You Need This In Your Reports

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You Need This In Your Reports

Please consider utilizing the following statements in your reports…

In my years of appraising, I have had had to argue with many Lenders, Attorneys, and general pains in the butt. What many of us have found is that when Banks screw up, they come knocking at your door.

What we need to do as appraisers is to state the separation of Lending liability to appraisal liability. Please consider utilizing the following statements in your reports after your statements of intended users that is required in your reports.

I have been using this for years in my reports as it returns liability for poor lending decisions back on the Lender – It is not a cure all – but will clearly state that you had no part in poor underwriting and qualification of the Borrowers:

The appraiser is engaged by client to render a value conclusion utilizing similar comparable sales within the subject’s market area. From analyzing and adjusting similar/dissimilar features of the comparable sales, appraiser is able to render a value conclusion. In addition, the cost to build a similar structure with a similar site is also evaluated. In this analysis these costs would include typical local builder’s profit that is typically attained in the market. In some cases where the income approach is applicable, appraiser also utilized this approach to value.

Appraiser has not examined the borrower’s credit report. Appraiser has not analyzed the borrower’s income, tax returns, W-2’s, financial statement, nor any other financial instrument with regard to borrower’s credit worthiness or capacity to repay any loan. Appraiser has not been engaged to assist in the underwriting criteria and decision making for any loan with regards to the subject. The determination of the borrower’s ability to repay a loan or the rating class of the final loan placed on the subject is determined solely by the lender – (the borrower’s ability to repay the loan note and not on the subject’s overall value). It is further understood that any lending decision made is the sole discretion and burden of the lender who qualifies the borrower’s ability to repay the loan and not the real estate which has been valued. Appraiser warrants that they are not part of any credit or loan making decision in conjunction with this transaction.

Appraiser’s engagement is to render a value conclusion totally disconnected from the lending underwriting process without bias. Appraiser has valued the subject relative to the market and has analyzed any special condition or feature relevant to the subject’s value. Appraiser has no financial connection or undisclosed business relationship with lender.

This little addition puts the shut up where it belongs –

Some of us seem to forget – that loans are made based on the ability to repay. The Asset value may change, but the Lender has approved credit for an $XYZ dollar amount. In reality, it comes down to the loan and not the real estate.

Consider this – when the market crashed was the loan tied to the real estate then? – No/Yes – regardless of the value of the real estate, lenders wanted their money – the collateral did not change the obligation of the Borrower. This gives you a fighting chance against the Bullies.

By Randy Jonason, Appraiser, CoveHarborCapital.com ~ Source The Foundation of Real Estate Associates (FREA): providing Errors & Omissions Insurance to appraisers and home inspectors since 1993. As a membership organization with over 6,000 members, FREA is one of the largest and most well respected professional associations in the country, providing E&O Insurance for appraisers and inspectors as well as educational opportunities, member benefits, and legal support.

Image credit flickr - Paul Sableman
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6 Responses

  1. AppraiserMorons says:

    Good luck getting this in your reports passed the lenders. What a joke. They will make you remove it. Period.

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  2. Mike Ford Mike Ford says:

    Comment by AM is inappropriate and demonstrates ignorance of the process. I’ve never had a lender tell me to remove protective comments like this. You cannot put them in the FNMA cert and limiting conditions which may not be modified, but you CAN put them in as separate supplemental limiting conditions.

    Randy, I’d go a step further and also insert verbiage that the appraisal is intended to be read in its entirety. Appraiser cannot be responsible for any investor loan purchases made on the basis of abbreviated xml data transmitted by loan originators or underwriters or their agents. Tampering with, abbreviating, rewording, rephrasing, redacting and or retransmitting partial appraisal data or portions of the appraisal report voids and nullifies the entire appraisal report. The appraisal is a professional work product, signed by a licensed or State Certified professional, and prepared in accordance with very specific reporting requirements. Modifying the report in any way or delivering or communicating its results in less than its complete form voids it; and releases the appraiser from any and all liability that may or could arise from subsequent decisions made in connection with the loan security or the loan itself.

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    • old don says:

      I go further, I introduce all my reports with a transmittal letter and an addenda “B” written by ME, not the forms arthor. The Transmittal letter states MY Client, and other things historically demanded by USPSP. The addenda “B” cites definitions, typically misinterpreted by readers

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  3. AppraiserMorons says:

    Go ahead and try it. You may never get another order.

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    • Tish Leahy says:

      I agree with Mike. I have inserted addendum’s with similar comments and have never been asked to remove them. Comments such as these are both appropriate and necessary. I’m fortunate to only work with banks, not AMC’S, but I don’t see how they could force you to remove it.

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  4. John Pratt says:

    I have over 20 years Banking experience and this statement is a good idea to include in your appraisal report and no one can make you remove it. It would be a violation of AIR if the AMC or Lender attempted to make you remove the statement.

    I also include the following statement in all of my reports and I have never had even one of them ask me to remove it.

    APPRAISERS LIMITED LIABILITY:

    The appraiser’s liability for errors, omissions or other deficiencies in this appraisal report is limited to the “Intended Users” as stated in this report. The intended user, users, are responsible for reviewing the appraisal report in a timely manner for errors, omissions and or other deficiencies which may be in the report and must report in writing to the appraiser within 30 days of the date of signature on the appraisal report any errors, omissions or deficiencies that exist in the appraisal report. This does not change, alter or amend the effect, terms or conditions on any insurance policy which the appraiser may have in force at any time during his/her business of providing professional services as an appraiser.

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