By RICHARD HEYN, SRA and DAWN MOLITOR-GENNRICH, SRA
Just like in any practice, it’s important to always remember the fundamentals. Developing an appropriate scope of work is critical in non-lending assignments. In order to maintain compliance with USPAP, first define your problem then develop a scope of work to solve it. Accomplishing this task involves identifying six assignment characteristics:
- Client and if applicable, any other intended user(s)
- Intended use
- Type and definition of value
- Effective date
- Relevant property characteristics
- Assignment conditions
Which elements do not vary much in lending assignments?
The first four elements on the list do not vary much in traditional lending assignments reported on Fannie Mae and Freddie Mac forms. The intended user, intended use, and definition of value are all pre-printed on the form and the effective date is the date of inspection, as stated on the form.
How do relevant characteristics differ from lender to non-lender work?
While USPAP requires the appraiser to identify the relevant property characteristics, for most mortgage lending assignments some of the characteristics do not change much from one assignment to another. Location and the physical characteristics tend not to vary, but the real property interest will seldom be anything other than fee simple in non-lending work. Also, personal property is often insignificant, or required to be eliminated from the valuation. Likewise, fractional interests, physical segments, or partial holdings are virtually nonexistent in mainline residential mortgage lending.
What are assignment conditions?
The sixth item on the list, assignment conditions, includes hypothetical conditions and extraordinary assumptions. However, in the world of the Fannie Mae form, only three such conditions are allowed: new construction, repairs, and alterations. Also, the only extraordinary assumption is if the appraiser calls for an inspection of a condition or a potential deficiency that the appraiser assumes does not require alteration or repair. Additional hypothetical conditions or extraordinary assumptions are not permitted.
Assignment elements in non-lending work.
The key point here is that problem identification and scope of work development doesn’t vary much from one lending assignment to the next. Much of it, including the scope of work is preprinted on the form. However, the assignment elements in non-lending work can vary significantly from mortgage lending assignments. For example a tax appeal assignment would, in most states, have a different type and definition of value, an effective date other than the date of inspection, a different intended use and user(s), and different assignment conditions, i.e., laws and regulations that apply to the assignment and/or specific to the intended use.
Use the proper form to report your assignment results.
One of the top reasons appraisers get in trouble with State regulators is using the Fannie Mae/Freddie Mac forms for non-lending assignments. ACI has an entire series of forms that are great for non-lending assignments. If you are not familiar with the gPAR family of forms from ACI, you are missing a valued resource and means to maintain compliance with USPAP.
In closing, remember that developing non-lending work requires building a relationship and establishing your brand. Be patient, network yourself, and the work will come.