An appraisal report is the final output of the assignment - by Allan Cohen

Who’s The Intended User sounds too much like Who’s On First. Poor Costello! If you hand him an appraisal report for his home, or possibly any property, and ask him, “Who’s report is this,” he just might say it’s his report. It’s his house; it must be his report. Not necessarily.

Like the manager of the baseball team that prepares the line up prior to the game, appraisers specify users of their appraisals, identify their client, and specifically state intended uses and users of their reports as part of accepting the assignment. These are identified prior to commencing our work, and yet, confusion reigns.

An appraisal report is the final output of the assignment. The report is the results. It’s the culmination of the appraiser’s supported opinion of value and can be written or verbal. The appraisal report documents facets of the appraisal assignment with a description of the property, steps taken in the appraisal process, and equally important, identification of the appraiser’s client and the appraiser’s expectation of the client’s use of the appraisal report. 

While this sounds straight forward, confusion arises when additional recipients of the report make themselves a participant. Receivers of an appraisal report often think possession grants power and ability to use report despite not being identified up front as the user nor having the appraisal be prepared specifically for them. A common example is the appraisal of a single-family home for lending purposes. Appraiser, bank, and AMC have a clear contractual relationship. Homeowners benefit from the appraisal of their property, but they are an outside party that wrongly assumes a say in the value, composition of the report, and use of the report. Homeowners receive a copy of the report, but this does not grant a widening of rights. Possession of the report does not allow the homeowner to take the report to other lenders in hopes of obtaining different mortgage terms, and they do not have the automatic right to submit the appraisal in court proceedings, such as probate filings. Further, while the homeowner may have knowledge of the property, as the third party or non-client, they do not have a say in the content of the report. If the appraiser makes an error in the appraisal process or description of the property, the homeowner may go the client (in this case, the bank) and ask for the error to be changed, especially if the error impacts value and the outcome of the assignment, but otherwise, the report is the work product of the appraiser as prepared for their client, which is lender. 

Steve Sousa, MBREA’s executive vice president, recently asked local experts for guidance on intended users. Renowned MBREA appraisal instructor Steve Elliot advised looking to Uniform Standards of Professional Appraisal Practice (USPAP) Frequently Asked Questions, Question 286, Pages 346-348. In this section of USPAP, intended user is defined, accompanied with instruction that the appraiser “is responsible for specifying the parties he or she is identifying as intended users.” MBREA stresses to all appraisers that they clarify intended users, intended use, and client at the outset of each assignment. Appraisal Institute does the same, and like MBREA, provides extensive writings on this subject to avoid misconceptions.

MBREA’s government affairs committee works toward removing this problem by clarifying this issue through legislation with House Bill 1975, An Act defining client, intended use and intended user in real property appraisal assignments and reports. Appraisers cannot expect every client to read USPAP, just as we cannot expect unintended users to refrain from trying to become an intended user after the fact. So we’ve gone to the community for information, received examples of unintended users asserting themselves, and presented to the state legislation a bill that adopts language which combines with USPAP to allay misuse of appraisals and deter actions by unintended users. 

MBREA reached out to members and other appraisers and received feedback with specific instances where unintended users impacted appraisers by requesting re-addressing appraisals, demanding extra report copies to pass around, raising complaints for lack of cooperation when informed they are not the client, and other surprise issues. MBREA recognizes consumers’ rights but seeks balance, adherence to USPAP, and applications of contract laws that differentiate between intended users and unintended users. 

Until the state legislature passes HB 1975, appraisers are urged to boldly state at the outset of each assignment that each appraisal has limited users and uses. Identify with specific detail who the client is at the outset and who the intended user (or users) is for your report. USPAP requires these steps. MBREA says to emphasize these steps! Know the FAQ’s and Advisory Opinions, especially the aforementioned FAQ 286, and Advisory Opinion 36, which opines possession of an appraisal report by a third party does not make the receiver the client or intended user. In other words, if your client shares or forwards your report, the recipient is not your new client. 

MBREA is working on clarifying this problem for all appraisers. USPAP covers this theme with standards, advisory opinions and FAQ. MBREA is going further. We presented a bill to the Massachusetts Legislature with sponsorship by representative Edward Coppinger of Boston/Brookline/10th Suffolk district and co-sponsored by rep. Thomas Calter of Kingston/12th Plymouth, rep. David Linsky of Natick/5th Middlesex, and rep. David Viera of Fairhaven/New Bedford/3rd Barnstable. The bill to clarify users is House Bill No. 1975.

The Joint Committee on Consumer Protection and Professional Licensure will soon take up this bill. Testimony by MBREA’s executive director Steve Sousa, president Marcus Johnson, and other members will be given this session. Let me know your thoughts. I will include them in my testimony if you cannot attend.

Allan Cohen is a certified general real estate appraiser and assistant assessor for the city of Newton, Mass.