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"Comp Check" Q & A from The Appraisal Foundation
Can
Appraisers Perform "Comp Check" Assignments?
Question: I'm a residential appraiser and have been asked to perform a "comp
check" (or "pre-comp") assignment, where a client wants to get an idea of the
value of a home prior to proceeding with a mortgage financing transaction. Does
USPAP allow me to perform this type of assignment?
Response: Yes. As stated in FAQ #130 in the 2008-09 edition of the USPAP
document, these types of assignments are allowed under USPAP. To understand the
USPAP requirements, it is important to identify exactly what the appraiser is
being asked to do. If the appraiser is asked to "provide comps," that would
typically mean the appraiser would be exercising his or her own judgment to
determine which sales are most "comparable" to the subject property. The
appraiser may choose to include only those sales that he or she deems are most
similar to the subject in size, location, quality, etc., which could mean that
certain sales may be omitted. In this case, the resulting data would have been
"filtered" by the appraiser's judgment, which would have the net effect of
providing a range of value to the client. This range of value is defined as an
appraisal under USPAP; therefore, the appraiser would be obligated to comply
with STANDARDS 1 and 2.
But as FAQ #130 also states, "comp check" assignments should be contrasted to
requests for an appraiser to simply provide data. For example, an appraiser
asked by a client to provide "sales data of all homes located within a one mile
radius" of a specific address could comply with the client's request without
complying with STANDARDS 1 and 2, because the appraiser would just be providing
sales data pursuant to the client's defined parameters. In this example, the
appraiser must be careful not to communicate any opinions or conclusions
regarding the data provided.
For additional related guidance on this topic, please refer to Advisory Opinion
19, Unacceptable Assignment Conditions in Real Property Appraisal Assignments
and Illustration #4 "Appraisal and Market Information" in Advisory Opinion 21,
USPAP Compliance.
Can
Appraisers Perform "Comp Check" Assignments for Free?
Question: Does USPAP allow appraisers to perform "comp check"
assignments for free?
Response: Yes. However, the appraiser would have to ensure that receiving
a "full" appraisal assignment is not contingent upon the result of the "comp
check" assignment. The Management section of the ETHICS RULE states, in part:
It is unethical for an appraiser to accept an assignment, or to have a
compensation arrangement for an assignment, that is contingent on any of the
following:
1. the reporting of a predetermined result (e.g., opinion of value);
2. a direction in assignment results that favors the cause of the client;
3. the amount of a value opinion;
4. the attainment of a stipulated result; or
5. the occurrence of a subsequent event directly related to the appraiser's
opinions and specific to the assignment's purpose.
Is
Disclosure of a Free "Comp Check" Assignment Required?
Question: If I perform a free "comp check" assignment and my client
subsequently requests me to perform a "full" (or more "traditional") assignment
on the same property, do I have to disclose the free "comp check" assignment as
having provided a "thing of value" to procure the new assignment?
Response: No. The Management section of the ETHICS RULE states, in part:
The payment of undisclosed fees, commissions, or things of value in connection
with the procurement of an assignment is unethical.
Since USPAP prohibits the second assignment from being contingent upon the
first, the free "comp check" could not be considered part of "procuring" the
second assignment. Therefore, disclosure of the free "comp check" assignment
would not be required. Appraisers may, of course, elect to disclose the prior
assignment, but it is not required by USPAP.
An appraiser can provide a free "comp check." An appraiser cannot provide a free
"comp check" AND the pursuant appraisal if the engagement was contingent upon
developing or reporting predetermined results.
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The USPAP Q&A
is posted each month on The Appraisal Foundation website (www.appraisalfoundation.org).
The ASB compiles the monthly USPAP Q&A into the USPAP Frequently Asked Questions
(USPAP FAQ) for publication with each edition of USPAP. In addition to
incorporating the most recent questions and responses issued by the ASB, the
USPAP FAQ is reviewed and updated to ensure that it represents the most recent
guidance from the ASB. The USPAP Frequently Asked Questions can be purchased
(along with USPAP and USPAP Advisory Opinions) by visiting the "Foundation
Store" page on The Appraisal Foundation website
(https://commerce.appraisalfoundation.org).
For further information regarding USPAP Q&A, please contact:
John S. Brenan, Director of Research and Technical Issues
The Appraisal Foundation
1155 15th Street, NW, Suite 1111
Washington, DC 20005
(202) 624-3044
(202) 347-7727 fax
john@appraisalfoundation.org