Can an appraiser complete a 1004D form (an Appraisal Update and/or Completion Report [Form 1004D]) if s/he did not do the original appraisal? A lot of appraisers ask this question. At first glance, you’d think the answer was “NO!”. How can appraiser-B update an appraisal that appraiser-A did six months ago? But before you answer, hold on a minute!
Yes, it is true a lot of lenders and clients no longer request we do these updates. Yet, some still do. And this blog is for appraisers who get requests to do them. So, what is the answer to the question? The short answer is “YES”, appraisers can update appraisals another appraiser did; but there are things to think about first. Since a lot of updates involve the purchase of a new house, the second appraiser will need a copy of the plans and specs to determine if what is on the site now is what is on the plans. Then, the appraiser will need a copy of the first appraisal and report. It is highly unlikely the second appraiser will get a copy of the first appraiser’s workfile. But the second appraiser must have a copy of the entire appraisal the first appraiser did. Without this, there is nothing to update.
For some more things to be aware of, look at the 1004D form itself. If you are doing an update, look at the first line. It asks the appraiser to determine if the value now has decreased from the value conclusion the first appraiser formed. In other words, to answer the question, the second appraiser must form a value opinion of the property now, to see if it has declined since then. That means the second appraiser must comply with Standard 1 in forming the updated value conclusion. And what about Standard 2. The client merely wants to know if the current value is less than the previous value. Yet, per either Standards Rule 2-2(a) or 2-2(b), are there not some requirements of what the second appraiser must communicate to the client (yes, there are)? Yet where is the second appraiser to report these on the 1004D form? It is possible to include them by reference, frankly (which this form accepts). But does the second appraiser typically do this?
And what about getting paid? To certify the current value is no less than the original value requires the appraiser to form two value opinions. That’s two appraisals; two entire appraisals. Remember, to agree with the first appraisal’s value conclusion is, by definition, to appraise the property. Indeed, to agree now with the value then is a retrospective appraisal (with all the baggage that carries). So, what this teaches us is that the client wants to underpay the appraiser for the appraisal update, while getting a retrospective value conclusion for free. How much sense does that make?
Now look at #2 under Appraiser’s Certification. It says, “I performed this appraisal update with accordance with the requirements of [USPAP]”. I’ve spoken with a number of USPAP experts, and they all assure me there are no appraisal update requirements in USPAP. This is because, under USPAP, there is no such thing as an appraisal update. There is merely an appraisal, whether it is retrospective, current, or prospective. So, this form asks us to Certify to something that does not exist. In its purest sense, this is misleading.
Now look at Certification of Completion, the 3rd question. “Have the improvements been completed in accordance with the requirements and conditions stated in the original appraisal report?” If the answer is “NO”, the report then requires the appraiser to “…describe any impact on the opinion of market value”. Unfortunately, it is not clear if this requirement to describe the impact refers to the original appraisal or the update appraisal. So, even when completing merely the Certification of Completion, there is the likelihood it, too will require a current appraisal of the property.
Think about it. If the client hired the appraiser to certify completion, that is what the appraiser bid on to get the job. Yet, it is possible the appraiser, to “…describe any impact on the opinion of market value”, would require a full-blown appraisal of the property after completion. Yet this is not what the appraiser bid on. So, where is the incentive? Does the appraiser bid on merely a completion certification, yet provide a full appraisal if that proves to be necessary? Or does the appraiser avoid losing (a lot of) money by merely stating there was no such impact?
Finally, notice the language of the Scope of Work for an Appraisal Update: “The appraiser must, at a minimum, concur with the original appraisal…”. Therefore, under this, the client sets the appraiser’s scope of work. Yet the Scope of Work Rule and Standard 2 both make it clear it is the appraiser who determines a credible scope of work in an appraisal assignment, not the client.
To repeat the question, then: Can appraiser-B update an appraisal appraiser-A originally did? The answer is clearly “YES”. A better question, however, is, does appraiser-B really want to? Given the potential pitfalls, such an assignment may be the one to skip
For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: