Along with many of you, I am a member of multiple online appraiser discussion groups. I find in those discussion groups a lot of the same types of questions my firm discovers when we provide assistance to appraisers, whether that is part of coaching or part of support around a state complaint filed against the appraiser. One of those common scenarios goes like this:
I completed an appraisal and transmitted the appraisal report to the client for a purchase appraisal. My market value conclusion came in below the purchase contract price. Now, a few weeks later, the parties have signed an addendum to the contract to match my value conclusion; the client has sent me that addendum. The client wants me to change my report to show the new amended contract price! They have sent me repeated emails to change my appraisal report so it shows the new price the parties have now agreed to, even though that addendum is dated after the assignment’s effective date. Even more, they want me to make this change in the Contract Section itself on page 1 of my appraisal report! I have told them I will not do it, but they are persisting. What should I do?
Standards Rule 1-2 indicates the research steps necessary to identify the problem, or the elements that define the assignment. No part of Standards Rule 1-2 indicates that contract price is an element that defines an assignment. So, the contract price changing does not require the appraiser to consider this situation a new assignment.
Standards Rule 1-5 requires in part
When the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business:
(a) analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal…
A contract is considered an “agreement of sale” so the appraiser must perform an analysis of the contract that was in place at the time of the effective date.
Standards Rules 2-2(a)(x)(3) and 2-2(b)(xii)(3) require in part for the appraiser to
…summarize the results of analyzing the subject sales and other transfers, agreements of sale, options, and listings in accordance with Standards Rule 1-5…
Standards Rule 2-1 requires in part
Each written or oral real property appraisal report must:
(a) clearly and accurately set forth the appraisal in a manner that will not be misleading;
(b) contain sufficient information to enable the intended user(s) of the appraisal to understand the report properly…
Nothing in Standard 2 requires any certain form or format. Nor does any part of USPAP distinguish between pages, form pages, text pages, exhibits, sections, form sections, headings, etc.
From the above citations:
These are the minimum requirements that must be met.
Notice that nothing prohibits the appraiser from rising above the minimum requirements, such as including information on amendments or addenda to the contract that took place after the effective date.
The appraiser could choose a variety of ways to disclose the summary of the contract analysis and any discussion on subsequent amendments. For example, the appraiser could include language like the following in the appraisal report. (Note that these examples are not exhaustive; there are a variety of ways to create a report that is clear, not misleading, and understandable. Appraisers are cautioned against copying these examples.)
[Contract section on the form]
See text addenda for information on the contract as of the effective date and a subsequent addendum.
The contract was dated January 1, 2024 for $500,000 and is written on a typical state contract. [Analysis summary.] Subsequent to the effective date, an amendment to the contract was signed by the parties on January 15, 2024 for $475,000.
[Contract section on the form]
The contract was dated January 1, 2024 for $500,000 and is written on a typical state contract. [Analysis summary.] See text addenda for more information.
Subsequent to the effective date, an amendment to the contract was signed by the parties on January 15, 2024 for $475,000.
[Contract section on the form]
The contract was dated January 1, 2024 for $500,000 and is written on a typical state contract. [Analysis summary.] Subsequent to the effective date, an amendment to the contract was signed by the parties on January 15, 2024 for $475,000.
According to secondary market guides for mortgage-related appraisals, lenders are not required to obtain new appraisal reports from appraisers merely because a contract price changes. (For example, see Fannie Mae’s November 2023 Appraisal and Property-Related FAQs and Single Family Selling Guide B4-1.1-05)
However, some lenders may have their own policies that do require them to obtain a new appraisal report in this type of situation.
As shown above, USPAP does not require the appraiser to consider this situation a new assignment.
Submitting a second report to the client results in a new report, not a new assignment.
In this scenario, the client was not asking for a new effective date. The second report simply includes more information than the first report did; the effective date of value is not changing in this scenario. Remember, though, that the report date (sometimes called the signature date) in the second report must reflect the new date the report is being transmitted to the client. Do not confuse effective date with report date.
(As an aside, if the scenario were different and there were a new effective date, the appraiser would be required to consider it a new assignment. See Scope of Work Rule and Standards Rule 1-2.)
While we often use the term “revised appraisal report,” technically it is correctly referred to merely as an “appraisal report”. USPAP does not distinguish between an “appraisal report” and a “revised appraisal report.” “Revision” could erroneously imply that the appraisal report somehow replaces, or negates, other appraisal reports that have been previously transmitted, but if multiple appraisal reports are transmitted for an assignment, they all exist as appraisal reports.
How an appraiser tracks files or numbers the appraisal reports is a business decision.
However, USPAP does require that appraisal reports contain the report date (i.e., when the report was transmitted), which helps distinguish between reports transmitted on different days.
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