AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at [email protected]
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One of the most overlooked sections of the URAR is the standard Assumptions, Limiting Conditions and Certifications. This is an area the appraiser should be very concerned with since many of the statements and terms contained on those pages are subject to different and broad interpretations and thereby increase the appraiser's liability.
Under FNMA Guidelines and as stated within the URAR form itself, you cannot add certifications (unless they area required by law or professional memberships) nor can any be removed, however nothing precludes you from clarifying your understanding of the certifications and citing what your actions were with respect to the scope of work, assumptions, certifications, etc.
Making sure you are "Crystal Clear"
We follow orders or people die, it's that simple. Are we clear? Yes, sir. ARE WE CLEAR! Crystal! From the movie "A Few Good Men"
Communication is the key to an effective appraisal report. In my opinion, the URAR and its Scope of Work, Assumptions, Limiting Conditions and Certifications don't adequately clarify the extend of the appraisal process or the steps taken by the appraiser to meet the requirements of the assignment.
Consider key statements on pages 4-6 of the URAR, show in "italics" below.
Click here to continue reading . . .
FNMA - SCOPE OF WORK:
The appraiser must, at a minimum: (1) perform a complete visual inspection of the interior and exterior areas of the subject property, (2) inspect the neighborhood, (3) inspect each of the comparable sales from at least the street, (4) research, verify and analyze data from reliable public and/or private sources and (5) report his or her analysis, opinions and conclusions in this appraisal report.
Questions:
- What constitutes a "complete visual inspection"?
- What does "inspect the neighborhood require"?
- What level of "verification and analysis" is required?
FNMA - STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS:
5. The appraiser has noted in this appraisal report and adverse conditions (such as needed repairs, deterioration, the presence of hazardous wastes, toxic substances, etc.) observed during the inspection of the subject property or that he or she became aware of during the research involved in performing the appraisal.
Questions:
- What is "adverse" and where is it defined?
- Is it possible that individuals may have different opinions as to what is or isn't adverse?
FNMA - APPRAISER'S CERTIFICATION: The Appraiser certifies & agrees that:
2. I performed a complete visual inspection of the interior and exterior areas of the subject property. I reported the condition of the improvements in factual, specific terms. I identified and reported the physical deficiencies that could affect the livability, soundness, or structural integrity of the property.
Question:
- Where are the "physical deficiencies" that "could" affect livability, soundness, structural integrity defined and who determines them?"
4. I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison approach to value. I have adequate comparable market data to develop a reliable sales comparison approach for this appraisal assignment. I further certify that I considered the cost and income approaches to value but did not develop them, unless otherwise indicated in the report.
Question:
- How must the exclusions of either approach be justified?
5. I researched, verified, analyzed and reported on any current agreement for sale for the subject property, any offering for sale of the subject property in the twelve months prior to the effective date of this appraisal and the prior sales of the subject property for a minimum of three years prior to the effective date of this appraisal, unless otherwise indicated in this report.
Question:
- Do you fully comprehend the legal aspects of a contract and are you qualified to analyze and comment on them?
14. I have taken into consideration the factors that have an impact on value with respect to the subject neighborhood, subject property and the proximity of the subject property to adverse influences in the development of my opinion of market value. I have noted in this appraisal report any adverse conditions (such as, but not limited to, needed repairs, deterioration, the presence of hazardous wastes, toxic substances, adverse environmental conditions, etc.) observed during the inspection of the subject property or that I became aware of during the research involved in performing this appraisal. I have considered these adverse conditions in my analysis of the property value and have reported the effect of the conditions on the value and marketability of the subject property.
Questions and Points
- How close to the subject property is "proximity" to adverse influences?
- Adverse, reliable, sufficient, etc. are subjective terms with meanings or interpretations that vary from individual to individual.
- How well does the URAR communicate what the appraiser did or did not do in the development of the value opinion and appraisal report.
Some may argue that competent appraisers address the issues I've cited in the normal course of developing and communicating the appraisal and that my questions or points may be reaching for the mere purpose of picking apart the form.
That said, look at the pages 4 to 6 of the URAR through the eyes of an attorney and consider the line of questioning that a lawyer would take or the points a lawyer would focus on in front of a judge, jury or commission. While your defense may include "I followed the standards set by the actions of my peers", I would think both you and your peers are more exposed than necessary.
In the next issue, well cover development of the Scope of Work Clarification Addendum to address many of the issues discussed above and how to add some armor to your report.
AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at [email protected] Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!
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