effective date

Ask Henry

New Lender, Old Appraisal

Hi Henry,
I did an FHA Appraisal for Lender A back in July. I was paid and the file was closed. I was not able to inspect the attic at the time, as the attic entrance was sealed off. This was noted in the appraisal report. Last week (3 months after my previous inspection and report) Mortgage Company B called and said they have my appraisal, the loan did not close with Lender A and they have a new lender who will accept my appraisal. However, they need me to go back to the property and inspect the attic for a fee. I refused as I completed the original assignment for Lender A and the file is closed.

Mortgage Company B and the homeowner keep calling me to comply and do the attic inspection. I called Lender A and they said "do not inspect, this is a USPAP violation and changes the scope of work." I want to be done with this appraisal and Mortgage Company B. My questions is whether this is indeed a USPAP violation? What is the best way to handle this with Mortgage Company B and the homeowner, who both keep calling me?

Thanks for your time,
Rob
rburkley@columbus.rr.com

Dear Rob,

The USPAP is quite clear that when the client changes, it requires a new scope of work dialogue and a new appraisal. There is nothing that requires you to make a new appraisal for the new client but why not do so? However, there is also nothing to stop you from making the inspection as long as it does not become part of your original appraisal report. For a new appraisal, you are permitted to use any of the data in the old appraisal as long as it was not provided to you on a confidential basis. It should be easy to update the physical description of the property, the neighborhood data, etc., and make the attic inspection which will be part of the new scope of work requirement. I suggest offering to make a new appraisal for Mortgage Company B, taking into consideration that much of data will already be available to you. You'll make the homeowner happy, and may even develop a new client.

HSH
askhenryharrison@revmag.com

Ask Henry

New Assignment, Prior Property

Hi Henry, 

In my experience, when I've done estate appraisals, the date of death provided the lower value for the client. If the estate has not been settled, say for more than one year, and the value decreases after DOD, will IRS accept a current value? I've encountered a situation, in which the electricity went off during an ice storm, the oil-fired boiler (which has a reset switch to prevent a buildup of oil in the firebox was not reset by anyone when the power came back on because no one was living in the house. The pipes froze, burst, and did a tremendous amount of damage as a result of water gushing from the baseboard hotwater system. The estate is in its third, going on 4th year. What is the property way to provide an estate appraisal?

Jack Sotack, Waymart PA
accent@echoes.net

Dear Jack,
The effective date of the appraisal is determined at the scope of work dialogue between the appraiser and the client. There is nothing in the USPAP other than this requirement. Often when the appraisal is made for estate work the date of appraisal is the date of the death of the owner, but not always. Whatever the effective date of the appraisal is date that you use for the condition of the property on that date and the market at that time.

HSH
askhenryharrison@revmag.com

Ask Henry

New Assignment, Prior Property

Hi Henry, 

You do a fantastic job and are THE SOURCE for appraisal questions and dilemmas. I have one of those dilemmas now!
 
I have a client who is asking me to take a new assignment on an appraisal that is over a year old and that I did for another lender. Obviously, the new client wants their name on the appraisal, but they do not want a current value. May I take the new assignment? 

Thanks in advance,
Mary Buckman, SRA
Green Bay, WI  
maryb@vogelsbuckman.com

Dear Mary,

Thanks for the kind words.  

The effective date of the appraisal is determined at the scope of work dialogue between the appraiser and the client. Many appraisals are made with an effective date at some time in the past. Whatever the effective date of the appraisal is, that becomes the date that you use for the condition of the property and the market at that time. The only USPAP restriction is that you cannot use any confidential information you received from the original client without their permission.

HSH
askhenryharrison@revmag.com

Ask Henry

Appraisal Changes

Dear Mr. Harrison,
                  
If contract revisions occur after the date of the appraisal and the lender has furnished a new contract, should these modifications be made to the contract portion of the appraisal to reflect a change in seller contribution, etc.? Or must the appraisal be entirely based on information obtained as of or before the effective date of the appraisal?

Best Regards,
Todd Floyd
toddfloyd@bellsouth.net

Dear Todd,

The requirement is that the lender supply you with their latest ratified version of the sales contract. This usually has no impact on your estimate of the market value in the appraisal. As part of your scope of work dialogue with the lender, you should agree on the effective date of the appraisal. There is no Fannie Mae or Freddie Mac regulation that I am aware of that prevents you from using information about things that happen after the effective date of the appraisal. However, when you incorporate this information, you should carefully explain in the appraisal what you have done so that there is no room for confusion or misinterpretation.

HSH
askhenryharrison@revmag.com

Ask Henry

Extraordinary Assumptions, Retrospective Appraisals

Hello Henry,

I am developing a retrospective field review with an opinion of value for investigative purposes. The effective date is 4-1/2 years prior and the subject and all (three) comparables were investor rehabs/resales in an economically distressed neighborhood, with price increases of 50 - 60% within 3-9 months.

LIA-RE
The main issue with the report under review is data verification and the credibility of the comparables' cash equivalent sales prices. Primarily, no 3rd party verification sources were cited and it does not seem that financing concessions were properly verified or adjusted for if they did exist. Seller-assisted financing was common in the market at that time. Most weight was given to Sale #1 which did not have an MLS listing. Sale #2 had a potentially unsupported 8%+/- upward condition adjustment for 'avg' vs 'good' condition; this sale had a "blank" listing #, but also had a 60% price increase within nine months, indicating that it may have rehabilitated in a manner similar to the subject. My research has revealed two sales that support the original value that have no MLS listings; and other "blank" MLS listings that appear to have been investor rehab/resales. I cannot verify these sales or the conditions of the sales in the normal course of business after an elapse of 4-1/2 years. Is it acceptable to use these sales in developing my OMV with the extraordinary assumption that they had no sales concessions that affected their prices? Or by using these unverifiable sales would I be committing the same poor practices found on the original report i.e., the pot calling the kettle black??

Thank you for your time,

Michael A. Ciaccio
Certified Residential Appraiser RD6539
macappraisals@gmail.com

Dear Michael,

I can only give you some general advice, as it is my policy not to comment on specific appraisals.

  1. It is up to the appraiser to select the most comparable sales. There are no USPAP restrictions on how this is done.
  2. It is up to the appraiser to make whatever adjustments are needed, keeping in mind that using unsupported adjustments can lead to trouble as the USPAP requires that the appraisal be credible.
  3. The USPAP has specific instructions about using "Extraordinary Assumptions" (2010-11 USPAP U-3 & U 18). From what you say, they may be appropriate in this instance. Be sure to follow the disclosure requirements.
  4. You must decide if your report is credible. If there is a reasonable doubt in your mind about its credibility, you should not make the appraisal, as it would violate USPAP to do so.

HSH
askhenryharrison@revmag.com

Ask Henry

Switching Clients from USDA to FHA

Dear Henry,

Can an appraisal done as a USDA appraisal be switched to an FHA appraisal, or would the property have to be re-inspected?

Kind regards,
Jeff Bridwell
jeff.bridwell@inhouse-solutions.com

Dear Jeff,

Whenever the client changes, a new appraisal is required by the USPAP. This means that there must be a new scope of work dialogue with the new client. There are no USPAP requirements about inspections; therefore, if the effective date and inspection date are the same, I think you will just need to rewrite the appraisal being sure you have covered everything required in the new scope of work.

HSH
askhenryharrison@revmag.com