Appraisal Report Corrections Protocol

Dave Towne
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Appraisal Report Corrections ProtocolFor some time, appraisers have written or called me, asking about how to do report corrections, or respond to client requests – after an original report has been sent in. I decided to distribute these suggestions to encourage a uniform procedure across the appraiser universe. I don’t recall ever seeing anything published about this topic.

  1. Disclose, don’t bury – modifications, corrections or responses to the original report, or even subsequent changes. I have seen too many reports where the appraiser hides changes within the body of the report as if those were part of the original, when in fact they were later additions.
  2. Remember that once you sign and deliver a report with appraiser certifications included, that becomes a ‘legal’ document. Itemize anything done to update or add to the report after the original submittal date. Read on for how and where.
  3. I suggest all reports contain a Table of Contents page. This TOC should include reference to all pages before it, and of course, after it. Some reports have a Cover Page with subject photo, date of appraisal, value, etc. as the first page. Put the TOC page after that, but be sure the TOC shows the Cover Page as the first page.
  4. Have your report software number each report page in sequence, with the numbering shown on each page – normally in the upper right corner – as Page X of Y Pages. This allows a reader to look at the TOC page and then flip to the desired page easily. This is also important to help discourage report tampering by anyone upstream from the appraiser – which has been a problem in the past.
  5. Now that those basics are implemented, here’s how to do corrections, changes, modifications, client responses, etc.
  6. Anytime you need to do anything as noted AFTER the original report was submitted, insert a separate Addendum page with signature block as the page IMMEDIATELY AFTER the TOC page. Don’t put the change notice Addendum and extra pages at the end of the report, because you want the readers to know exactly what was done, and when. (Note that the following page numbering will automatically change.)
  7. On the new Addendum page, upper left, write the date in BOLD TYPE you received the request, etc. from the client. “Received”, not the current date, because sometimes these modifications are not done for one or more days after receiving the original message.
  8. Skip 2 – 3 lines, then write “On the date above, the appraiser received from the client a (message or request) to do “XYZ.” This is where you tell the reader what the client requested of you. If justified, identify the actual person who sent the request….but most often you can just say ‘the client.’
  9. If in this process, you need to make changes to the body of the report, in any of the fields or comment boxes, or add something you may have originally forgotten, tell the reader what was done, and make corrections / additions as necessary.
  10. However, if the request has to do with ‘change the sale price’ in the report due to a re-negotiation AFTER your original report was submitted, DO NOT change the sale price on the form page. Instead, write a description of what occurred, and also include the PRICE CHANGE ADDENDUM (usually supplied with these requests) as the page following the new Addendum discussed above. FNMA has issued a notice that they do not want original reports changed when this occurs. So this process complies, and it will also satisfy other users such as FHA, VA, etc.
  11. Anytime a client provides you additional written documentation, include that as an additional page following the new Addendum page. Print it as a PDF to include, or else scan it in as a Scanned Document. Make sure the Addendum references the additional page by a name, so that the ToC will show it properly. Sometimes this occurs when an original report is written “Subject to” an inspection by another qualified party. That party supplies a written document to the lender, who sends you the document and asks you to change the report to “As Is.” I think this is perfectly fine, as long as the process is described on your new Addendum and the other  party’s document is included in the revised report.
    NOTE: just because you write a report “Subject to” inspection does NOT automatically trigger the need for a 1004D Completion to be done. That’s a lender decision, not yours.
  12. ROV requests: lenders are allowed (by Dodd-Frank) to send you additional APPROPRIATE sales for consideration. The word ‘appropriate’ is in the law, but most often these are just higher priced properties or have other amenity differences that do not make them ‘comparable’ to the subject. Sometimes you are directed to put these inappropriate sales into a grid page, do all the calculations, and then explain why they are NOT or ARE appropriate. Well, guess what – you are the appraiser and you decide how these are to be handled.
  13. ROV properties ‘not’ comparable: I say nuts to putting those into a grid. Just identify each one by address in Bold Type on your new Addendum, and describe why it/they are not comparable. (I recently had this occur.)
  14. Comparable ROV properties: this can be become somewhat of a sticky situation. If it becomes obvious that an Opinion of Value change will be necessary (higher or lower), it is best to notify the client that the original report is no longer valid, and a brand new report under a different appraiser file number will be submitted. This is because of how the UCDP process with UAD works (and with FHA and VA submittal portals also). If a ROV property is determined to be comparable and is included in the report grid… but NO VALUE CHANGE will be made, I think you can appropriately describe what you did in that analysis in the new Addendum, and re-submit the report under its original appraiser file number. However, you could also send in a ‘new’ report with a different appraiser file number, just to keep things neat and tidy. (This also helps comply with USPAP, where we are directed to keep copies of ALL submitted reports separately.)
  15. Once you have worked through the above steps, it’s time to finalize the new Addendum. After your last comment entry describing what was done, skip a few lines, and then write “This page (and the following page) and the noted “corrections / additions / modifications” are the only changes made to the original report. No change to the OMV has been made.” Then skip one line, and write “A new signing date of XYZ has been applied to this report.” The signing date may be different from the ‘receiving date’ of the request. I put the above lines in Bold Type just so they stand out.

Following a protocol such as the above makes your reports look very professional. It makes it easy for report users to follow the process that was done. By disclosing everything, the user does not have to wonder about details, especially if they already have the existing report and suddenly another report for that same subject property shows up.

I have used the above process for years. No one has ever questioned a re-submitted report when they can see exactly what was done.

By the way, use this process if you find a problem with a submitted report after delivery, but before the client makes any response. None of us are 100% perfect. Sometimes we miss things, overlook items, or make typos, etc. Use the process I have described, be upfront about what was originally done, make corrections, describe what you did, and send back a corrected report. In other words – just be honest and ethical. You will be appreciated for that. Don’t fear admitting a mistake was made.

Image credit flickr - Eugene Peretz
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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26 Responses

  1. Avatar Kathy Caldwell says:

    Please share where the FNMA notice can be found regarding contract price changes after the appraisal date? Your item 10.

    2
    • Phillip Case on Facebook Phillip Case on Facebook says:

      the new contract price is a battle with the lender as I often experience they require it changed on page 1 or will not accept it added to an addendum

      3
  2. Ross Grannan on Facebook Ross Grannan on Facebook says:

    That’s all fine and dandy until it’s converted to an ENV file. And BTW even if the corrections are “buried in the report” I bet they are where they are supposed to be not detached from the body of the report. And since it is a legal document each new reader should read it “cover to cover”.

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  3. Avatar Shen Valley Appraiser says:

    I disagree with changing a “subject to” Original Report to “as is” for any reason – the reported conditions are as of the Date of the Site Visit to the house, the Effective Date. Adding addendum/documentation stating the “subject to” condition has been satisfied is appropriate, but changing the Original Report to “as is” implies the status of the Condition was known at the time of the Site Visit, i.e. Effective Date. This is not true & could be construed as misleading in a Court of Law – try explaining why your Report says “as is” and yet you have comments about an “unknown” condition -so which was it – known or unknown as of the Site Visit/Effective date? Could be problematic with your Credibility.

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  4. Avatar David says:

    The appraisal is a work in progress until it is accepted by all parties. It is not final because you say it is.

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  5. Avatar E J says:

    So, drop everything your doing and come in from the field and do all this for gratis and have it completed and resubmitted within the 4 hour due time. No questions asked.

    4
  6. Avatar John M Pratt says:

    I have followed a similar approach to requests for revisions for years. I do one thing a little different than you suggested. I actually copy and paste the the complete request from the AMC/Client into that addendum which I put as the FIRST page (ahead of every page in the report) and then separate each of the requested changes to leave space for my response to each of the requested changes. Put RESPONSE: or APPRAISERS RESPONSE: and make your comments. In your comments include if you made a change in the report or did not change the report. Do this separately for requested change or correction. This way there is mistake of what was requested and what your the appraiser did. I have talked to Fammie and HUD and if the only thing that you did was add the addendum and make responses to the requested change however did not make any changes to the original report you should NOT change the signature date on the report. They do not want 2 different report which are the same with 2 different signature dates. Changes in “Contract price” after the appraisal has been completed, signed and submitted, fannies position is that NO changes are to be made to the Original report. The appraiser can add an addendum (preferable at the front of the report) and just state that the lender has provided a copy of document that shows a change in the sales price of the subject and that a copy of that document is in the appraisers file. No changes are to be made to the original report.

