Who is Your client?
That may seem like a simple question to answer, but it is a continuing problem that has not gone away from generation to generation. Most appraisers generally assume the person requesting the appraisal is their client and many times that may be true, but not always. As a matter of fact, it has become a huge problem in the industry, especially over the past twenty years. This is especially true with the advent of appraisal management companies and mortgage underwriters. Appraisers must know who their client is before proceeding with the appraisal. You may get a call to do an appraisal directly from a lender, but those days a fast becoming a rarity. Banks are under pressure from the Fed to use appraisal management companies as a third party between the bank and the appraiser. Consequently, the appraiser’s client for all intents and purposes is the appraisal management company, since the appraiser must send the appraisal to the appraisal management company upon completion along with his bill for services rendered. In this case the appraisal management company’s client is the bank or lender and the appraiser’s client is the appraisal management company. This is the current trend directed by the FDIC and Federal Regulators. This has prompted numerous appraisal firms to turn their attention to becoming appraisal management companies. Some banks and lenders have opted to establish their own management system in order to have greater control on the lending process. Whether any of these new methods are a good idea only time will tell. As always dishonesty will find it’s way in, no matter what attempts are made to keep it out. Greed drives people to destruction.
In the beginning of my career, there was little need on the part of the appraiser to question who his client would be. Today it is much more complicated to determine. Yesterday doesn’t matter much today, since client relationships are much more difficult to determine. We now have to deal with banks, mortgage companies and appraisal management companies that are hired by lenders to order and review appraisals. Banks were our primary clients for many years, but now most of them use appraisal management companies. Consequently, our client on a residential loan is no longer the bank, but the appraisal management company. The commercial side of the business remains fixated on the lender as client; however, that may also change to a third party appraisal management company in the near future. Much of the commercial loans are processed through an internal underwriter, who may also order and review the appraisal. In short clients can be just about anyone and it is incumbent on the appraiser to determine who that might be. You should never accept an assignment until you know who your client is, how you are being paid, when you can expect payment and who is responsible to pay. Sometimes the party paying your fee is not your client. You need to ask the person contacting you several questions before accepting the assignment.
- What is the address of the property?
- Who owns the property?
- What is the purpose of the appraisal?
- What type of report is needed?
- When is the report due?
- Who is paying for the appraisal?
- Who is my client?
- To whom is the appraisal to be addressed?
- Where do I send the appraisal?
- How should I send the report, mail, email, etc?
- Who should I contact for access to the property?
- To whom should questions be directed?
If the client is an appraisal management company, then most of these questions will be answered in the appraisal request form received from the management company delivered to your email inbox.
Some of the smaller banks are not using an appraisal management company, but are handling the entire process in house. They may be using an appraisal request form, but it may not provide the details needed to answer all your questions. Your client will generally be the banks underwriter, who will negotiate the fee, turn time, place the order, review the completed report and order payment from the lender. The intention of the FED is to have a third party handle the entire appraisal function between the loan officer and the appraiser. This is designed to eliminate loan officers from being able to coerce appraisers into higher values to make the loan. You will need to inform the client that your fee is not contingent on value. Regardless, you must be paid your fee. I would suggest collecting your fee upfront before proceeding with the assignment, especially with private clients; such as businesses and individuals. This is not uncommon in the industry and removes any chance of fraudulent attempts to hold your fee back until you produce a product that satisfies an unscrupulous lender, business or individual. A written contract with the appropriate person will alleviate much of the collection problems and any possible misunderstanding. Therefore, you need to become a very good business man, as well as, a very good appraiser and keep very accurate records. Accurate record keeping is required by USPAP, it is just very good business practice.