appraising, Real Estate, uspap

What are the Differences Between “Assignment Conditions” and “Scope of Work”?

confusion

For some unknown reason in our real estate industry, there is a huge misconception about the term “Scope of Work”. This issue is not just with AMCs, Realtors®, Lenders and Clients, but with Appraisers, and possibly Appraiser Regulatory Officials, as well. Recently, we’ve started hearing the term “scope creep” more and more; and just to let you know, there is no such term in appraising. Some appraisers might say the definition of “scope creep” is when their Clients come back for more and more after the original appraisal report was submitted upon completion of the assignment. This article will help you to understand the differences between Assignment Conditions and the Scope of Work for an assignment, and what a Client can justifiably request from you (the appraiser) after the submission of the original appraisal report. Let’s start with what happens chronologically.

First, an “Assignment” is defined as, “(1) an agreement between an appraiser and a client to provide a valuation service …” (Source: USPAP 2014-2015, Page U-1). “Assignment Conditions” are often thought of as being the conditions that a Client sets forth (generally in the form of an appraisal request or appraisal order) in regards to their requirements for the appraisal services they are requesting. In fact, as with any other type of agreement, assignment conditions set forth in an appraisal assignment agreement should be those which are mutually agreed upon by both parties to the agreement. Many times, an appraisal request will have pages upon pages of Client proposed “assignment conditions”. There is nothing wrong with that at all. You can either accept the appraisal assignment or decline it. Before accepting an appraisal assignment, you should always carefully read the proposed assignment agreement and be sure that you understand and agree with all the conditions of that agreement. As a professional appraiser, you must decline an assignment that is subject to unacceptable assignment conditions (Source: USPAP 2014-2015, AO-19 and FAQs). There is nothing that states you must accept an appraisal assignment. It is your choice.

Secondly, “Scope of Work” is defined as “the type and extent of research and analyses in an appraisal or review assignment” (Source: USPAP 2014-2015, Page U-4). Sometimes we receive fee and turntime quote requests before we receive an actual assignment. This is often one of the first steps in determining the “Scope of Work”. We ALWAYS should do preliminary research on a property before we accept an assignment. We should always: check to see if we have performed any services (appraisal or otherwise) regarding the subject property within the three-year period immediately preceding acceptance of the assignment; search the MLS or other source for current listings and prior sales of the subject; examine the tax records and any photos of the subject; examine the subject’s recorded deeds; and view aerial views of the subject property to determine if there are any other factors off-site (externalities) that may need further research because they may possibly impact or affect the subject negatively. From this initial research, we can identify some of the elements needed to determine the “Scope of Work” for the assignment. ONLY THE APPRAISER can determine the Scope of Work for an assignment, NOT THE CLIENT. Once you have completed the initial research and you have obtained enough information for an initial Scope of Work decision, you THEN can quote the appropriate fee and turntime based on the complexity of the assignment. Obviously, if an assignment is complex and will need additional time for research and analysis, an increased fee is warranted. Fee negotiations should be a part of your fee and turntime quote process. At the point when you receive the actual order (assignment), then you can accept the assignment (with all of its “Assignment Conditions” and with the appropriate fee and turntime you provided) or decline it.

Thirdly, this is where some Clients and appraisers get confused. Once the original appraisal report is transmitted to the Client, they can ONLY ask for any or all of these 3 items:

  1. Consider additional and specific comparable sales as provided via the Lender/Client.
  2. Provide further detail, substantiation, or explanation for the real estate appraiser’s value conclusion, through the registrant’s established dispute process.
  3. Correct errors in the real estate appraisal report.

Any other requests from the Client other than what is above cannot be addressed in that appraisal. Remember to always state in your addendum the date of any changes and the items that were changed; and change the signature date to the new signature date which is the date you made the changes to the appraisal report. Also, if it is necessary to re-inspect the subject property, be certain that the effective date of the appraisal is changed accordingly and that you comply with the USPAP requirement to report prior services.

If you have any questions or need assistance, please contact any member of the NCPAC Peer Assistance & Review Committee by clicking the link below. The link below will take you to the NCPAC Peer Assistance & Review Committee page on the NCPAC website:

Peer Assistance & Review Committee Members

Sign image credit: ArtsHacker.com.

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