Industry News
Scope Creep Relief
Here is Addendum Language shared by appraiser Laurie Richards.
MODIFICATIONS TO A SUBMITTED ORIGINAL REPORT:
The client or lender must submit in writing (e-mail is preferred) any request for additional information or modification to the appraiser. This information will be retained in the appraiser’s workfile. The appraiser recognizes that persons who have a relationship with the lender or a financial interest in the property are allowed to request additional information from the appraiser concerning comparable properties in this report. However, additional properties submitted to the appraiser for consideration must be appropriately comparable per the Dodd-Frank law. Report users are cautioned that ‘sale price’ may not make another property appropriately comparable to the subject property. Furthermore, costs paid for renovations, remodeling or maintenance may not totally upwardly influence the market value reported herein. Any modification, revision, or change to a signed and submitted report will be done via a dated and signed Addendum attached to and incorporated in the revised report, or by a dated comment on a form page where space allows. USPAP requires ethical conduct by the appraiser. Modifying an existing report at the request of any User or even by the appraiser, and resubmitting it as if it is the original without explanation, is considered to be unethical.
This Addendum (or dated comment) will include verbatim or paraphrased change request information that is given to the appraiser by the Lender, the Client, or any other identified User as noted in the original report, and may include the name and employer of the individual requesting the modification. If the appraiser made an inadvertent error which is discovered after the original report submission, that will be identified and whatever change is necessary will be done. A new signing date will be applied to the revised report.
The appraiser reserves the right to review the desired change information submitted by a report User, to report that information per the above Addendum procedure, but to make no other change to the original report if that is considered the correct application. This procedure is in compliance with USPAP Standard 2 to prepare and submit a report that is not misleading, and the Ethics Rule of USPAP. The appraiser is the only person ultimately responsible for the report content, and this appraiser intends to comply with USPAP requirements regardless of Lender, Client or other User communication that may be considered in conflict with USPAP.
EXCEPTION TO REPORT MODIFICATION:
The appraiser is required to report observed conditions with the property at the time of inspection that have an effect on value, or that are safety, security or salability issues. Those conditions may be described in writing in various places in the report. Photos of those conditions and other photos may be included that can help the client or underwriter understand property conditions and characteristics. Therefore no written information or photos that document those conditions will be removed from the report after the original report is delivered to the client.
POTENTIAL ADDITIONAL FEE AFTER REPORT SUBMISSION:
Requests for additional information, including but not limited to additional comparables, the Cost or Income Approaches to value when not applicable, reliable, or necessary to form a credible opinion of value etc., or when not included in the Client’s original assignment order, may result in additional fees commensurate with the amount of additional work required to satisfy the request for additional data.
More Helpful Boilerplate
The level of detail requested is beyond the scope of work required for a summary report. These items would be contained in a self-contained report. If these details are required, please order a self-contained report and the fee will be adjusted accordingly.
Third Party (AMC) Liability Coverage Now Available
Many appraisers have to make a painful choice: sign a third party indemnification agreement with an AMC that could result in huge liability or refuse to sign and miss out on the work. Today, many AMCs require all the appraisers who work for them to sign an indemnification agreement (third-party coverage), that places a great deal of liability on appraisers. OREP now has a policy available that can provide contingent appraisal management company coverage as an option. The endorsement option can only be added to certain policies OREP offers, so please ask your OREP agent for details: (888) 347-5273.
Do you Need General Liability Insurance?
Do you need general liability insurance? You just might. Business Owner’s / General Liability Policy has been compared to a homeowner’s policy for your business. Coverage includes but is not limited to Property Damage to others, Bodily Injury, Business Interruption and Loss of Income coverage, Personal Property Coverage (computers, client records, buildings) and employee dishonesty. Inspectors, appraisers and real estate agents/brokers need this coverage. Minimum premium is $500. Workers Comp also available. Call OREP.org for details and a free quote (888) 347-5273 or email: info@orep.org with your request.
What to Redact on Sample Reports
Potential clients often request that appraisers send a sample report to demonstrate their competency and work style. Given that appraisal reports contain confidential information, the question arises – what should the appraiser redact from the appraisal report before forwarding it to potential clients? Judy Lazar, an appraiser from Illinois, advises appraisers to “Redact anything that identifies the client, borrower and address of the property, including the PIN and maps. Be careful if you use a black Sharpe; sometimes you can still see the information if you scan it as a PDF.” To make sure she gets all of the confidential information, Lazar says she searches throughout the document for specific words. “I typically pull up the report I want to use and open it as a new file labeled ‘sample report.’ To make sure I catch it all, I’ll do a search for the borrower name, subject address and client name/address and replace that information with ‘sample report; information redacted,’” Lazar says.
