fees
296) Contingent Fees
04/09/08
Dear Henry,
In eminent domain practice I often see very large appraisal fees for work on a parcel yet it is billed based on an hourly rate. However, if the parcel is settled for considerably less than the amount in the appraisal, the fee is oftened reduced accordingly. This seems to me to be a violation of USPAP as the fee appears to be contingent upon a future circumstance. The appraiser does not do any less work, yet accepts a lower fee. What is your opinion?
Name and Address withheld by request
Dear Friend,
Sounds like a violation to me.
H2
In eminent domain practice I often see very large appraisal fees for work on a parcel yet it is billed based on an hourly rate. However, if the parcel is settled for considerably less than the amount in the appraisal, the fee is oftened reduced accordingly. This seems to me to be a violation of USPAP as the fee appears to be contingent upon a future circumstance. The appraiser does not do any less work, yet accepts a lower fee. What is your opinion?
Name and Address withheld by request
Dear Friend,
Sounds like a violation to me.
H2
240) Payment in Advance
02/11/08
Dear Henry,
Can getting paid for your appraisal services be included as a condition in the appraisal, just like any other condition that is used in an appraisal?
An example would be that you would include a condition in the appraisal report that the appraisal would have to be paid for before the intended user could actually use the appraisal for its intended use.
I have had situations over the years where I have not been paid for appraisals, but the appraisal was used anyway and the client just never paid for it. Actually, in some of these instances, I have demanded that the appraisal not be used because it was not paid for; but that did not work very well. It seems that if the appraisal and the right to use the appraisal were conditional upon the appraisal being paid for, this type of thing could be avoided. I understand there are legal issues involved here. I would like your advise, mainly in regard to USPAP and accepted business practices.
W. Michael Watts wattsappraisals@cox.net
P.S. Your Q & A Program is a much needed service for appraisers.
Dear W.
There is nothing that requires you to extend credit to a client. You can always ask for your money up front. However, once you have delivered the appraisal I don't think you can stop the client from using it unless you get a court order.
H2
Can getting paid for your appraisal services be included as a condition in the appraisal, just like any other condition that is used in an appraisal?
An example would be that you would include a condition in the appraisal report that the appraisal would have to be paid for before the intended user could actually use the appraisal for its intended use.
I have had situations over the years where I have not been paid for appraisals, but the appraisal was used anyway and the client just never paid for it. Actually, in some of these instances, I have demanded that the appraisal not be used because it was not paid for; but that did not work very well. It seems that if the appraisal and the right to use the appraisal were conditional upon the appraisal being paid for, this type of thing could be avoided. I understand there are legal issues involved here. I would like your advise, mainly in regard to USPAP and accepted business practices.
W. Michael Watts wattsappraisals@cox.net
P.S. Your Q & A Program is a much needed service for appraisers.
Dear W.
There is nothing that requires you to extend credit to a client. You can always ask for your money up front. However, once you have delivered the appraisal I don't think you can stop the client from using it unless you get a court order.
H2
190) New Client = New Appraisal
12/21/07
Hi Henry,
As I get work from this REO Company, I sometimes get the appraisal request from the loan officer. If that is the case, that loan officer requests that the lender name on the original appraisal be changed, do I still charge for a new appraisal? Or do I charge a change fee?
Andrea Veit andiee22@aol.com
Dear Andrea,
This is becoming the most frequent question I am being asked. The answer is simple and always the same.
A new client requires a new appraisal.
The theory is that the needs of each client are different and what these needs are is determined as part of the scope of work discussion. What you charge, however, is up to you and the client. It is not covered by the USPAP.
H2
As I get work from this REO Company, I sometimes get the appraisal request from the loan officer. If that is the case, that loan officer requests that the lender name on the original appraisal be changed, do I still charge for a new appraisal? Or do I charge a change fee?
Andrea Veit andiee22@aol.com
Dear Andrea,
This is becoming the most frequent question I am being asked. The answer is simple and always the same.
A new client requires a new appraisal.
