Limited Vs. Complete

[Doug in NC]

Can somebody help me get this clear in my head? I'm doing a relocation appraisal, it may not even matter what its called (since its not a federally-related transaction).

Anyway, here's the scenario. Client requests a "Limited" appraisal (no cost approach wanted). Home is less than 6 months old. My understanding is that the cost approach should be done and kept in the file, even though the client doesn't want it addressed in the appraisal report. If, on the other hand, the home were 20 years old, the cost approach would not be appropriate in my opinion; therefore, this is a "Complete" appraisal. The cost approach would not need to appear in the file or in the report, in this instance. The cost approach would not be typically applied in this instance, so the Departure Provision is not invoked. Is this correct?

 

[Fred]

"Is this correct?"
I would say, yes, but others will say no. As you say, "The cost approach would not be typically applied in this instance." Then again, there are some folks who apply the cost approach in all instances.

 

[Frederick R. Ruffell]

Doug you basically have it correct.
There are 2 questions you must answer when invoking departure.

1.)is it APPLICABLE (in this case "it" is the cost approach).
If yes then answer the 2nd question. if no then departure has not been invoked......therefore no departure = NOT Limited. (i.e. a condo, the cost approach is not applicable, but the appraisal is still COMPLETE)

2.) is it (in this case "it" is the cost approach) NECESSARY to produce a credible result?
If yes then departure is not permitted. If no then departure is permitted. Departure invoked = Limited appraisal. (i.e. a SFR that is 6 months old with 20 model match sales within 0.5 miles over the last month...Cost approach is applicable, but NOT necessary to produce a credible result, go ahead and depart.)

It should be noted that only some, not all, of the USPAP Standard Rules can be departed from.

 

[Restrain]

In an ERC, as with the 2055, an approach is SPECIFICALLY not set forth in the report. IMHO, that makes it a "Limited" report. This is for a specific client. HOWEVER, this is not an appraisal for a federally funded lending institution, so departure is not the issue it would be for a loan.


Roger

 

[Dave Henry]

Roger: I hate to disgree, but the form does not dictate whether it is Complete or Limited, that is something decided before doing the assignment, if an approach is not applicable, no departure, therefore a complete appraisal. An ERC and a 2055 can be complete appraisals, especially when the cost approach is not applicable....which is most of the time IMNSHO. You might want to review the Scope of Work sections of USPAP.

Dave