Ask Henry Harrison
Reviewing Another Appraisal
Dear Mr. Harrison:
I have a situation. I was contacted directly by a homeowner who has a 50% interest in a town home (she owes 50% and her roommate owns 50%). The roommate wants to sell the property and my client wants to potentially buy her out. My client requested an appraisal to define current market value. I produced the appraisal and gave it to my client. Now a few weeks later her roommate has produced a desktop type of appraisal that she had done by another appraiser. His value and my value are quite different. I have been asked by my client and her attorney to produce a review of the other appraiser's report and her attorney cites it should be in compliance with USPAP Standard 3. I have attached a redacted version of the other appraisal in question for your review due to it's unfamiliar format.
My questions are as follows:
1. Am I able to perform a review on this appraisal?
2. Is his appraisal considered "consulting" and does that change my ability to perform a review on his work?
3. Is there any conflict of interest issue?
4. What form would I use if so?
5. I do see some issues with his findings that I am capable of explaining; however I am at a loss for how to properly proceed at this point.
Your help will be very much appreciated. Thank you in advance for your time.
Sincerely,
Michael J. Pritchert
mpritchert@gmail.com
Dear Michael,
When you make an appraisal for a client, unless you have previously agreed to perform other functions such as reviewing another appraisal, your required services to the client are over. You can be required to testify in court if someone subpoenas you. I took a look at the appraisal you sent me. It is nonstandard, and probably noncompliant. In my opinion, you would be making a mistake if you agreed to review it. I say "pass".
H2
Desktop Valuations
Dear H2,
I would like to get your take on the use of Desktop Valuations. Wells Fargo/RELS have stepped up their use of this product and we are being asked to do these reports through an AMC. The statement of limiting conditions appears to have the appraiser covered. However, I am concerned that this is a "cheap" way for the lender to get an appraisal. Any thoughts would be appreciated.
Gary Anderson
andersonapp@roadrunner.com
Dear Gary,
Each time an appraiser agrees to do this type of work, they reduce the credibility of all appraisers who are trying to be professionals. There is nothing in the USPAP that requires that a property be inspected.
The USPAP does require that every appraisal be credible. Personally, I don't see how an appraisal can be credible when the property is not inspected and the appraiser depends solely upon data (usually unverified) where you have no idea of the special conditions that were part of the comparable sale price.
In my opinion, if appraisers continue to facilitate this type of valuation, it will just be a matter of time before the residential appraisers put themselves out of business.
H2
Gross Living Area Below Ground Level
Dear H2,
I have a question about GLA. The house in question is an A-Frame design, and is built on the side of a hill. It consists of three levels. The first and second levels are rectangular in shape and the third level is the A-frame portion of the house containing the sleeping loft. The bottom level is where I have a question about the GLA. The front of the bottom level is completely exposed and above grade. The front portion of each side wall is above grade, with the grade of the land rising toward the rear of the house. Most of the rear wall is below grade, however, with approximately three feet of the rear wall above grade level. This level of the house contains two bedrooms, bath, den, and is of the same quality as the upper level of the house, which contains the kitchen, living room, one bedroom, and a bath. Should the bottom level be considered in the GLA ?
Todd Darnell
DARNELLT@aol.com
Dear Todd,
The Fannie Mae Guidelines for using the GLA say that only those part of the house that are "100% above ground" should be include in the GLA. Therefore, the lower level of this house would not be included. However, the guidelines also point out that they are only guidelines and that if the appraiser feels an exception should be made, it is permitted as long as the appraisal makes it clear what that exception is and why the appraiser feels it is necessary to make the exception.
H2
Repeat Appraisals
Dear Mr Harrison:
I am writing to you to see if you can help me with this situation that I'm in the middle of. I completed an appraisal in January 2009 and in May of 2009 the lender sent me a new assignment for the same property because the underwriter could not accept an appraisal over 90 days old. I completed the new assignment on May 22nd 2009.
Today I received a new assignment for the same property again, because the same underwriter will not accept an appraisal under 6 months time after the first one!
Can I keep doing appraisals on the same property without having problems with my FHA license?
Also, another client sent me an assignment yesterday for a property I did in April 2009 because the FHA case number was cancelled. Can I do another appraisal so soon after the original one?
In all cases, by the way, the latest appraised value has been lower -- but how long can I continue this?
I thank you in advance for your time and am awaiting your response!
Dear Jay,
Currently there is nothing in the USPAP to prevent you from appraising a property as many time as you want, except for the Confidentially rules — which don't seem to apply in your situation. The new 2010-11 USPAP, which goes into effect January 1st, 2010, contains some additional requirements about repeat appraisals including additional disclosure requirements. Right now the USPAP requires a new appraisal every time the effective date of the appraisal changes and whenever the lender/client changes. There are no limitations on how many times you can appraise the same property.
One of the best assignments I had when I was an active appraiser was from a New York Trust Company who hired me to appraise a mansion here in New Haven that was in Trust and was used by a member of the family who was on the Yale faculty. I did a full narrative appraisal every year for over 10 years and they never questioned my fee.
H2
Dear H2,
Thank you very much for your help; I hope I run into a client who needs an appraisal of a mansion every year too.
Jay