    As for the change from “Subject to” to “as is”, I agree that you should never change the original report. You can put in an addendum (again in front of your report) that you have been provided with documentation that shows the Subject To condition has been satisfied and that support for that is in the appraisers file. If they request that you go back to the property to verify that the condition has been corrected you should required a 1004D and the appropriate fee.

    4
    • Avatar Garth says:

      SOUND advice Article. As per Mr Pratt practice: I also “copy & paste” word-for-word the requested changes.

      For typos- or clarifications: hummmmm
      I have with ALL change “after original” delivery CHANGED to the “revised signing date”. Because simply… & for clarity: NOT the original date…anymore. Right? Looks like I’m wrong.
      So, I will NOT NOT NOT change the original signing date for the above “stated” specific reasons.

      Because: Most often, delays are where the Reviewer could not locate in MY report what it is they are looking FOR.
      SO, actually I am just pointing them in the right direction. Handing them the missing puzzle piece.

      I have a pre-page called: Intro’ Pages where it is used as TOC …for dummies… for clarity!!
      ON this PAGE is every “Lender-Client” SOW reference or respective comment SINCE the Form does have space limitations.

      On this page, I can reference “where” to find the “compliant for use & whys” for this & that.

      Great Article & Posts. Glad to know I am doing what I am suppose to in the most concise & “in your face” order of occurrence. AND no revised SIGNING date.!!

      1
  7. I agree almost completely. Items 12 and 14 are exceptions.

    #12- FNMA license agreements with lenders for use of CU require a ‘human being to have first screened requested new comps for relevance, AND to determine that their use wouldn’t act affect the assignment results. Now having successfully defended against a very protracted court case that arose from something related to this I can positively say that most review reports will not achieve this result or step because ONLY an appraiser can do one, and lenders will not pay for such reviews. FNMA does not require that human to be a licensed appraiser, but if it is not, what appraiser is going to listen or consider such a person’s’ determination’ to carry any weight?

    Bottom line for me is that any ROV MUST include a reason the client considers the comparable to be superior. Not merely that they are comp shopping for a value. I don’t mind saying ‘no’ to lenders when they just shotgun comps. CIte the FNMA license requirement to them in its entirety including ht part where FNMA says to report their asses!

    #14 Conventional can be a new report. FHA? Its been awhile since I revised one, but doesn’t an FHA appraisal STAY WITH THE PROPERTY for six months? Even if done as a ‘new’ report it would still need an explanatory addendum along with prior service disclosures.

    VA should never have this situation. An appraiser declares a Tidewater condition to exist prior to submission of the completed report (so my understanding goes-please, any VA appraisers correct if wrong). Comp reconsideration actually take place DURING the development prior to reporting period. No need to do anything except document what took place IE: preliminary data suggested a value of $250,000 against a contract price of $265k. Tidewater resulted in additional relevant sales data being identified and considered. The conclusion was increased from a preliminary of $250k to $270 based on sales # X, Y & Z within this appraisal report. Nominally higher than the sale price.

    Tidewater data was information not previously readily available to the appraiser. (Such as closed sales not shown as recorded-agent called title co and obtained closing data which appraiser verified and then used.)

    2
  8. Avatar Scott says:

    I can comment on the VA Tidewater. It works very well. The appraiser can utilize it anytime before submitting the completed appraisal report. Here is one scenario. I get a VA request and the contractual price is $500,000. Subject is a typical home with a lot of good sold comparable’s (within a 1/4 mile, within 100 sf, etc). Starting my initial research I find that MLS data suggests there were 5 excellent sold comparable’s that sold for $450,000 in the last 3 months. I try and determine why my subject is $50K more. At this point I invoke Tidewater through the POC. The POC let’s the agents know Tidewater was invoked. The agents are now given 2 business days to show me (the appraiser) how it was priced. I have heard it ALL. From it was bid up to the subject has gold plated toilet seats to any and everything in between. I would estimate that 1/2 the time the agents actually ADMIT they knew it was in contract for too much. If no CLOSED sales can be provided (and I have missed a few over the past 15 years) then I proceed if told to do so or stop right there and the deal is dead. Tidewater works great if the appraiser knows how to use it. All it does is allow the agents/sellers/homeowners the opportunity to show the appraiser why it is in contract for the amount it is. The Buyer ALWAYS has the option to add their own cash or often the price is negotiated back to reality.

