Hello, Can I please have a Letter of Transmittal?

In the fast-paced mortgage financing industry often an appraisal is rushed and once the value, condition, marketability and remaining economic life are confirmed, the appraisal may be shopped with different lenders. In some cases, the report will be sent to lender A and soon after, a second request is made for another lender, lender B.

Each appraisal firm has their own policies regarding letter of transmittals. It is up to each firm how they deal with letter of transmittal (LOT) requests and how much they will charge. Releasing a report to anybody has inherent risks and liabilities and it is up both the client and the appraisal firm whether an LOT is provided. When an appraiser signs a report with a specific lender and purpose, he/she is granting the user permission to use the report as intended which presumes the ability to litigate for any damages caused by decisions and actions resulting from the reports information and/or conclusions

Let me give you an example. Mortgage Broker Maggie orders an appraisal from Adlaw Appraisals for her client, Carl who owns a home on 929 Refinance Way, Vancouver. In this situation, Maggie and Carl agree that Carl will pay for the appraisal and legal fees. The appraisal is completed for Maggie (the client) and sent to Lender A for mortgage financing purposes.

Things have gone sideways with the financing. Carl is not happy with the rate and service provided by Maggie and now wants to use his mortgage broker friend Bob to complete the deal with an alternate Lender, Lender B.

  • Who can request an LOT on this file?
  • Only the client can request an LOT.
  • Who is the client?
  • The client is Maggie.

The appraisal company has a responsibility to their client to not use that report for any other purpose other than the purpose that was originally intended.

Three Common Situations

  1. Lender B calls appraiser – “Hi, I’m doing some financing for Carl on 929 Refinance Way. I love your appraisal, great work! Can you please send us an LOT made out to Lender B”.
  2. Appraiser “No sorry we cannot as you are not the client and we must receive instructions from our client. If we receive instructions from Maggie and we feel Comfortable, we will send an LOT over immediately. Please have Maggie contact us to make that request.
  1. Carl calls appraiser – “Hi, I’ve decided to go ahead with another broker and with a different lender. Can you please send us an LOT made out to Lender B”.
  2. Appraiser “No sorry we cannot as you are not the client and we must receive instructions from our client. If we receive instructions from Maggie and we feel Comfortable, we will send an LOT over immediately. Please have Maggie contact us to make that request.
  1. Bob the broker calls and ask “Hey Adlaw. Great Appraisal. You know your stuff! Can you email me a copy of the report made out to Lender B? I’d really appreciate it and I’ll bring you lots more business if you help us out. My client doesn’t want to pay for a 2nd appraisal and the financing fell through with Lender A. I have a private lender lined up, but they want a LOT in their name, Lender B. Thanks!”
  2. Appraiser “No sorry we cannot as you are not the client and we must receive instructions from our client. If we receive instructions from Maggie and we feel Comfortable, we will send a LOT over immediately. Please have Maggie contact us to make that request.

It is very important that during all the appraiser does not breach any privacy regulations. The appraiser should never seek out direction from the borrower (Carl), or any of the lenders as they are not the appraiser’s Client. If Rob calls asking if we did an appraisal for the client, we cannot discuss that is also a breach of privacy.

So, who actually owns the report? In contrast to what many homeowners think, it is NOT the one that pays for the appraisal but the one that engages the appraisal company that is the client. Nor is it the lender who is the client as they did not engage the appraiser in this example. It is important the appraiser remain impartial, unbiased and respect the confidentiality of the client-appraiser relationship.

In summary, an appraiser has to respect its client-appraiser relationship. An appraiser can (and has) been sued if a report is sent out without the client’s (Maggie) authorization. If an appraisal report is relied on by a lender without a proper LOT that lender has no recourse with the appraiser as they were never authorized to use the report. It can get confusing and there are many ways around potential roadblocks in the appraisal process. Adlaw Appraisal is here to work with you and to help you GET THINGS DONE!

Sincerely,

Adam Lawrenson, AACI, P. App

Owner Adlaw Appraisals Ltd.