Single Most Misunderstood Problem in Real Estate Appraising
Per USPAP, the Scope of Work is determined by the Real Estate Appraiser, not the Lender. However, am AMC will say you signed that Engagement Agreement and I will cover that in a minute.
When it comes to USPAPs rule for Scope of Work determined by the Appraiser, which is part of the administrative code in Florida, the following is the rule.
The Scope of Work must include the research and analyses that are necessary to develop credible results.
The scope of work is acceptable when it meets or exceeds:
- The expectations of parties who are regularly intended users (Note: Not what an AMC wants or a Lender, but the user such as FNMA, FHA, etc.) for similar assignments, AND; (Note: It states AND, not OR. Very Important.)
- What an Appraiser's peers' actions would be in performing the same or similar assignment (i.e. whatever leads to the most credible results).
Note: A lender does not get to TELL an Appraiser how many comparable sales to use in the development of a report. In the development of the report, the Appraiser determines the number of comparable sales that will provide the most credible results. A minimum of three is customary, but the Appraiser may decide the report needs more in order to provide superior results. The Certified Appraiser is NOT an order taker and fully controls his or her own work product (i.e. appraisal report).
Having said that, the next part covers an Engagement Letter. Those letters attempt to control what we call assignment conditions. You can read the full article at http://www.workingre.com/late-appraisal-uspap-violation
FAQ 2016-08: Is Turnaround Time an Assignment Condition?
Question: My state’s appraiser regulatory agency sent out a newsletter that says a due date is an assignment condition, and that failing to adhere is a violation of USPAP. Is this true?
Response: “Assignment due dates are contractual obligations, but are not assignment conditions under USPAP. Turnaround times and similar items are business practice issues, and are outside the scope of USPAP”.
Assignment conditions are addressed in the Problem Identification section of the SCOPE OF WORK RULE (Lines 421-425). The Rule states in part
Assignment conditions include assumptions, extraordinary assumptions, hypothetical conditions, laws and regulations, jurisdictional exceptions, and other conditions that affect the scope of work. Laws include constitutions, legislative and court-made law, administrative rules, and ordinances. Regulations include rules or order, having legal force, issued by an administrative agency.
So, USPAP already covers assignment conditions and those Engagement Letters cannot circumvent USPAP because it is part of the Administrative Code. Those engagement letters can only being enforced by filing a lawsuit against the appraiser for some how creating liability by not delivering what was requested in the assignment request. However, the assignment is suppose to rise to the level of what the intended user needs and that is laid out in the FNMA Selling Guide for example as well as the FHA Handbook.