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| The new 1004, Condo, Appraisal Update/Final inspection and 2055 forms are required as of November 1 2005. Please note that the 2055 exterior form has a very limited application due to the requirements of an impartial party to provide detailed and accurate information about the subject. What you should know before you order an appraisal for yourself: Reassigning or readdressing a previous appraisal Appraisals: Copies of reports to applicants, cost. Who should order the appraisal for my mortgage? Can the appraiser tell me anything in the report prepared for my mortgage company? USPAP-UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE
What you should know before you order an appraisal for yourself: USPAP requires an appraiser to identify the intended use and intended users in an appraisal assignment. USPAP also requires that an appraiser not be misleading in the marketing of their services (see Management section of the ETHICS RULE). Statement on Appraisal Standards No. 10 (SMT-10) provides clarification, interpretation, explanation, and elaboration on the appraiser’s USPAP obligations when performing assignments for use by a federally insured depository institution in a federally related transaction. SMT-10 discusses supplemental standards issued by federal financial institution regulatory agencies for appraisers, as well as requirements imposed on lenders that the lender or their agents directly engage the appraiser in such assignments. In order to not be misleading when contacted by a prospective client the appraiser’s obligation is one of proper disclosure. Before an appraiser accepts an assignment knowing the intended use of the appraisal is, or may be, for a federally related transaction by a federally insured depository institution, it is that appraiser’s responsibility to disclose to the prospective client that the lender or its agent is required to directly engage the appraiser. The appraiser should also disclose to the prospective client that it is unethical for the appraiser to later "readdress" or otherwise change the report to indicate a federally insured depository institution was the client when the appraisal was performed for another party (see AO-26 titled "Readdressing [Transferring] a Report to Another Party" and AO-27 titled "Appraising the Same Property for Another Client" for related advice on this issue). Back to Top
If the client still wishes to proceed with the appraisal after the appraiser has properly fulfilled these disclosure obligations, the appraiser can accept the assignment. It would be prudent to recite disclosures in the engagement letter and in the report. (Also refer to SMT-9 for additional information relating to intended use and intended users). Illustrations:1. Homeowner Susan Daly contacts appraiser John Hunt to perform an appraisal of her residence. She is considering refinancing and wants to determine the amount of equity in the residence before completing a loan application. Assuming the refinancing would be a federally related transaction at a federally insured depository institution, what is John’s responsibility to this potential client? Answer A25 Illustration #1Before John accepts this assignment, it is his responsibility to disclose to Susan that a lender or its agent is required to directly engage the services of an appraiser in a federally related transaction and should not accept his appraisal report. If Susan still wants to engage John, his disclosure allows him to accept the assignment. Reassigning or readdressing a previous appraisal: ADVISORY OPINION 26 (AO-26)This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems. SUBJECT: Readdressing (Transferring) a Report to Another Party APPLICATION: Real Property, Personal Property, and Intangible Property THE ISSUE: After an assignment has been completed and the report has been delivered, an appraiser may be asked to "readdress" (transfer) the report to another party. Does USPAP allow an appraiser to "readdress" (transfer) a report by altering it to indicate a new recipient as the client or additional intended user when the original report was completed for another party? No. Once a report has been prepared for a named client(s) and any other identified intended users and for an identified intended use, the appraiser cannot "readdress" (transfer) the report to another party.Back to Top The party or parties who engage an appraiser (by employment or contract) in a specific assignment. (Bold added for emphasis) Assignment is defined as: A valuation service provided as a consequence of an agreement between an appraiser and a client. (Bold added for emphasis) Intended Use is defined as: the 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. (Bold added for emphasis) Intended User is defined as: the client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment. (Bold added for emphasis)
Identification of the client, any other intended users, and the intended use are key elements in all assignments. Because these identifications drive the appraiser’s scope of work decision, as well as other elements of the assignment, they must be determined at the time of the assignment. They cannot be modified after an assignment has been completed. Illustrations: Question #1 An appraiser was engaged by Client A to appraise a property. The appraiser delivered the appraisal report to Client A. The client has decided not to pursue the transaction that generated the need for the appraisal report. The appraiser is contacted by Client B. Client B requests that the original report be readdressed (transferred) by replacing Client A’s name with Client B’s name in the report. Is this acceptable? Answer to Question #1, Illustration for (AO-26) No. Simply changing the client name on the report cannot change or replace the original appraiser-client relationship that was established with Client A. Therefore, this action is misleading. Question #2 How can this circumstance be handled according to Standards? Answer to Question #2, Illustration for (AO-26) The appraiser can consider Client B’s request as a new assignment. In so doing, the appraiser may establish a new appraiser-client relationship with Client B and appraise the property for this new client. Important considerations, i.e., confidential information and other factors are further addressed in AO-27 – "Appraising the Same Property for a New Client". Accepting the assignment from the second potential client is not prohibited by USPAP, assuming any existing confidential information is handled properly. Several parts of the Confidentiality section of the ETHICS RULE are pertinent to this matter. An appraiser must not disclose . . . assignment results prepared for a client to anyone other than the client and persons specifically authorized by the client . . .Back to Top An appraiser cannot disclose the results of a particular assignment, performed for a particular client, to anyone other than those designated by that client. However, an understanding of the definitions of assignment, assignment results, and client are key to a complete understanding of this requirement. Assignment – a valuation service provided as a consequence of an agreement between an appraiser and a client Client – the party or parties who engage an appraiser (by employment or contract) in a specific assignment Assignment Results – an appraiser’s opinions and conclusions developed specific to an assignment As can be seen in the definitions, both the client and the assignment results are specific to an assignment. If there is a new potential client, valuation services performed for that new client would constitute a new assignment and the assignment results would be specific to that new assignment. Therefore, acceptance and performance of the new assignment to appraise the same property would not be considered revealing the first client’s assignment results to the second client, even if the value conclusions were the same. It should be noted that the value conclusion could easily be different if the effective date or the scope of work changed in any manner. It should also be noted that USPAP requires the appraiser to provide an unbiased opinion of value to each client. Question #3 Why might Client B want their name on the report that was completed for Client A? Answer to Question #3, Illustration for (AO-26) Client B may want to establish an appraiser-client relationship because it provides all the rights, obligations, and liabilities such a relationship places on the appraiser. A prudent method to establish an appraiser-client relationship is to have a written engagement letter or contract with any client at the time of the assignment.
The above excerpts are here to briefly answer some commonly asked questions and should not be relied upon solely. One needs to read the Full USPAPBack to Top
TITLE 15--COMMERCE AND TRADE (4) Where a creditor has been requested by a third party to make a specific extension of credit directly or indirectly to an applicant, the notification and statement of reasons required by this subsection may be made directly by such creditor, or indirectly through the third party, provided in either case that the identity of the creditor is disclosed.
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