    1
    • I do include an addendum that outlines all the requests and added information. Including this at the beginning of the report causes much more work in these revision requests. Adding a page causes all numbering to change. If you have referred to other page numbers in your report (ie: see page 5), all numbers will have to be changed. In my opinion, this causes more time spent on what are typically unreasonable “revisions” to begin with. If you “miss” making a page number change, then the report is a mess, very misleading.

      1
  9. Avatar ghulam m chughtai says:

    i am selling a house on FHA loan the appraiser missed 1 feet dimension width wise and the length of the house is 40′. which changes the overall area by 80 sq. feet on both floors as it has a full basement. House footprint is only 862 sq. feet and due to small house, even 80 Sq. ft is 10% of the covered area. He appraised it 15k less than the sale price. Now he is digging his heels even its a mistake in the measurement. He is stating 40 feet is nothing, but all of his calculations are done on sq. ft. basis. The price difference is almost 6%. Anyone can recommend anything to help me deal with these issues with the appraiser. Thanks in advance for your help.

    0
    • Mike Ford Mike Ford says:

      Ghulam if an appraiser misses 1′ of width and the length is 40′ then the error is 40 sf not 80.
      IF he adjusted at $30/sf then the impact would theoretically be $1,200 for GLA. Unless the price range is in the $50,000 area an adjustment of $1,200 is not going to be significant. (That’s assuming you are correct on the 1′ of width).

      A basement is not included in GLA. Not even a finished basement. Additionally, there is no assurance that the 1′ was also “missed” in the basement. They often are nominally smaller in width than upper living area levels which are sometimes measured to the outside of any siding or other fenestration depending on whether it’s ground to eaves or half wall.

      Unless you have a comparable sale in as close proximity as the sales he or she used, that also suggests a higher price, then as unwelcome as the news is, there is no basis for suggesting the appraiser reconsider the value further. We consider “market significant” numbers. Not necessarily exact math extensions.

      From what YOU have communicated I dont see a $15,000 error potential. Or even a $5,000 error possibility. You COULD have (pay) a USPAP SR3 compliant appraisal review performed. That would address all relevant issues including whether his choice of comparable sales selection was appropriate or not; along with specific adjustments.

      I get concerned when I see dual adjustments for what MAY be the same purpose (GLA and room count). Though it is not automatically incorrect procedurally, it MAY be indicative of an appraiser used to making non-market derived adjustments. NOT a definite. Just a possibility.

      It’s very hard for us to prove separate rooms and low gla adjustments. Then again if he made no room count adjustments, and had a much higher gla of $100-$150/sf would that bring the adjusted indications to a narrower or a wider range?

      None of us here can give you a meaningful review in a blog.

      2
      • Avatar Ghulam Chughtai says:

        Wish i knew this: USPAP SR3 compliant appraisal review process. Roughly how long it takes and how much it costs.

        Now I have signed the addendum at a reduced price, do I have a recourse.

        0
        • Mike Ford Mike Ford says:

          I charge a minimum of 150% of what I’d have charged for the original appraisal. Most lenders won’t pay competitive rates for reviews.

          The form and format suggested by lenders today is also one that ‘encourages’ findings of acceptability. I either want a narrative review or an old-style NARAMU form review augmented as appropriate.

          From what you are describing so far it would be faster to find decent comparables IF THEY EXIST that demonstrate a higher value in your specific neighborhood. Is it worth that much to find that the appraiser MAY have technical errors if they don’t also affect the conclusions substantively?

          It all hinges on whether there are or are not SIMILAR comparable sales that sold for more money and which after adjustment still indicate a higher value for your subject.

          WHY doesn’t the listing agent help with this? They are the one that suggested a price aren’t they? Why cant THEY support what they advised? Unless of course you disregarded that advice .

          0
  10. Avatar Dave says:

    Look to the bracketed range for GLA in market grid.

    1
    • Avatar ghulam m chughtai says:

      The GLA1 is mentioned as 862 the actual area is 902, because he missed 1 feet width wise so its missing 40 Sq. ft. in GLA.

      0
  11. Avatar ghulam m chughtai says:

    The GLA1 is mentioned as 862 the actual area is 902, because he missed 1 feet width wise so its missing 40 Sq. ft. in GLA. He is stating to the lender that 40Sq.ft wont make a difference. but on 2 floors is 80Sq.ft

    0
    • Read the addendum and see if the appraiser stated the following:

      “Differences of less than X square feet are not adjusted.”

