As the market has cooled, it’s gotten harder to estimate the value of property. Clients run the very real risk of over paying to secure a home if they are led by their emotions rather than the facts, and mortgage brokers have a responsibility to step in and prevent this from happening.
As a result, more brokers are realizing how partnering with a qualified appraiser can help their clients avoid any nasty financial surprises. But it’s not always that simple, especially when an appraisal has been completed but the borrower is then turned down by their first-choice lender.
Imagine the scenario: the mortgage broker, the party who originally requested the appraisal, asks an appraiser for a reliance letter in relation to a property recently appraised. The broker also says that she wants the appraiser to make reference to the increased market value created by additional lots having been developed, thus adding lots to the residential sub-division. “Please just indicate the higher value in the reliance report for the extra lots developed,” the broker said.
So, what is an appraiser likely to do when that situation arises? The Appraisal Institute of Canada outlines the steps that are taken by their AIC Members:
- The first step of the appraiser is to get an understanding of the file and what has transpired since they completed the report. Where passage of time is a consideration, the appraiser should ask why the property is taking so long to get financed.
- The appraiser will ask the broker to provide all relevant information regarding the changed scope of the development. New terms will alter the scope of the original assignment and would constitute a new assignment… therefore, a new report.
- If the appraiser’s client consents to the release of the reliance letter, but the appraiser is not comfortable with the circumstances surrounding the matter, as the author and the person liable for the report, the appraiser has the right to decline the request.
- The appraiser is recommended to document all exchanges (verbal and written) in their file (date and time-stamped), in the event that an unauthorized third party decides to rely on their report.