David S. Roberson]

I think I've done work for you before. That sounds very familiar.

 

[George Hatch]

There issues relating to appraisals and then there are issues relating to the business of rendering appraisals. This is clearly in the latter category. I woud try to avoid mixing the two any more than is necessary. Making an appraisal continegent on getting paid or (a check clearing) is expressly forbidden in the Ethics Rule, so that option is out. So are any other ruses we might use to make a lender think the opinion of value may have changed if our reason involves getting paid. I would just play this one straight up and tell the lender that their borrower gave you a bad check.

No lender I know will use an appraisal where the appraiser hasn't been paid. If they want to use the appraisal to fund a loan where they're going to make some money then they will see to it that the appraiser gets paid, even if they have to take it out of escrow; an option I'm sure the borrower in this case was hoping for. If they want to deny the loan based on the appraisal, most lenders will still try and get the borrower to pay up before notifying them of their decision.

Another recourse that has always worked reasonably well for me is to contact the borrower, inform them that you are shocked to discover their check is NSF and that you want to give them a chance to make good before contacting the lender. Tell them that lenders commonly deny loan requests or change the terms if they find out that the borrower is in any way unreliable in paying their commitments. This is very much a credit issue for a lender. In other words, it's not in their best interests to stiff the appraiser. Depending on your delivery, this will often work out. You don't want to come across as being desperate for the money or as being angry, just be professional.

We always call on a check to see if funds are available before processing the report, and we tell the borrowers when they give us a check that the report doesn't go out until the check clears. They always have the option to give us certified funds or cash if they want it faster than that.


George Hatch

 

[Richard Carlsen]

Making an appraisal continegent on getting paid or (a check clearing) is expressly forbidden in the Ethics Rule, so that option is out.

George Hatch

George;

Specifically where in the Ethics Rule is that stated.

Thanks

Richard

 

[Restrain]

Goodpasture rules... at least in this instance. Go to the DA and file charges with the DA. You're outta luck with the lender if you accepted a "pay at the door" and submitted the report without the check clearing. You agreed to a 'third-party' payee, the borrower, so you can't hold up the lender.

Next time, even if it's a rush, wait till the check clears.

Roger

 

[Richard Carlsen]

Goodpasture, as usual, has fine advice. However, I think I will play out my bluff and see if I can get paid without causing the buyers any real trouble or blowing the deal for the brokers involved. Maybe all of my messages to the various people, and then nothing but my answering machine for 5 days while we celebrate the holidays, will put some urgency into the situation.

This whole situation has made me think about next year. We've been so busy this past 6 months that we have not had time to stay on top of our accounts receivables. It is now at what I consider an unacceptable level.

Come the first of the year, there are many lenders out there who have abused my Net 30 days payment that will wonder why I now require payment up front or cash/certified funds COD at time of inspection. Personal checks will be accepted but they will be required to be mailed to me and must clear the bank first before an appointment inspection will be set. I've had it with people taking advantage of my good will and accommodating nature. I could have been fishing in stead of doing those reports.

 

[Doug Smith SRA]

Making an appraisal continegent on getting paid or (a check clearing) is expressly forbidden in the Ethics Rule, so that option is out.

George Hatch

George;

Specifically where in the Ethics Rule is that stated.

Thanks

Richard

USPAP Line 294-296

Manangement:

5. the occurance of a subsequent event directly related to the appraiser's opinions and specific to the assignment's purpose.

In a Q & A, for instance the Foundation holds that, discounting a fee to get paid falls into #5. If you complete an appraisal and the property is not funded, and in the fight with the lender to get paid, you agree to a lesser amount, you are acting unethically. That is really strange interpretation but there you go....

 

[Richard Carlsen]

I'll have to ponder that one for a while.

One more income property to do (The last one in my career so help me!!!!) and then it is time to get ready to visit the Grandkids.

 

[George Hatch]

Richard,

You are, of course, absolutely correct. The Ethics Rule does not expressly forbid making an appraisal contingent on getting paid. That was a very poor choice of words on my part. However, it is still forbidden; it just isn't expressly stated that way.

