This is Diana, with ABC-The Appraiser’s Business Companion. In the building of an appraisal, dates are a big deal; have you ever wondered why? For the obvious beginning of this answer here’s another foundational question, do you want to leave your effective date open? Most would say “of course not”; which brings me back to the same question; why not? Here’s another question, what does current, retrospective and prospective have to do with the effective date?
We have a date of engagement (not the forever until we die, just until we finish up the appraisal); there was an offer to employ our services and there was an acceptance by the appraiser to give that service, the execution of the service begins. The executed date will not be when we were offered to appraise, or when we accepted to do the appraisal, it will be when we report our findings. That is the executed date of our completed contract for engagement. Date of engagement is not required to be reported in the Appraisal Report, but the date of the Appraisal Report submitted to the client as complete is the executed date. Sometimes that date moves as the client or others who have influenced the client, will ask for revisions. Each time we make that decision to respond to those requests we have a new communication, i.e. a new Appraisal Report Date that signifies, through our signed certification, the date of the latest communicated information related to our engaged service. One of the larger problems appraisers will have is when they fail to maintain a copy of their past rejected appraisal reports. Rather than begin a new file they will go into their software with the same file number, revise as directed and add a new signature date but in doing so they wipe out their history (BIG PROBLEM). Our USPAP tells us the importance of keeping records and these past reports are part of what is expected to be retained.
Does USPAP require us to label the appraisal albeit Current, Retrospective or Prospective? No, it doesn’t but, there is an Advisory Opinion #34 that gives excellent direction. Note the excerpt “Two dates are essential to an appraisal report. Standards Rules 2-2(a)(vi) and (b)(vi), 6-8(g), 8-2(a)(vi) and 9 (b)(vi) require that each appraisal report state the effective date of the appraisal and the date of the report. The date of the report indicates the perspective from which the appraiser is examining the market. The effective date of the appraisal establishes the context for the value opinion. Three categories of effective dates – retrospective, current, or prospective – may be used, according to the intended use of the appraisal assignment.” There you have it, the effective date has a category. You’re not required to label the category but you are required to make it clear the perspective the examination of the market is taking place.
What’s the big deal? It has to do with the diligence of research and analysis done during the time of the development. It’s a snapshot of the market and how it influences the demand and value of the subject. It involves the communication details. If for example, the turn around time was tight and you weren’t as diligent as you’d normally be in an assignment. Now the revision requests come in and you’re having to go back and try to present what should have been presented the first time. You turn in a revised report, get all clean and compliant and the value doesn’t support the pending price. Now the appraiser is turned into the state board; not with the clean report but with the original. Where’s the defense without the evidence? Did you know the state enforcement agencies will ask for a copy of all appraisal reports performed for the client (that includes those not yet accepted until the revisions have been made).
Consider all of those who are doing disaster appraisal assignments. They are often asked to perform in one assignment a before the disaster (retrospective) and subject to repairs (current under a hypothetical condition) and at a future date once the repairs are complete, a prospective appraisal (not a hypothetical but definitely an extraordinary assumption). In these cases, the 1004 form won’t work; the GPAR form will satisfy some of the information that needs to be communicated but at this point how do you describe the improvements on page 1, including the neighborhood and not have to do it three times?
Dates matter, verbiage matters, how the research was conducted and the analyses were reconciled matters. When we build our appraisal, and communicate our results in the Appraisal Report we need to have a clear roadmap drawn for the client and other intended users.
This is Diana Jacob and you’ve just had a tip from ABC-The Appraiser’s Business Companion.