Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John revisits everyone’s favorite topic: Scope Of Work.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays Tuesdays, one of the smartest guys I know. …Jonathan Miller

I recently bid on a large assignment for a major lender. Lets say the collateral for the loan is mixed use bldg with 150+ tenants. Although the solicitation for a “bid” (sorrycan’t use that word in this context without cringing) was via a simple email, being mindful of our new scope of work rules, I asked my client the nature of the leases in order to determine whether a direct cap analysis would be appropriate or whether a discounted cash flow model was warranted. He hadn’t seen the leases but indicated that a DCF analysis should be included. Also, an accelerated delivery was being requested.

The results: there was a 300% range in bids, with the low fee being more like what you might expect for a walk-up apartment building. This to me is a glaring example of how these new USPAP “scope of work” rules are going unheeded, and the need for more communication upfront. With such a range, isn’t it clear that these appraisers are contemplating a very different scope of work. Or is the appraiser with the low bid just pricing out appraisal services based on the minimum wage?

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