Appraisers' Free Forum

Please tell me how you would modify my boiler plate scope statement. Another appraiser buddy says it needs to be changed, so I come here to broaden my horizons .... please make suggestions, at will ... Thanks!!!

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The scope involved a complete inspection of the property, both inside and out, including interviews with the owner. Also
complete, were investigations of the surrounding neighborhood and environment, references and uses of public records and
other available public and private data sources, utilizations of national building cost publications with local builder input and
analysis of improved and vacant market real estate sale and rentals when possible. The scope involves a complete analysis of all factors affecting Market Value as of the appraisal date in the development of this Complete Appraisal/Summary Report..

The purpose of this appraisal assignment is to estimate the market value of the fee simple interest vested in the real property identified and described in the body of this summary appraisal report. The estimate of market value is derived in accordance with the definition of market value provided in the attached Fannie Mae Form. The intended use of this appraisal is to aid the intended user - the mortgage loan institution (hereby identified as the client by name in the body of the report) and its funding source - in evaluating the subject property as collateral for mortgage loan purposes. The borrower is not an intended user, and is not the client, but may obtain a copy of the report from the client at the client’s discretion. Obtaining a copy of the report and reading it does not in itself constitute use; reliance upon the appraisal report to make a decision or to take an action does. Use of this appraisal report by any person or entity other than the client named in the report is prohibited and renders the report completely null and void unless expressly authorized by the appraiser in writing at the time of engagement.

The Client and those listed immediately below are the sole intended users of this report. The Client is the sole intended user of this report. "Parties who receive a copy of an appraisal...as a consequence of disclosure requirements applicable to an appraiser's client do not become intended users of the report unless the client specifically identifies them at the time of the assignment." [excerpt from USPAP Statement 9]

Intended User(s) of Report:
The named client.

Borrower:
The borrower(s) has (have) not been identified as an intended user by the client. This report is the intellectual property of the appraiser. This report is addressed to a specific use for a specific intended user. The appraiser is not responsible for any other use nor is responsible to either the borrower or anyone not named under the section above titled "Intended User(s) of Report."

The appraiser cannot discuss this report with any party not an intended user and the appraiser is under no obligation to
"Update", "recertify", or otherwise modify this report in violation of Advisory Opinions issued by the Appraisal Foundation's
USPAP, except to make corrections to actual errors.

The appraiser can develop a new appraisal in a new relationship of the same piece of property during the same time so long
as the original client-appraiser confidentiality provisions are not violated.

Adequacy of Scope:
The appraiser has proposed and the Client has agreed (prior to submission) that the level of development and reporting
detailed above is sufficient to address the substantiative criteria of a reasonable Scope of Work within the context of the
Intended Users and Intended Use. With the exception of revisions made for the purpose of correction of any errors, the
Appraiser does not anticipate further development or reporting requirements for this assignment. Any additional requests
from the Client or any third parties may represent a change in the assignment conditions and require the development of a
new assignment. With the exception of corrections of any errors or omissions, any additional requests must be made in
writing and may be subject to additional billing to recover the costs associated with the additional work.

DB, is this to be included in a 1004 report, or are you using for a narrative SOW?

Regardless, there are some needed changes, but I need to know where you're using it.

Residential - 1004 .... If I remember correctly, I got part of this from Otis ... part from George Hatch ... Part from you ... and the rest was boiler plate with the software .... Please edit or tell me where to as necessary .... I am in a time crunch ... not for delivery... just a personal time crunch... more later on that subject....

I have read this thing until my eyeballs are crossed and the only thing I see that absolutely HAS to be changed is the removal of "Complete Appraisal/Summary Report" verbiage .....

Thoughts?

Okay, first refer to page 4 of the 1004:

The appraiser may expand the scope of work to include any additional research or analysis necessary based on the complexity of this appraisal assignment.

This page already includes the "significant six" except for the purpose of the appraisal: To form an opinion of the market value of the fee simple interest in the subject property described in this report.

Don't repeat what's already there. You already have a minimum scope of work. Just expand it to include whatever else you did, or to explain what the minimum scope already lists. Example:

I conducted a complete interior and exterior inspection of the subject property. This inspection was limited to a visual observation of the parts of the subject house that were unobstructed. I did not move furniture, unscrew access panels, or look at any part of the house which was obstructed from view. An appraiser's inspection does not rise to the level of a comprehensive home inspection conducted by a qualified professional inspector. My inspection of the subject is limited to that which is readily apparent. I observed the roof only from ground level, and only those parts of the roof that are visible from the ground were observed. The crawl space and attic were inspected by head and shoulders entry into their respective entrances.

The form already says that the intended user is the lender/client. I would simply expand that as follows:

The lender/client did not identify any other intended users (by name or by type) to me at the time the assignment was engaged. Consequently, no other users' needs are addressed by this report, including those of the borrower.

Stephanie Coleman refers to six elements as "the Significant Six" which must be covered in SOW. But your SOW does not have to be in any particular section. These six elements are addressed as follows:
1) Purpose of appraisal -- Page 1 of URAR, top line.
2) Client (or Lender/Client) -- page 1
3) Intended use -- page 4
4) Intended user -- page 4, and expand in comments.
5) Effective date -- Page 2
6) Property interest appraised -- Page 1

So you don't need to add those, except for #4's expansion. Just expand the scope statement to the extent necessary to CYA and to prevent misunderstanding of the preprinted elements. When additional research is required, explain that research at the point in the report at which it becomes significant. Yes, I reviewed relevant data, searched several data sources, and confabulated with owners and others to get my data. But:

Sale #3 presented unusual findings in its trust deed history. Courthouse retrieval shows a purchase price of $86,000 and a loan of $130,000. The purchaser of this property told me that the additional money over the purchase price was borrowed for the purpose of renovating it. He explained that he had replaced the kitchen, all floor covering, the roof, and had upgraded the existing floor covering from vinyl to ceramic tile in the bathrooms. He had replaced the existing bath fixtures in both bathrooms. He said that the house exhibited normal wear and tear when he bought it, but that there was a minor leak in the roof which had stained the ceiling in the master bedroom. I took this information into consideration when comparing Sale #3 to the subject.

Present that "expansion of scope" statement at the point in the report where you're describing the comps, or wherever else you think the reader would make the most sense of it.

I wouldn't worry so much about confining the SOW in one spot--especially boilerplaque (I like PC's term, so I'm stealing it.) There are a few--very few--things which need to be expanded upon to CYA. Leave the rest as it is, and explain any expansion of scope at the point of use.

And another thing. You don't need to review USPAP in your SOW. You could leave in the paragraph headed "Borrower:", but I'd lose the rest of it. It's just restating what USPAP already requires of you, and provides you no butt-coverage.

Remember, even a fish would stay out of trouble if he'd keep his mouth shut. Say no more than you absolutely must, especially when dealing with legal requirements.

I removed everything but the first paragraph and the last paragraph ... you're right ... the form takes care of the rest of it ....

Thanks Jim!!!

One more example:

Suppose your SOW includes an income approach. Your research digs up two good comps, and a third which is sorta iffy. You get enough data to extract a cap rate from one comp, but the info on the other two are too skimpy or are suspect.

Your normal income approach SOW includes all the mental masturbation blather normally included to bore hell out of a user, but in this case a little more is required. Introduce it *during* the approach:

In attempting to arrive at a supported capitalization rate, I extracted Sale #1's rate from the data provided. I was not able to discover enough data about Sales #2 and #3 to extract a capitalization rate from them. As a result, I used the weighted average (band of investments) method to build a capitalization rate, and compared that to the rate extracted from Sale #1. The calculations and reconciliation are shown below.

See? If you put in the extra stuff where you had to do it, the user can follow your reasoning better.