By: D. Scott Murphy, CEO D. S. Murphy and Associates
At D.S. Murphy, our mission is “to build relationships by providing the most reliable services that: homeowners can understand and trust, agents will recommend to their clients, and lenders feel confident utilizing.” One will notice that the mission statement starts with a reference to “relationships.” Why are relationships in this industry so important? What is our role in each relationship? It is important for all parties to understand the fabric of these connections.
The first issue is that of client relationship. Most agents understand the concept of agency or client relationship. An agent has different responsibilities and duties with their client depending on the agreed upon agency. These duties are governed by state and federal licensing laws and carry steep penalties if they are not closely adhered to. Appraisers are also licensed and bound by state and federal laws including USPAP (Uniform Standards of Professional Appraisal Practice). These laws outline quite clearly who the appraiser’s client is and who the intended users of our appraisal reports are. In a typical mortgage appraisal, our client is not the buyer. Most will argue that the buyer is our client since they paid for the appraisal report. This is not technically correct. Our client is the lender who has engaged us to perform and appraisal for their sole use. The borrower is simply reimbursing the lender for their due diligence expenses which are typically an appraisal and a credit report. As a matter of fact, federal OCC (Office of the Controller of Currency) laws require that only the lender can engage the appraiser in a mortgage transaction. In other words, the borrower cannot go out and hire an appraiser and then turn that report over to the lender.
Lenders are required by law to provide the borrower with a copy of all valuations completed by the lender in procuring their loan. This includes an appraisal, an appraisal review or automated valuation. The borrower is required to be given this information 3 days prior to closing.
When a homeowner contacts an appraiser to order an appraisal for their personal use such as prelisting, estate, divorce – they are then the appraiser’s client. The appraiser is required to keep all information strictly confidential and can only share it with their client – the homeowner in this case.
We encourage everyone involved with real estate to gain a full understanding of the valuation process. D. S. Murphy & Associates teaches a number of appraisal related continuing education classes. Please visit our website at www.dsmurphy.com for more information on classes and general appraisal topics.