|
Questions
and Answers
It sometimes pays to take a step back from the day to day routine and look at the bigger picture. In reading through materials that I have neglected, I came across several interesting questions and answers. They were useful to me. They may prove to be useful to you in your appraisal efforts.
-
I have been asked perform an appraisal assignment that includes providing a retrospective value as well as a current value. Can I report both value opinions within one appraisal report?
This is a common situation that often occurs with multiple past and present dates. Let’s consider the initial situation.
The Appraisal Standards Board has this to say in the most recent Q&A. “Yes, you can communicate both within one appraisal report.” Inasmuch as two opinions of value (appraisals) are included in the report, both opinions must be developed in conformance with STANDARD 1 and reported properly within the requirements of STANDARD 2.
These types of reports often occur in tax, estate, or other complex situations. One of the problems that occurs with “multiple value reports” is confusion caused by confusing report organization or lack of care in logically presenting and explaining the analysis. Often, confusion occurs in setting forth the market conditions and property characteristics for each of the dates as well as with the analysis and presentation of comparable data and analysis. The appraiser must take particular care to be clear as to the specific factors for each time period.
These type of reports tend to not fit into “templates” very well and require a little extra thinking to make sure that the appraiser conveys what is necessary to be conveyed and for the reader to take away what is meant. Extra explanation, including often a discussion of the report’s organization, is necessary.
-
Can appraisals of multiple properties be contained within the same report?
Again, as long as the requirements of STANDARD 1 & 2 are met, there really is no reason why this cannot be done. With multiple properties, attention needs to be paid to organization in order that the reader not be confused and a misleading report be prepared.
When the properties are reasonably similar and within the same market area, this type of presentation may be appropriate.
In both cases, client guidelines play a role. Agreement with the client is essential in arriving at a format that is acceptable and that will conform to USPAP. It is the appraiser’s burden and duty to provide a result that meets the expectations of typical market participants (“one client does not a market make” to paraphrase an old adage) and of appraiser peers.
-
What is the acceptable procedure for “re-addressing” or “overwriting” a report for a new client?
This is a pervasive problem in the marketplace, particularly with residential appraisals. It gets particularly sticky when the report was originally prepared for the borrower and the request is made to write it to a federally insured institution.
The client may not have the same interests as the intended user: reports prepared to meet FIRREA requirements have the federally insured institution as the intended user: the client may only be an intermediary.
Both FIRREA and USPAP are quite clear that borrower ordered appraisals are not permitted. Re-addressing a document does not solve the problems.
To amplify further, there are several reasons why this is a problem. The first is considering for whom the appraisal was prepared. It may be your data and your opinions, but remember who paid you for this work.
Consider further the nature of the client-appraiser relationship: this relationship does not transfer automatically and once transferred (if indeed it can be), the appraiser is still under the requirement in STANDARD 1 to identify the client, intended use and user at the time of engagement.
Something must occur between the first client and the appraiser in order to allow any transfer and it seems clear that the original client still needs to be identified. This may result in confidentiality issues and other problematic situations.
So what can be done? Consider such a request a new assignment. What your initial clients needs to decide is whether the appraiser-client relationship is over: an appraiser would be well-advised to get it in writing.
A new assignment would result in a new effective date, consideration of any changes in market conditions, and the possible development of new comparables or new adjustments to the data. It’s pretty tempting to get paid a fee for a few minutes of work to change a name and address and “reprint” the report and send off via e-mail, but it’s a temptation well worth resisting.
William J. Pastuszek, Jr., MAI, heads Shepherd Associates, a real estate valuation and consulting firm located in Newton, Massachusetts. The firm specializes in providing real world answers throughout New England to a wide variety of local, national, and international clients.
|