Richard Hagar, SRA says that appraisers must redact “Everything that anyone can use to determine the location of the subject property and the client and anything that could be considered ‘confidential information,’ including the cost of construction, depreciation, land value, market value and final value conclusion.” The problem, Hagar points out, is that by the time appraisers redact all of the confidential information, the report becomes unreadable. At that point, anyone receiving the report cannot perform a proper ‘review’ and check the facts. Paul Charron, an appraiser from Massachusetts, says that his company seldom sends sample reports for precisely this reason. “I don’t like to send samples and rarely do. I usually tell them to send me an order and they can see a sample of my work,” says Charron. “But if a sample is absolutely necessary I always have a sample appraisal with my own home as the subject. I update it once a year. If that doesn’t work, forget about them!”
2013 AMC Resource Guide
The 2013 AMC Resource Guide has over 200 verified AMCs listed, with the first 50 sending over 90% of the author’s work. Expand your business and find the AMCs that pay fairly and know how to treat an appraiser professionally. Visit WorkingRE.com or email your request to subscription@workingre.com.
New Working RE Home Inspector Edition
The new Home Inspector edition of Working RE is dedicated to home inspector issues only. Find a link to the PDF magazine at WorkingRE.com.
Broker/Agent E&O Insurance
Coverage, Price and Service: why settle for less? Brokers and Agents looking for Errors and Omissions or General Liability insurance can stop their search with OREP. Serving real estate professionals for over 12 years, OREP offers Brokers/Agents complete Professional Liability coverage along with a variety of incidental coverages in the Minimum Premium, including Open House Coverage, Seller’s Defense Coverage, Regulatory Boar Defense, Lockbox Coverage, Prior Acts, Asbestos, Fungus/Mold, Lead Coverage, and much more! General Liability is also available. Minimum Premium $369. Varies by state. Call OREP.org for details and a free quote (888) 347-5273 or email: info@orep.org with your request.
AMC Recovery Fund to Help Appraisers
Kentucky is the first state to create a fund specifically intended to reimburse appraisers who have suffered financial harm by AMCs who have shut their doors. According to Larry Disney, Executive Director of the Kentucky Real Estate Appraisers Board (KREAB), the new recovery fund is fair to all concerned- borrower, lender, appraiser and AMC. The fund is underwritten by an $800 per year surcharge on each AMC registered in the state. It has a cap of $300,000 that will be replenished if funds become depleted.
According to Disney, the bill requires the following conditions be met before an appraiser can request past due payment(s): 1. The AMC must cease to be registered in Kentucky either voluntarily or involuntarily; 2. The appraiser must receive a final judgment in a court of competent jurisdiction within the Commonwealth; and 3. If no viable alternative for full restitution is available, as determined by the Board. According to Disney, if each of the tests are met, the amount paid to the appraiser shall equal the actual amount of appraisal fees that are proven to be owed to the appraiser by the AMC, plus all reasonable and appropriate court costs associated with determining the final judgment.
The recovery fund does not address instances of an AMC failing to pay for an appraisal that is prepared competently and ethically, in compliance with USPAP, or because of excessive turn time. Those problems are addressed by administrative state regulations set by the Board, Disney says.
“It took a lot of consistent and constant work, talking to legislators, making them aware of the federal requirements, the definitions, and other issues that every state agency faces or will face,” Disney says. Find the complete story, first published in the Working RE Online Edition, at WorkingRE.com.
Collection Technique
Shelli Jones, an appraiser in Indiana, has been appraising 20 years and says that she has only lost $50 to AMC non-payment issues. “Like many appraisers after HVCC, I ran into payment issues with some notable AMCs who were slow to pay, or simply refused to pay for appraisals that I delivered. I would give them 30 days after I delivered the appraisal to pay my invoice and then I would email them notification that a lien would be placed on the homeowner’s property that was appraised,” Jones said. “I also sent notification to the homeowner stating that because their lender hired a company to handle the appraisal on their property and the appraiser fee was not paid, a lien would be placed on their property for the amount of the fee plus any late fees and filing fees. I gave them all 30 days to respond.”
Jones says the threat of a lien isn’t always enough to get paid, however. “Several times I actually had to file the lien. I sent a certified letter letting them know that a lien was filed with the county courthouse and that it would not be lifted until my fee was paid, plus an extra 10 percent every 30 days for late fees,” says Jones. In some cases, the person who paid the fee wasn’t even the AMC. “When I would file a property lien, twice the homeowner paid and a few times the lender did. One time only, did the AMC ever pay me,” Jones says.
Jones says she feels for the homeowners. “What’s bad is that the homeowners have paid for the appraisal; the lender collects that fee and I think the lender ought to be responsible for who they hire. It’s a major problem. The homeowners are usually livid, since they had to pay all those fees to the lender upfront,” says Jones.
Jones explains that in her state of Indiana, it is very simple for an appraiser to file a lien on a property. “You go to the county courthouse and file something similar to a mechanic’s lien. You can actually put a lien on the home. So if it is ever sold or refinanced the lien would have to be settled,” Jones says.
Jones’s approach is not an option for all appraisers, as the laws vary by state. “It’s allowed in my state, but it’d have to be something that appraisers check on in their own state. In Indiana, they call them a mechanic’s lien. My appraisal service was performed at the property, so it qualifies,” says Jones.