Ask Henry

Disposition Value

Hello Henry,

I have a client who's requesting a market value and a disposition value on every commercial report. If you were asked to do that, what steps would you take and how would you go about coming up with your disposition value? Thanks for taking the time to answer my question.

Robert Jones
Certified General Real Property Appraiser
robertjones56@bellsouth.net

Dear Robert,

As part of the "Scope of Work" dialogue that the USPAP requires you to have with a client before you make an appraisal, you have to agree regarding what definition or definitions of value are going to be used. This is not a problem when the value in question is market value as its definition was blessed by the US government as part of the FIRREA act. However, when a special value definition is needed, it is usually supplied by the client (ERC is a good example).

I think you are looking for trouble if you try to draft a custom definition of value. It might even be considered "practicing law without a license". My recommendation is that you suggest that the client have their attorney draft the definition they want you to use for disposition value.

HSH
askhenryharrison@revmag.com

Ask Henry

FIRREA Enforcement

Dear Henry,

As a federal statute, who or what government entity is charged with enforcement of the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA)? If an appraiser is aware of activity specifically prohibited by the statute, to whom should such activity be reported? It would seem nonsensical to have a federal law that was unenforceable by either the US Attorney General or the FTC or the EEOC. If you are unaware of a specific entity to approach, could you suggest a course of action in order to discover the appropriate party? Thanks for the favor of a reply and thanks for publishing my editorial response in your initial blog issue.

Peter von Nessi, CSA-G
normandygroup@optonline.net
Bronx, NY 10465

Dear Peter,

The way I remember it is that FIRREA established the government agency call the Appraisal Subcommittee. About the same time, the national appraisal organizations finally got motivated and established The Appraisal Foundation, which was given the mandate to write Appraisal Qualifications and Appraisal Standards for the profession. The Appraisal Foundation received financial aide from the Appraisal Subcommittee to accomplish these tasks. The actual task of licensing and certification of appraisers and the power to investigate complaints about appraisers was left up to the individual Appraisal Commissions that each state was required to establish. The duty of supervising these Commissions was left up to the Appraisal Subcommittee. It is their responsibility to see to it that the individual state Appraisal Commission carry out their duties. Therefore, if anyone had a complaint about an appraiser, it was supposed to be reported to their state's Appraisal Commission. If the problem were with a lending institution, it could be reported to the State Banking Commission or if a federal criminal offense were being committed, to the FBI.

Today, there is a big difference in the way these complaints are handled. In some states, little or nothing ever happens regarding follow up on complaints. In contrast, other states go overboard trying to enforce the regulations. Most states fall somewhere between these two positions. The best way to find the most effective avenue for getting your complaint dealt with seriously is to contact your state's real estate appraisal commission and ask for their advice.

HSH
askhenryharrison@revmag.com

Ask Henry

Fair Market Value, Market Value, IRS Value

Dear Mr. Harrison,

I have been asked by an attorney whether there is any difference between "Fair Market Value" (a term he sees in IRS rules and regulations) and "Market Value" as used in appraisals. I have told him that the term "Fair Market Value" has been superceeded by the term "Market Value," but he is still concerned that there could be some value difference attributed to the use of one term rather than the other. Can you help me clear this up for him please? Thank you!

Donald
apps1@compfxnet.com
Dear Donald,

The definition of "Fair Market Value" is contained in the FIRREA Act and is required for all mortgages where the U.S. government is involved. It is the value most often estimated by appraisers. Keep in mind that the USPAP requires that every appraisal state the type of value being estimated and provide a definition of that value. Different IRS publications and regulations seem to include different definitions of the terms Market Value and Fair Market Value. I suspect that if you based your appraisal on one of those definitions, the value you estimated might differ from an appraisal based on one of the IRS definitions. The attorney is going to have to research which of the IRS definitions applies to the matter they are involved in, and if an appraisal is needed in the case, be sure to supply the appraiser with that definition of value.
HSH
askhenryharrison@revmag.com

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