Unintended Consequences – Intended Use

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Intended use unintended consequences

Intended use must be clearly stated in the report.

Unintended Consequences

From USPAP:

INTENDED USEthe use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.

There can be many intended uses for one appraisal. We all understand that. An appraiser can, theoretically, complete an appraisal on an REO to find a reasonable marketing price and that same report can, theoretically, be used for mortgage purposes.

Great! Two birds; one stone.

But, if you utilize the Fannie Mae 1004 you have only one intended use.

From the 1004:

INTENDED USE: The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction.

When you have others such as HUD asset management companies or other AMCs, including Fannie Mae themselves, utilizing the form for a different intended use, it creates a USPAP compliance problem for the appraiser.

From USPAP:

It is essential that appraisers develop and communicate their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading.

From Statement on Standards #9:

Disclosure of the Intended Use in an Appraisal, Appraisal Review, or Appraisal Consulting Report

An appraiser can avoid misleading parties in possession of an appraisal, appraisal review, or appraisal consulting report by clearly identifying the intended use in the report and stating that other uses are not intended. For example, a statement similar to the following may be appropriate:

This report is intended only for use in (describe the use). This report is not intended for any other use.

The intended use description provided in the statement must be specific to the assignment.

While Fannie Mae can certainly claim ownership of the form, they still can’t add a silent, additional intended uses based on form ownership. The easy answer is for Fannie to fix their own form. Offer intended use options. But then, Fannie doesn’t allow tweaks to their existing certifications.

Ironic, isn’t it?
All intended uses must be clearly stated in the report. That’s in stone. If this applies to Fannie, then it certainly applies to everyone else piling on that bandwagon.

Expediency isn’t an excuse, is it?

Illinois Appraiser Newsletters, Volume October 2011

IDFPR Board

IDFPR Board

Provided as a service to licensed and registered Illinois appraisal professionals as well as Illinois course providers and users of appraisals. Illinois Appraiser Newsletters promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois. promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois.

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2 Responses

  1. Avatar D. D. says:

    I had performed a (non real estate) personal property appraisal for a group of maritime assets for the client’s intended use of due diligence for prospective purchase. There was only one intended user (owners representative) named on the reports. Subsequently one year later apparently after the company made an acquisition of most of those assets, a tax accounting firm contacted my firm and told me they are auditing the workfile to form an irs basis for value. Permission from the client was obtained directly and granted to share the data and workfile, although The intended use of the report was not for tax purposes but for negotiation and due diligence to make a purchase of the assets. Now it appears the negotiation tool (the restricted appraisal reports) are now being used to form a value basis for taxation purposes. It was never disclosed what the actual acquisition price was for each asset. Would this unintended use of the restricted appraisal report from an unintended user constitute a violation of USPAP and if so without the report being copyrighted is there any defense or recourse the appraiser can enforce? How in your opinion should this have better been handled or what would you do in this case?

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  2. Avatar D.D says:

    Are valuations able to be copyrighted?
    This link appears to offer some insight here:

    https://www.workingre.com/appraiser-wins-copyright-suit/

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Unintended Consequences – Intended Use

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