The theory is that the needs of each client are different and what these needs are is determined as part of the scope of work discussion. What you charge, however, is up to you and the client. It is not covered by the USPAP.
H2
148) Fee Schedule
11/09/07
Dear Henry,
I still have a problem with setting fees based on value ranges. If it is a large house that is complex, why not charge based on size? Many houses in the "expensive" price range are just tiny little townhouses sitting on high priced lots or with access to special amenities, like a golf course.
I can see complaints brewing when the fee is based on a range of values between say $300,000 and $500,000 and the appraisal comes back at $300,000. The client may think that the value was pushed up to get the higher fee or if the value came in at $550,000, the client may again think that the value was pushed to get a higher fee from the next higher value range.
I see this as dangerous territory. What is your opinion?
RD(name withheld by request)
Dear RD,
For the reasons you explain many appraisers do not set fees based on the range of value. However, it is quite common in some market areas.
I don't think it is permitted by USPAP to have the value range for the fee be the appraised value. It should be based on what the client thinks the house is worth before the appraisal is made. You are certainly right that the fee cannot be contingent upon the appraised value.
There is nothing wrong setting the fee based on the size of the house, but it is not as common as using a value range.
H2
I still have a problem with setting fees based on value ranges. If it is a large house that is complex, why not charge based on size? Many houses in the "expensive" price range are just tiny little townhouses sitting on high priced lots or with access to special amenities, like a golf course.
I can see complaints brewing when the fee is based on a range of values between say $300,000 and $500,000 and the appraisal comes back at $300,000. The client may think that the value was pushed up to get the higher fee or if the value came in at $550,000, the client may again think that the value was pushed to get a higher fee from the next higher value range.
I see this as dangerous territory. What is your opinion?
RD(name withheld by request)
Dear RD,
For the reasons you explain many appraisers do not set fees based on the range of value. However, it is quite common in some market areas.
I don't think it is permitted by USPAP to have the value range for the fee be the appraised value. It should be based on what the client thinks the house is worth before the appraisal is made. You are certainly right that the fee cannot be contingent upon the appraised value.
There is nothing wrong setting the fee based on the size of the house, but it is not as common as using a value range.
H2
132) Fee Schedule
10/20/07
Dear Henry,
Any thoughts on the proper format/template for a fee schedule. Is it OK to use ranges,e.g. based on value/complexity: $0-$300,000 the fee is whatever, $300,000-$500,000 the fee whatever but higher, $500,000-$750,000,etc,etc.? Do you see a problem? Please withhold name, e-mail, etc.
NAME WITHHELD BY REQUEST
Dear Friend --
I see nothing wrong with this. I would add a statement saying these are based on average houses in the market and if the scope of work is expanded or the house is atypical, the fee will be adjusted accordingly to reflect the extra work it will take to complete the appraisal.
While you may not charge a percentage of value, you certainly can set prices that reflect the presumed complexity of the appraisal assignment. A large residence with many outbuildings, lots of surrounding land, and other amenities will clearly be more complicated to appraise than a standard-issue tract home.
H2
Any thoughts on the proper format/template for a fee schedule. Is it OK to use ranges,e.g. based on value/complexity: $0-$300,000 the fee is whatever, $300,000-$500,000 the fee whatever but higher, $500,000-$750,000,etc,etc.? Do you see a problem? Please withhold name, e-mail, etc.
NAME WITHHELD BY REQUEST
Dear Friend --
I see nothing wrong with this. I would add a statement saying these are based on average houses in the market and if the scope of work is expanded or the house is atypical, the fee will be adjusted accordingly to reflect the extra work it will take to complete the appraisal.
While you may not charge a percentage of value, you certainly can set prices that reflect the presumed complexity of the appraisal assignment. A large residence with many outbuildings, lots of surrounding land, and other amenities will clearly be more complicated to appraise than a standard-issue tract home.
H2
110) Leased Fee Estate?
06/24/07
Dear Henry,
On the sales comparison grid of summary reports (1004, 2055, 1025, etc.), there is a line where you have to indicate whether the properties (subject and comparables) are "leasehold" or "fee simple".
Being a residential appraiser, I have always put "fee simple" as I have never run across a residential property that was "leasehold" ownership. However, if the property is "tenant occupied", wouldn’t the owner of the property have a "leased fee estate", rather than a "fee simple estate"? If that is true, should we put "lease fee", rather than "fee simple" for all tenant occupied properties on the sales grid? If so, for Form 1025, we probably should put "leased fee" in almost all cases.
Have I been putting the wrong legal rights and interests on the reports all these years? Really need your advice on this. It's really bugging me.
William Tsai wctsai@comcast.net
Dear William,
Technically, you are correct. When a property is leased, the owner has a "leased fee estate" and not "fee simple." However, this does not seem to be what Fannie Mae wants reported as long as the lease is short.
According to Fannie Mae's requirements, dated June 30, 2002 Part XI Chapter 4, Section 401: The Subject Property, they want you to indicate whether the property is "fee simple", "lHHeasehold" (which means the improvements are on leased land), "PUD", "Condo" or "Co-op". However, you do need to report that the property is leased in the comments.
Hopefully, you will no longer be bugged!
H2
On the sales comparison grid of summary reports (1004, 2055, 1025, etc.), there is a line where you have to indicate whether the properties (subject and comparables) are "leasehold" or "fee simple".
Being a residential appraiser, I have always put "fee simple" as I have never run across a residential property that was "leasehold" ownership. However, if the property is "tenant occupied", wouldn’t the owner of the property have a "leased fee estate", rather than a "fee simple estate"? If that is true, should we put "lease fee", rather than "fee simple" for all tenant occupied properties on the sales grid? If so, for Form 1025, we probably should put "leased fee" in almost all cases.
Have I been putting the wrong legal rights and interests on the reports all these years? Really need your advice on this. It's really bugging me.
William Tsai wctsai@comcast.net
Dear William,
Technically, you are correct. When a property is leased, the owner has a "leased fee estate" and not "fee simple." However, this does not seem to be what Fannie Mae wants reported as long as the lease is short.
According to Fannie Mae's requirements, dated June 30, 2002 Part XI Chapter 4, Section 401: The Subject Property, they want you to indicate whether the property is "fee simple", "lHHeasehold" (which means the improvements are on leased land), "PUD", "Condo" or "Co-op". However, you do need to report that the property is leased in the comments.
Hopefully, you will no longer be bugged!
H2
80) Appraisers As Collection Agents
04/23/07
Dear Henry,
I kept an inspection appointment and I was not paid at the door, as were my instructions from the Mortgage Company. I called the borrower back in two days requesting the fee and she was upset that I was calling her for the fee. I called the Mortgage Company and advised them that we were not paid and couldn't go ahead with the assignment. They said OK.
The borrower submitted a complaint with the State Licensing Board against me. She told the License Dept that I was rude. I was not. The State Licensing official said I was supposed to get a written release of assignment from the Mortgage Company. Otherwise I had to complete the appraisal report anyway.
Isn't the State Licensing Board wrong? The person there said I was not in compliance with USPAP by not completing the report. Another appraiser did the appraisal and the borrower got the mortgage anyway..
What do you think I should do now????
(name withheld by request)
Dear Friend,
What is happening to you does seem unfair to me. Making appraisers act as collection agents in my opinion is very unprofessional. However, it is also very common.
The way I read the USPAP it makes clear, that like any professional, once you take on an assignment you have to see it through regardless if you are paid or not. A doctor cannot stop the treatment of a patient once they have started it, just because they have not been paid.
This situation is even worst as the homeowner is not your client and does not owe you any money. You are owed the fee by the client.
In the future, if you are going to act as a collection agent for one of you clients, you should have written instruction that include instructions to you that if you do not receive the fee you should not start the appraisal. When you rely on verbal instructions, there is always a problem trying to prove what was said. Likewise, you shouldn't start doing any work on an appraisal you do not intend to finish, regardless if you ever get paid.
