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Working RE :
Low cost, same-day E&O Insurance
Fannie
Tussle
Editor’s Note: Ever since the new Fannie Forms hit the light of day,
appraisers have had issues with it; particularly Items #21 and #23. Below is
clarification from the Appraisal Standards Board of The Appraisal Foundation on
Item #23. For one appraiser’s concerns regarding Item #21, please see Something
to Talk About: Fannie's
New Forms.
Question
I have studied the recently issued revised Fannie Mae appraisal report Form
1004. On
Response
USPAP requires that each written appraisal report must:…clearly
and accurately set forth the appraisal in a manner that will not be misleading. Part
of satisfying this requirement is clarifying which parties are Intended Users.
USPAP requires the appraiser to identify the Intended User(s) and to state in
the report who the Intended Users are. (See the definition of Intended User,
Standards Rule 1-2(a), and Standards Rule 2-2(b)(i).) The revised Fannie Mae
appraisal report Form 1004 clearly states that the lender/client is the Intended
User. However, the language in the Appraiser’s Certification Item #23 confuses
the matter. Therefore, in order to clearly and accurately set forth the
appraisal in a manner that is not misleading, the revised Fannie Mae report Form
1004 requires supplementation to clarify which parties the appraiser is
identifying as Intended Users. As stated in USPAP: An
appraiser must supplement a report form, when necessary, to ensure that any
intended user of the appraisal is not misled…Part
of not misleading the Intended Users is ensuring that they know who they are.
Question
Does the Appraisal Standards Board consider Item #23 in the Appraiser’s
Certification on report Form 1004 confusing?
Response
The
statement that the parties listed, “…may
rely on this
appraisal report as part of any mortgage finance transaction that involves any
one or more of these parties” [bold
added for
emphasis] is subject to various interpretations. First, from a practical
standpoint, there is little distinction between parties who “use” the report
and parties who “rely” on the report. It is difficult to determine the
difference between those parties given permission to “rely on” the appraisal
report (from the Fannie Mae report forms) and those parties identified as
“users of” the appraisal report (from the USPAP definition of Intended
Users). Another matter of confusion is the meaning of the word “may” in the
phrase “may rely on.” One interpretation could be that the appraiser is
granting permission. This permission for the parties to “rely” on the report
suggests that they are Intended Users. Another interpretation could be that the
appraiser is simply acknowledging the possibility that another party might
choose to rely on the report, even if that party is not an Intended User. This
possibility has always existed; the appraiser cannot control to whom the client
provides copies of the report.
What
should an appraiser do if the parties listed in Appraiser’s Certification Item
#23 are determined by the appraiser to be Intended Users? What if the appraiser
determines they are not Intended Users?
Response
If the appraiser intends any of the parties listed in Appraiser’s
Certification Item #23 to be Intended Users, the report must state that fact,
and the appraiser must comply with the USPAP requirements associated with these
other Intended Users. For example, further supplementation might be necessary to
comply with Standards Rule 2-1(b), requiring that the appraisal report must: …contain
sufficient information to enable the intended users of the appraisal to
understand the report properly…If
the appraiser does not intend the parties listed in Appraiser’s Certification
Item #23 to be Intended Users, the report must be supplemented to clearly
explain this. For example, as indicated in USPAP Statement on Appraisal
Standards No. 9, a statement similar to the following may be appropriate:
