Editor’s Note: Appraisers doing lender work are being squeezed for money and time, with the rise of low-fee AMCs work and recent requirements, such as those imposed by Fannie’s 1004MC form. For these reasons, many appraisers are seeking more non-lender work. Here’s some of what you need to know.   

Appraising for Non-Lenders
by Phil Spool, ASA

In order to continue in this profession with a decent income, residential appraisers have to begin looking for additional clients outside of the lending industry.

Non-lending clients are attorneys, accountants, agents, homeowners and insurance companies (for insurable value), among others. Attorneys need appraisals for marital assets for divorces; accountants need appraisals for estate purposes (retrospective market value); agents need appraisals to either set or adjust the asking price on a listing and a homeowner may want to hire an appraiser directly to determine how much their home is worth. While there are several other potential reasons why a residential appraisal is needed, the above are the most common sources for residential appraisals other than the sale of a house or a refinance of an existing mortgage. Additional types of properties include a condominium unit and two to four rental units, which a State Certified Residential appraiser are allowed to appraise.

Now that you have decided to appraise for non-lenders don’t begin rejoicing just yet; even though you no longer have to deal with those “pain in the neck” review appraisers- looking over your shoulder, telling you what you should or should not do, you now are your own reviewer and decision maker regarding comp selection and adjustments. You are responsible for your report and therefore should have someone there to review your work for factual, typographical and theoretical errors. Also, your work product now becomes available to more intended users than when the appraisal was for a single lender.

If you perform an appraisal for litigation, such as a divorce, there is a good chance the opposing party will have a skilled appraiser scrutinizing your appraisal report for any weaknesses.  Nothing can be more embarrassing than mistakes brought to your attention during a deposition and/or court trial, not to mention an “attack” to your credibility. Remember, the opposing side is looking for any excuse to discredit you. This includes any USPAP violation you’ve made. If I emphasize the need to avoid USPAP violations, it is because other than careless errors, poor comp selection and the misapplication of appraisal theory, USPAP violations can lead to a suspension or worse, revocation of your appraisal license.

Using Good Forms
Appraisals for non-lenders have one thing in common: the property can’t be appraised using the current Fannie Mae 1004MC or 1073 form, which states: “The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction.” As the intended use is stated in the form, you cannot cross it out, ignore it or add another intended use. Forms without this pre-printed verbiage, that you might want to use for non-lender work, are not USPAP compliant unless they include certain elements that must always be present. These include:
(1) intended user - Standard Rule 2-2 (b) (i);:

(2) intended use - Standard Rule 2-2 (b) (ii);

(3) scope of work - Standard Rule 2-2 (b) (vii); and

(4) summarization of the highest and best use of the subject - Standard Rule 2-2 (b) (ix).

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