There is nothing in the USPAP that I am aware of about harsh words, though they might be considered to be unprofessional conduct.
My advice to you is to do whatever is necessary to placate the Licensing Board and move on. It might be helpful if your client could send the Licensing Board a letter telling them that they, not the homeowner, were the client and that they did give you verbal instructions not to go forward with the appraisal.
H2
I kept an inspection appointment and I was not paid at the door, as were my instructions from the Mortgage Company. I called the borrower back in two days requesting the fee and she was upset that I was calling her for the fee. I called the Mortgage Company and advised them that we were not paid and couldn't go ahead with the assignment. They said OK.
The borrower submitted a complaint with the State Licensing Board against me. She told the License Dept that I was rude. I was not. The State Licensing official said I was supposed to get a written release of assignment from the Mortgage Company. Otherwise I had to complete the appraisal report anyway.
Isn't the State Licensing Board wrong? The person there said I was not in compliance with USPAP by not completing the report. Another appraiser did the appraisal and the borrower got the mortgage anyway..
What do you think I should do now????
(name withheld by request)
Dear Friend,
What is happening to you does seem unfair to me. Making appraisers act as collection agents in my opinion is very unprofessional. However, it is also very common.
The way I read the USPAP it makes clear, that like any professional, once you take on an assignment you have to see it through regardless if you are paid or not. A doctor cannot stop the treatment of a patient once they have started it, just because they have not been paid.
This situation is even worst as the homeowner is not your client and does not owe you any money. You are owed the fee by the client.
In the future, if you are going to act as a collection agent for one of you clients, you should have written instruction that include instructions to you that if you do not receive the fee you should not start the appraisal. When you rely on verbal instructions, there is always a problem trying to prove what was said. Likewise, you shouldn't start doing any work on an appraisal you do not intend to finish, regardless if you ever get paid.
There is nothing in the USPAP that I am aware of about harsh words, though they might be considered to be unprofessional conduct.
My advice to you is to do whatever is necessary to placate the Licensing Board and move on. It might be helpful if your client could send the Licensing Board a letter telling them that they, not the homeowner, were the client and that they did give you verbal instructions not to go forward with the appraisal.
H2
46) Appraisal Fees
02/05/07
Dear H2,
We are suddenly getting inquiries about the "big raise in our prices", with quite negative reactions. As it turns out, some of our lender/clients are adding a fee on top of our appraisal fee, sometimes more than doubling what is being charged to the borrower. We are in a small town and this has become a real issue with our realtors.
My question is whether it is legal for the banking industry to double our appraisal fee and still call it an appraisal fee? Does this in any way jeopardize banking disclosure rules? Perhaps the Appraisal Institute or some organized group needs to explore this?
Esta Zanders estathat@frontiernet.net
Dear Esta,
I am not aware of any regulation that says that what a lender charges their client for an appraisal fee has to be the same as what they pay for it.
However, I agree that what you've described is a bad practice. I suggest that if you have hard evidence, you should send it to the banking commissioner in your state. If you get a reply, please send it to me so I can share it with our readers.
H2
We are suddenly getting inquiries about the "big raise in our prices", with quite negative reactions. As it turns out, some of our lender/clients are adding a fee on top of our appraisal fee, sometimes more than doubling what is being charged to the borrower. We are in a small town and this has become a real issue with our realtors.
My question is whether it is legal for the banking industry to double our appraisal fee and still call it an appraisal fee? Does this in any way jeopardize banking disclosure rules? Perhaps the Appraisal Institute or some organized group needs to explore this?
Esta Zanders estathat@frontiernet.net
Dear Esta,
I am not aware of any regulation that says that what a lender charges their client for an appraisal fee has to be the same as what they pay for it.
However, I agree that what you've described is a bad practice. I suggest that if you have hard evidence, you should send it to the banking commissioner in your state. If you get a reply, please send it to me so I can share it with our readers.
H2