Whether routine or unique, appraisers face many types of situations as part of their appraisal and appraisal review assignments.
Click a situation below to explore some key factors appraisers may need to consider when working through assignment situations.
The Client Changes the Financing
I am in the middle of an assignment (I have not delivered a report) and the client is changing the financing.
1 – An assignment exists.
The appraiser agreed to perform an appraisal or appraisal review assignment.
2 – No report has been delivered.
In this scenario, the appraiser has not delivered a report and there is no other indication that the assignment has ended.
3 – The client indicates that the financing option is changing.
In this scenario, the intended use (e.g., use in conventional, FHA, USDA, or VA financing) is being changed at the request of the client. The appraiser must be familiar with the applicable requirements, often found in Guides and Handbooks, such as the Fannie Mae Selling Guide and the HUD Handbook 4000.1.
Because there is no indication the assignment has ever ended in this scenario, the appraiser determines he or she is working within the same assignment. Even when it is the same assignment, though, the appraiser must still evaluate how the changed intended use impacts the necessary scope of work (i.e., related to the intended use, the appraiser must review the requirements in Guides and Handbooks for requirements).
4 – Carry out the new scope of work.
As with any appraisal or appraisal review assignment, the necessary scope of work must be performed. If the scope of work changed due to the change of the intended use, the appraiser may need to do additional or different research, analyses, or inspections.
The intended use may also require certain content be included in the eventual report to the client.
5 – Continue with the assignment.
Proceed with the necessary development and reporting steps.
Deliver a revised report to the client.
Key references: USPAP Scope of Work Rule, Standards Rule 1-2, Standards Rule 2-2. These USPAP references are not exhaustive.
I turned in a report and now the client is changing the financing.
1 – An assignment exists.
The appraiser agreed to perform an appraisal or appraisal review assignment.
2 – The appraiser transmitted a report.
In this scenario, the appraiser already delivered a report to the client which is an indication the assignment had reached an end.
3 – The client indicates that the financing option is changing.
In this scenario, a different intended use (e.g., use in conventional, FHA, USDA, or VA financing) is being required by the client. The appraiser must be familiar with the applicable requirements, often found in Guides and Handbooks, such as the Fannie Mae Selling Guide and the HUD Handbook 4000.1.
Because the report delivery indicates an end to the original assignment and the client is requesting that the intended use change, the appraiser determines he or she will now be working in a new assignment. As with any assignment, the appraiser must evaluate how the various assignment elements (including the intended use) impacts the necessary scope of work (i.e., related to the intended use, the appraiser must review the requirements in Guides and Handbooks for requirements).
The agreement to perform this new assignment could be in the form of a typical engagement letter or other format that lays out assignment elements, including the intended use.
As an added note, whether or not the client assigns a new order number has no bearing on the appraiser’s obligations.
4 – Carry out the scope of work for the new assignment.
Some or much of the work from the first assignment may be practical to be reused for the new assignment that has been created.
As with any appraisal or appraisal review assignment, the necessary scope of work must be performed. Despite the possibility of reusing some or much of the work from the first assignment, the different intended use for the new assignment may require the appraiser to do additional or different research, analyses, or inspections.
The intended use may also require certain content be included in the eventual report to the client.
The appraiser must be mindful of maintaining a workfile and communicating disclosures to the client regarding prior services.
5 – Proceed with the new assignment.
Proceed with the necessary development and reporting steps.
Deliver a report to the client.
Key references: USPAP Scope of Work Rule, Record Keeping Rule, Ethics Rule, Standards Rule 1-2, Standards Rule 2-2. These USPAP references are not exhaustive.
Assignment versus Report
Isn’t "new report" another way of saying "new assignment"?
1 – What is an Assignment?
According to USPAP Definitions, an assignment is “a valuation service that is provided by an appraiser as a consequence of an agreement with a client.”
2 – What is a Report?
According to USPAP Definitions, a report is “any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.”
3 – What this means
The “assignment” is the big picture of what the appraiser has been hired to perform. Examples include: performing an appraisal; performing an appraisal review; performing consulting work as an appraiser; gathering and transmitting market data as an appraiser.
The “report” is simply one component to an assignment – the communication of assignment results to the client in an appraisal assignment or appraisal review assignment.
Using these words incorrectly can lead to confusion, miscommunication, or technical errors.
4 – Example scenario
Scenario: At the end of a conventional assignment, the appraiser delivered the report (an indication the conventional assignment concluded). The client now wants to change the financing to FHA (not conventional).
It would be incorrect to say “The client ordered a new report” in this scenario. Rather, such a situation indicates “The client ordered a new assignment.”
Even though the client might not know the difference between these words and some participants might use the term “report” interchangeably with “assignment”, an appraiser must understand the difference because certain obligations apply. For example, for each assignment, an appraiser must maintain a workfile and make certain disclosure of prior service.
Key references: USPAP Definitions, Advisory Opinion 21. These USPAP and Guidance references are not exhaustive.
Have a question or problem? Need education or support?
We have solutions.
Go to our Services page or email support@walitt.com.
Material is as of the date created and may not have current links or current information. This content is offered as is and implies no guarantee of compliance. Users of this material are responsible for ensuring the validity of information.
