New Appraisal Assignment?
An appraiser receives an assignment involving a purchase contract on a short sale. The short sale price is $150,000. The appraiser concludes an opinion of value at $180,000.
A week later the lender wants the appraiser to amend the appraisal to reflect the renegotiated contract that pegs the property at $180,000.
As an aside, the lender would not provide the new contract.
First, is the lender’s request automatically a new appraisal assignment?
AO-3 offers useful guidance:
Regardless of the nomenclature used, when a client seeks a more current value or analysis of a property that was the subject of a prior assignment, this is not an extension of that prior assignment that was already completed – it is simply a new appraisal assignment.
Let’s take this one step further by examining AO-111:
Question: I recently had a client contact me and ask me to change the effective date of my appraisal, to make it one week after the effective date shown in my report. Does USPAP permit me to simply change the effective date without taking additional steps?
Response: No. As indicated in the SCOPE OF WORK RULE, the effective date of the appraiser’s opinions and conclusions is an assignment element.
If the client is asking for an appraisal with a different effective date, the appraiser needs to determine the appropriate scope of work to produce credible assignment results for this request. Such a request would need to be considered a new appraisal assignment, but that does not necessarily require starting from scratch. As with all new assignments, the appraiser must decide the appropriate scope of work to produce credible assignment results. This would include a decision as to whether or not it was necessary to perform another inspection, as well as the extent of any additional research and analyses that might be required. The scope of work for the new assignment can be different from the scope of work completed in the earlier assignment. As with any assignment, the appraiser might be able to use information and analyses developed for a previous assignment.
AO-112 follows up with:
Question: I recently completed an appraisal for mortgage financing purposes in a purchase transaction and delivered the report to my client. My opinion of value did not support the pending sale price. As a result, the purchase transaction was not consummated. However, one week later the buyer and seller entered into a new purchase agreement where the sale price coincided with my appraised value. My client asked if I can provide a revised report that includes the analysis of the newly agreed-upon sale price. To provide a revised appraisal report, must I consider the client’s request as a new appraisal assignment?
Response: If the client does not require a more current effective date, USPAP would not mandate treating the request as a new assignment. However, if the client does require a more current effective date, the request must be treated as a new assignment.
In this example, regardless of whether the effective date is changed, the date of the report would have to change to accurately reflect the appraiser’s consideration of the newly obtained agreement of sale. Because the new purchase agreement was obtained after the date of the first report, the revised report would need to have a date of report that is the same as or later than the date the new purchase agreement was obtained by the appraiser.
In addition, the new report would also need to reflect the appraiser’s analysis of the prior agreement of sale. In the development of an appraisal, an appraiser is required under Standards Rule 1-1(b), to not commit a substantial error of omission or commission that significantly affects an appraisal. Since information about the prior agreement of sale is known by the appraiser and that information is relevant to the appraisal problem, it must be considered.
Even if the new contract isn’t made available you can complete the assignment so long as you detail what steps were taken to obtain it.
Now that you understand that it’s a new assignment, should the appraiser charge the lender for a whole new assignment?
This is purely a business decision. New assignments do not necessarily translate into new invoices. But, they aren’t baked-in freebies either.
As a business person this is totally the appraiser’s call.
~ Source Illinois Appraiser Newsletters December 2011 issue