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Request for 2055 on Income Property

Discussion in 'Urgent - Help Needed' started by Tracy May, Mar 18, 2006.

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  1. Tracy May

    Tracy May New Member

    0
    Nov 2, 2005
    Professional Status:
    Licensed Appraiser
    State:
    Michigan
    I had a lender request a 2055 for an exterior inspeciton only. While performing the inspection, I noticed a seperate entrance to the upstairs. After interviewing the HO, I found out this was a duplex with the HO living in the downstairs and a tenant upstairs. There is no way I can do an exterior only appraisal on this home, correct? Because, I have to include all of the detail required by a the multi family form, right?
     
  2. Couch Potato

    Couch Potato Elite Member

    0
    Mar 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Many have expressed concern about doing any property on the new 2055 due to the certifications about knowledge of the condition of the interior, room counts etc. from sources independent of the transaction (home owner interview would not qualify). Even if the property would qualify for a 2055 as a SFR with accessory unit, if your sources for interior information did not reveal it was two units they are certainly not sufficient to satisfy the certifications of a 2055.
     
  3. Denis DeSaix

    Denis DeSaix Elite Member

    315
    May 16, 2005
    Professional Status:
    Certified General Appraiser
    State:
    California
    Tracy,

    There are a number of potential issues here. The first one I’d ask is “did you verify the subject is zoned SFR or multi-family” to begin with when you accepted the assignment?

    Past that, now that you are aware there is a significant discrepancy of what actually exists vs. what your data said existed, the 2055 cannot be completed; per Fannie, you need to tell your client (yes, the appraiser needs to tell the client) the assignment needs to be upgraded to a 1004. (I'm giving the same advice as Greg, here).

    As was pointed out in the past when I erroneously said an income property could be done on a 2055, ONLY SFRs can be done on the 2055 revised form.

    Time to upgrade the assignment and increase your fee!
     
  4. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    Just a wild guess here, but does the owner REALLY live there?

    Back to the original question, no this cannot be done on the 2055.
     
  5. Tracy May

    Tracy May New Member

    0
    Nov 2, 2005
    Professional Status:
    Licensed Appraiser
    State:
    Michigan
    Thank you! Yes, the owner lives there, but the other problem with this assignment, is that it has already been turned down by another appraiser because it is zoned single-family residential. Does that means this property is not "appraisalable"(probably not a real word)???

    I would assume since that it had a previous appraisal and they did purchase the house, there is a market value out there to be identified, I don't mind doing it.

    So, in my mind, I would have to check "illegal" for zoning and of course describe the situation, but would this affect the highest and best use?

    And there are only two MF comps within 20 miles, is there anyway I could compare with a SFR sale?
     
  6. Denis DeSaix

    Denis DeSaix Elite Member

    315
    May 16, 2005
    Professional Status:
    Certified General Appraiser
    State:
    California
    Tracy-

    First, kudos to you for using this forum to get information on a situation you are unsure about!

    Now, there really are some big issues here that you may not know or be familiar with. Just because the property is zoned SFR does not make its current use “illegal”. I would ask if you have actually read the zoning ordinance? In my market, many times, the zoning has primary, conditional and permitted uses. A two-unit improvement in a SFR zone could be:
    • Legal (with permits)- both units could be rented out.
    • Legal, non-conforming (grandfathered)- both units could be rented out, but restrictions might be in place that would prohibit the structures from being rebuilt “as-is” if damaged/destroyed. In other words, today it’s a 2-unit property, after a fire, it can only be a 1-unit property.
    • Illegal.
    • Not considered a 2-unit property. Some jurisdictions allow a second, ancillary unit to be built but the permit/code requires the owner of record to reside in one of the units; therefore (in my book), the property is not a residential income property because both units are not rentable at the same time.
    (I’m sure there are other scenarios, but these are the most common I find).

    Next, once you determine where the property “fits” in the above categories, you need to determine if the subject is at its Highest & Best Use (as improved), and if so, then regardless of the zoning, it still may fit within Fannie’s lending guidelines (maybe not your client’s, but Fannie’s are the minimum lending standards if you are using their form).

    From Fannie’s Handbook for Appraisers:
    “In general, Fannie Mae will not purchase or securitize a mortgage for a property with improvements that are not legally permissible. Under certain conditions, however, we will purchase or securitize mortgages for properties with an additional unit or apartment that is not in compliance with the neighborhood’s zoning classification.”
    (My highlight for emphasis)

    So, here’s my advice-
    • This property does not fit within a 2055 SOW.
    • You should call or visit the zoning regulators and research the property.
    • Do not necessarily “pass up” this assignment. If you haven’t dealt with this type of situation before, this may be your chance. However, if this is your first time, get some qualified/local advice from an experienced appraiser who knows that market. You can get some good (and sometimes not so good) advice here, but you should verify what you are going to do with someone who is experienced in that specific market to see if it is an appropriate approach.
    Good luck!!
     
  7. CANative

    CANative Elite Member

    380
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    The larger question at this point is: Do you have the competency to finish this assignment and if not, do you have a plan to gain competency prior to completion?

    Any property can be appraised as long as the appraiser is competent in that specific property type.
     
  8. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    Tracy, remember I warned you about bringing your thick skin to the forum. There's one of your first boxes that you walked into.:icon_rolleyes: Next, Denis, Greg and Greg gave some very sound advice. Your question can't be answered flatly due to the fact that we don't know what your laws, ordinances and zoning standards are of today. So, you need to find out if it's a legal non-conforming, illegal or what. I'm also sure that the lender (MB) already knew it was a 2-unit since there was probably income shown from the rental. I don't care how shocked :ohmy: they may appear on the phone. They KNEW! :new_ukliam2: They were just praying that you might not be so ethical and observant and that they could slide this one through. I would also not be surprised if they cancel the order once you inform them.

    Edit to add: BTW - I won't do the 2055 on the new forms! Only the old!
     
  9. Tracy May

    Tracy May New Member

    0
    Nov 2, 2005
    Professional Status:
    Licensed Appraiser
    State:
    Michigan
    Thanks, Denis, for the info. Good point, Greg, bringing up the competency rule. The competency rule requires that appraisers accept only that work that they have the experience necessary to perform, either individually, or, if needed, in association with others.

    The “experience necessary to perform, individually, or, if needed, in association with others”.

    Standard 1 - developing a real property appraisal, by identify the problem to be solved and the scope of work necessary (the stage I am currently at with this assignment) and correctly complete the research and analysis necessary to produce a CREDIBLE appraisal.
    Standard 2 - reporting the results of a real property appraisal, an appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.

    If an appraiser can adhere to standard 1 and standard 2, does that not make them "competent" to perform the assignment? Currently, I am developing the scope of work and performing research.

    I think that participation in this forum, at least for me, is helpful in developing methodologies to approach the problem, to check and double check my own opinions, and get constructive advice and from other appraisers. This is part of my research.

    In my experience thus far as an appraiser, I find almost every assignment is a learning experience. I plan to continue to perform the research necessary to complete the assignment until I run into an issue, I am not able to explain, analyze, resolve, or perform. Will that happen? Since, I am still in standard 1, defining the scope, and performing research, I'm not there yet.
     
  10. Tracy May

    Tracy May New Member

    0
    Nov 2, 2005
    Professional Status:
    Licensed Appraiser
    State:
    Michigan
    Thanks Otis, for the kind words. I love this forum! I learn from every response. I guess I am taking full advantage of any member that will discuss these issues with me. I can't tell you how much I appreciate all of your responses. I look forward to the day when I may have an answer instead of a question. So how many posts does it take before I'm not a newbie?
     
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