It is unethical for an appraiser to accept compensation for performing an assignment when it is contingent upon:



the reporting of a predetermined result (e.g., opinion of value);
a direction in assignment results that favors the cause of the client;
the amount of a value opinion;
the attainment of a stipulated result; or
the occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignment's purpose

The issue of contingent compensation has always been described in the USPAP training materials as the concept that the full or partial payment for the appraisal services would be subject to the Client being able to attain a desired result. That result can be as limited as getting the value opinion they want, the omission or misrepresentation of a relevant fact in a report, or some other item relating specifically to the appraisal and the appraisal report. The result could also involve no appraisal shenanigans at all, but instead be related to the desired end result such as a deal funding, or prevailing in a legal proceeding. These prohibitions are intended to better enable appraisers to do their work without undue outside pressure, and to better support our assertions of independence and impartiality. Any actions that detract from these goals will also detract from our credibility and ultimately, will also detract from our long term survival.


The question here is if the appraisal report itself can include a contingency that would render it void after the fact if the appraiser doesn't get paid. I think we all agree that an appraiser can agree to work for free. And I think we can all agree that an appraiser cannot ethically accept an appraisal engagement that involves compensation of any kind that is contingent under the terms described above. Given the above prohibitions, there are no circumstances where an appraiser could ethically accept an assignment with the fee arrangements (including an agreement to work for free or at a reduced fee or other compensation in lieu of) being mutually stipulated in advance. That said, how could the appraiser ethically accept a specific assignment if the payment was truly in question? And if the payment is not in question, how could the appraiser be allowed to insert a condition of the appraisal and appraisal report making it valid only if payment is made?

Just to see how this would look, let's write up such a condition:

This appraisal was engaged by the above client under "COD" terms whereby the borrower has agreed to pay the appraiser directly for services rendered. This appraisal and appraisal report are made subject to the appraiser receiving said compensation.

Other than the appraiser's intention to get paid, what else could the average reader infer from such an appraisal condition? Most notably, could a reader infer that the appraiser is conceivably willing to develop and report (and deliver) appraisals and appraisal reports, knowing in advance they might not get paid? What would that say about the lack of undue pressure on the appraiser? Could the reader infer that if the borrower was unhappy enough to not pay the appraiser that the appraiser might change the appraisal for them? Could the reader infer that if the deal didn't fund or that the judge ruled against the borrower that the appraiser would just go away and not demand full payment? Could a reader infer that the appraiser might enter into an engagement "betting" that a specific outcome would be forthcoming, with the added inference that the appraiser would also be willing to cover that bet by coloring the appraisal accordingly?

There are too many other questions such an appraisal condition would raise, all of which detract from our goals of working and being percieved by the public as impartial and unbiased.

Sure, it is a reality in the fee appraising business that we will enter into a certain percentage of engagements knowing that we will eventually get stiffed. Which ones those might be, we have no way of knowing in advance. However, that's a business issue, not an appraisal issue. We are not the only ones who have to work this way, though. You don't see CPAs conditioning their audits based on payment; you don't see doctors rendering medical opinions or care that may be relied upon only if they get paid, you don't see architects conditioning their plans based on payment; and you don't see lawyers conditioning the quality of their contracts or their use of their pleas before a court based on payment. Payment of professional fees is a matter forever separate and apart from the ethical, technical and professional requirements we are held to.

So, expressly forbidden? No. Permissible and allowable? Also no.

George Hatch

 

[Richard Carlsen]

George;

I have not had time to fully digest your post as dinner will be on the table in about 4 minutes I'm told.

However, in the URAR form in the reconciliation section we see the following:

"This appraisal is made: #1. As is; #2. Subject to the repairs, alterations, inspections or conditions listed below; and #3 Subject to completion per plans and specifications."

Please note the word "conditions". Could not the contractual obligations of the lender be part of the conditions of the report? Why not add something like the following in your report to cover non-payment:


"This report is subject to fulfillment of the obligation by the client named herein for payment in full to the appraiser for services rendered in writing this appraisal report. Use of this report for lending consideration or loan justification is not authorized with this condition imposed."

There is not an UW that I know of who would clear such a condition for closing. By doing this, value is not tied to the closing. Value is fully disclosed in the report as requested. They know what my opinion of vlaue is and they can make their closing plans accordingly. What I am doing is restricting the use of the appraisal document as justification for the loan until the fee has been paid as agreed by the lender.

That's it.....dinner is ready. Back in a while.

Richard

 

[Verne Hebert]

I like airphotos first post. Then collect from the lender as you are suggesting. Then take the check to the DA.

The check issue and contractual issues are state issues specifically.