Frequently Asked Commerial Appraisal Questions: Updates and Reappraisals
Martens Appraisal typically performs over 600 appraisal reports per year and we are often confronted with a situation where we performed a report for one client and now another party is looking to get their own opinion of value on the property.
This request is usually for us to “readdress” the report to the new client. Or we may be asked to “recertify the value” for the new client. Another request we get is to “update” a report we have done previously for a new client.
There is a lot going on here, so the first step in this process is to figure out what it is you need. Terms like “reappraisal” may mean one thing to you, and another to our team of state-certified appraisers.
If you are confused about what you need, we suggest you start by having a conversion with our Chief Operating Officer Andrew Braun. He oversees the bidding process, and for over 10 years has been answering client questions about what the options are when it comes to appraisals.
We took a stab at answering some other frequently asked questions on this topic.
Can you tell me what the property appraised for the last time you did it?
Short answer: No. The Confidentiality Section of the USPAP ethics rule and the Appraisal Institute Code of Professional Ethics state that an appraiser must not disclose confidential information or assignment results to anyone other than the client and persons specifically authorized by the client.
This means we can’t tell you the final opinion of value, highest and best use conclusions or any indication of value from any of the approaches used.
Can we accept a new assignment appraising the same property for a new client?
We can, but we cannot disclose any confidential information contained in the original report without the permission of the original client.
If there is confidential information that we would need to disclose, but the previous client will not let us, we would have to decline the assignment.
Can I get this appraisal updated?
There is no official term in USPAP for an appraisal “update” (or “reappraisal”). While these terms may get thrown around they mean different things to different people. When it comes to USPAP, requests for “updates” and “reappraisals” are new assignments.
When we get a request for an “update”, we are assuming that you want to know the value of the property as of today. The appraisal in the file is only going to give the value as of the date of the previous appraisal.
Can you readdress or change the name of the client on this report to our bank?
We are not able to “readdress” a report to another client for a couple of reasons. First off, changing the name of the client on the report and then giving the “readdressed” report to another client does not change the first appraiser-client relationship, nor can a new appraiser-client relationship be established without some sort of engagement letter.
Secondly, because the “readdressing” of the report does not change the appraiser-client relationship and so “readdressing” the report could violate our confidentiality obligations with the initial client.
Our only option in this situation would be to perform a new assignment for a new client and you would get a new report.
There is one additional note here for lenders. The appraisal requirements of FIRREA allow a regulated lender to use a report that was prepared for another “financial services institution”. This means that Lender 2 can use a report that was prepared for Lender 1, even though Lender 1 shows as client on the report. Lender 2 does not have to be named as client, according to the FIRREA requirements. However, usually Lender 2 will “want their name on the report”. Why? Because Lender 2 wants the appraiser-client relationship, and all the rights and obligations that come along with it, to be between them and the appraiser. What does this mean? It means that as far as the appraiser is concerned, this is a new assignment.
Can I reassign this report to another party?
You can, we don’t need to be involved. For our purposes, “reassigning” means signing over one’s rights and obligations with regard to the report to another party.
When we prepare and deliver a report for Client 1, that report is no longer ours to “give” or assign to anyone else. Client 1 could assign their interests in their report to Client 2, but we would not be involved in that process.
Can you recertify the value of this report?
“Recertify” is another term that gets thrown out there but there is confusion on the meaning. Many times when a client asks us to “recertify” a report they are wanting us to “reassign”, “readdress” or “update” a report.
“Re-certification of value” as defined by Advisory Opinion 3 of USPAP is an assignment in which the appraiser determines whether or not the conditions of an appraisal have been met. This is not really an appraisal at all, because it has nothing to do with developing an opinion of value.
Can you provide a letter of some sort that allows us to rely on the report?
No. This used to be allowed but is no longer an acceptable practice.