Realtors, remember the last time your buyer switched lenders at the last minute? I bet you were hoping you could just use the old appraisal, right? Lenders, how many times have you reached out to the appraiser and asked them to change the name on their appraisal from the original lender to the new?
This FAQ impacts lenders, homeowners, and Realtors, and there’s much confusion from all parties, so I hope to give some clarity on the question:
Can an appraisal be readdressed to a new client?
To answer this question, let’s consider the following example:
The home at 1416 Maple Drive was for sale. Mr. & Mrs. Smith wanted to buy the home, and began working with their lender, All-American Mortgage Company. All-American Mortgage hired an appraiser to complete an appraisal report for the purchase of the home, and the appraisal was completed and delivered to the mortgage company a couple of weeks later. Just a few days after, Mr. & Mrs. Smith decided they wanted to switch lenders. Eagle Mortgage was offering a ¼ point lower on the interest rate, and $1,000 less in closing costs! What a deal! So they went through the process again with Eagle Mortgage and the processor at the new mortgage company called up the original appraiser.
The phone call went something like this, “Hi Mr. Appraiser, I’m with Eagle Mortgage Company, and we’re the new lender for Mr. & Mrs. Smith, who are purchasing the home at 1416 Maple Drive. You just did an appraisal on it a few weeks ago for another lender, and we just need you to change the name on the appraisal report and email it right back to us. Thanks!”
Now, much to the surprise of lenders, homeowners, and Realtors alike, the answer to our FAQ is “no”. And I’ll tell you why next.
Per USPAP, appraisals cannot be readdressed to another party.
The Uniform Standard of Professional Appraisal Practice (USPAP) states that once a report has been prepared for a named client(s) and any other identified intended users and for an identified intended use, the appraiser cannot “readdress” (transfer) the report to another party.
So if an appraiser can’t readdress a report, how can we still meet our client’s needs? USPAP says the answer is with a new assignment. As an appraiser, I can begin a new relationship with Eagle Mortgage Company and appraise the property for them. With a new report as part of a new assignment, their name is on the report, and everything is just the way they need it.
It’s important to keep in mind that I have to be careful in my new appraisal not to disclose any information previously deemed confidential, unless I have the first client’s permission.
“So are you saying you have to complete an entirely new, full appraisal with another inspection”? This is usually the first question asked after explaining this process.
Again, the answer is “no.” Or at least “not always.”
According to an article by The Appraisal Institute, “In many such cases there may be little additional work in performing a new assignment for another client. Perhaps when all is said and done you will be providing virtually the same data and analysis, and even the same value conclusion…”
So what’s an appraiser…and a lender…and a Realtor…and a homeowner to do?
Let’s try & land this plane, shall we? If you’re a lender, what are your options? How can you get this deal closed for your buyer or homeowner? It’s going to come down to a conversation between you and the appraiser. The two of you need to talk with each other and determine who the client is, the intended user, intended use, date of value, scope of work, etc. It may be that the home was just appraised two weeks ago. The new lender is fine with the comparable sales and analyses, and everything else in the original report. And, they are also fine with the date of value from two weeks ago. They don’t need a new inspection, so they simply work out an agreement for a new assignment that does not involve a re-inspection of the property.
The cost here is usually up to the appraiser, but likely will be minimal as long as there is only minimal work to be done. In our experience homeowners who change lenders do so very soon after the original appraisal was completed. Therefore, it’s not likely that much has changed in the market or with the property. And most of our clients are 100% ok with us simply working up a new assignment, relying on the original date of value, and naming them as the client. We do charge a fee for this, as we’re still doing all of our analyses we would usually do. But this helps our clients get their name on the report, and gets the homeowners to the closing table with little additional money out of their pockets.
If the new lender does want the appraiser to re-visit the property, the fee will be higher, but usually we try to give a little discount, especially if we had just been to the property. Again, communication between the lender and appraiser is key.
If you have a question you’d like us to feature, email me at email@example.com
For more information on this and other topics related to the appraisal process, check out our Guide To Appraisals set of E-Books at https://riverfrontappraisals.com/guides/.