      What is X?

      And what is the GLA for the comps?

      2
      • Avatar Ghulam Chughtai says:

        This is what I have found” GLA adjustments are made $30 per sq.ft. bathroom adjustments are made $4000 per bath and $2000 for half Bath. Bed room adjustments are made $2000 per room. Basment adjustments are made $8 per ft. On size and $10 per sq. Ft. Finished.”

        He noted the above statment under “Summary of sales comparison approach”

        From the statment it’s clear that he is not rounding off areas but pricing it on sq.ft. basis.

        Am I correct in this assumption? So if that is the case why he is stating to the bank that change in area is not going to make a difference?

        Thanks for your help.

        1
    • Mike Ford Mike Ford says:

      Basements are not living area. The error (if any) is 40 sf of GLA. Your basement area is NOT part of the living area. Period.

      Was any adjustment made in the basement gridline (right under the living area boxes)?

      1
  12. Avatar Dave says:

    Look at the adjusted range at bottom of grid. If change occurs it must move within this range if comps are good. Focus on comps NOT sf.

    2
  13. Avatar Ghulam Chughtai says:

    I really thank all of your comments and trying to help me out here. Here’s what happened, I meet the appraiser on site showed him the dimensional mistakes, he ended up adjusting the price by $4000 only. I have not seen the new appraisal yet. But I am done fighting so I signed the addendum at a reduced price. I wish I new more about, “USPAP SR3 compliant appraisal review” process.
    What local lender told my broker that their is nothing they can do, I can not order another appraisal because FHA doesn’t accept an other appraisal even if the seller pay for it. The buyer did not wanted to change lender because the lender bank’s president is buyer’s Godfather. So I got stuck between the rock and the hard place. Time was important as I am paying for another property also. I don’t know if the lender told a lie to help his Godson but I have no proof. Plus they told me that even if I put it back on the market the new lender will see the old appraisal for 3 years.
    But i really appreciate you all taking time to help me.

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    • Mike Ford Mike Ford says:

      If you are reporting accurately, then yes. You were apparently lied to.

      1. “There is nothing you can do.” Outright lie.

      2.” Lenders ‘see’ the old appraisal for three years.” Misleading at best. Arguably a lie or egregious, & reckless ignorance.

      Appraisals until very recently stayed with the property for 6 months, not 3 years. Now I believe it’s up to a year (Id have to double-check). However, IF a significant error was made in the original appraisal and it is not deemed to be credible, then a new appraisal CAN be ordered. That would have been the lender’s responsibility

      3. There is an apparent perceptual conflict of interest involved. The bank President whose bank ‘advised you’ that there is nothing you can do has a close personal relationship with the buyer. A Godfather in the Christian religion is or has accepted responsibility for the God Child’s soul. Most objective observers would consider that a personal relationship. Coupled with the outright lie, and deceptive statement noted above, motive becomes a real issue in my mind. The burden of proof that these events are true is on you.

      It’s always easier to blame the technical variances on the appraiser. Lazy or incompetent brokers who didn’t get value support before listing the property love to shift blame. It sounds like the lender COULD be seeking to help negotiate a lower price for his or her God Son.

      Appraisers aren’t required to be perfect. Our standards acknowledge perfection is unattainable. We are required to produce credible results. A $4,000 new adjustment on a $300,000+ sale is max 1.3% variance. Normally variances of 5% or less aren’t even considered ‘errors’.

      Do you have recourse? Sure. Hire an attorney.

      I discourage it because from what you described it would be extremely unfair to the appraiser (unless you have that SR3 review to back it up). Also, it’s clear the lender OR their agent misinformed you.

      It could get extremely expensive. Say you do it in small claims court. The opposing side appeals to it. Now you have discovery. Every single post here on the topic has to be divulged and disclosed by you to the opposing attorney. The other parties (bank or appraiser and brokers) could (likely) cross-complain.

      If I were the appraiser I certainly would. NO ONE gets to take pot shots at my professional reputation for free. I absolutely would defend and seek damages from the accuser (you).

      1

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Appraisal Report Corrections Protocol

by Dave Towne time to read: 5 min
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