1004 D Update on New Construction Unit

[Webbed Feet]

The 1004D is the worst piece of Bovine Essence devised by the GSE's except for the extremely poor MC form....but that's a discussion for another day.

Very Agreed

<......snip.....>

So, I'm in the camp which says 'do the analysis, keep a workfile and answer the question, plus state on the form what you did to arrive at the conclusion.' But don't include a bunch of new grids, or written commentary, or photos of comps, etc. Save all that junk for the 'new' appraisal assignment that should come in a few days.

Unfortunately, that plan still leaves ones report out of compliance with the USPAP. Not only is the second half of the 1004D now mislabeled as a "Summary Appraisal Update Report," when there really is no such thing as "Updating" an opinion of value and now no "Summary" report, but it doesn't comply with either of the now "Appraisal Report" or "Restricted Appraisal Report" reporting standards.

More, what I did not see clearly discussed, is Fannie's typical poor instructions failed to clarify that what Fannie really wants to know is did the original hypothetical value that considered the original hypothetical improvements now months later go down in value as if today the hypothetical improvements had lost value in the market place.

For a conforming loan Fannie is not going to lend on incomplete construction anyway. So Fannie is not looking to be told that the past hypothetical 100% completed home has a greater value than just the land and foundation today. I believe the assumption by Fannie is when the bottom half of the 1004D gets completed that it is being completed because the construction is 100% complete as per the plans and specs. Fannie under that expectation wants to know if the then value at least equals the now value with both reflecting a completed project.

 

[Mr Rex]

Unfortunately, that plan still leaves ones report out of compliance with the USPAP. Not only is the second half of the 1004D now mislabeled as a "Summary Appraisal Update Report," when there really is no such thing as "Updating" an opinion of value and now no "Summary" report, but it doesn't comply with either of the now "Appraisal Report" or "Restricted Appraisal Report" reporting standards.

More, what I did not see clearly discussed, is Fannie's typical poor instructions failed to clarify that what Fannie really wants to know is did the original hypothetical value that considered the original hypothetical improvements now months later go down in value as if today the hypothetical improvements had lost value in the market place.

For a conforming loan Fannie is not going to lend on incomplete construction anyway. So Fannie is not looking to be told that the past hypothetical 100% completed home has a greater value than just the land and foundation today. I believe the assumption by Fannie is when the bottom half of the 1004D gets completed that it is being completed because the construction is 100% complete as per the plans and specs. Fannie under that expectation wants to know if the then value at least equals the now value with both reflecting a completed project.

Where is this labeling? I'm afraid it doesn't show up on my copies.

Jack booted USPAP thugs have been known to have no mercy on Ducks who so willfully disseminate such easily debunked BS, on principle alone.

 

[VolcanoLvr]

The current GSE forms (including the 1004D - top black band) have the word 'Summary' on them. That in itself does not put them out of compliance with USPAP, because the forms also say "Appraisal Report." (NONE of the GSE forms are 100% USPAP compliant.....appraisers have to add to them to make them compliant.)

My opinion and recommendation for completing the TOP part of the blasted 1004D remains with Certification #4 on it. Just maintain a workfile, summarize your analysis, and check the box 'yes' or 'no' and turn in the blasted thing.

The next step is up to the lender....if the question answered is 'yes.'

The value stated on the original "Subject to completion" report is NOT a 'hypothetical value.' It is an Opinion of Market Value based on a Hypothetical Condition revealed in the comments in the Reconciliation Section on page 2, and perhaps elsewhere in the report if additional commentary is necessary.

The bottom part of the 1004D is NOT an appraisal. Seems to me the instructions on the form for completing this part are understandable to most appraisers.

 

[hastalavista]

My opinion and recommendation for completing the TOP part of the blasted 1004D remains with Certification #4 on it. Just maintain a workfile, summarize your analysis, and check the box 'yes' or 'no' and turn in the blasted thing.

This is a rare occasion where I disagree with you. :new_smile-l:

It is an appraisal report, in the full sense of what that means.
The prior report can be incorporated, but at a minimum, the new report requires:
A. A new market analysis
B. A discussion and summary of the value analysis (with reconciliation); the value analysis may or may not require a grid (I'd say it depends on how complex the original assignment was).
C. A new signed/dated certification.

In theory, the physical and legal characteristics of the subject might not have changed since the prior appraisal; incorporate the old report for those components.
The current market trend may not have changed, but the market is a different market (you cannot step in the same river twice, as they say); a new market analysis is necessary. I think the 1004MC would be sufficient for most assignments.
A new appraisal requires its own certification; the one-page 1004D does not have a USPAP compliant certification; appraisers need to include a new one that is specific to the new assignment.

It is my opinion that the complexity of the original assignment would be the benchmark to establish how much detail is required for the update.
A simple tract house in a large development with plenty of sales? Update the market analysis and narrate the sales that were used to support the value opinion (which is expressed as a relationship against the value in the prior report).
A not-so-simple assignment where there significant analysis required? Logic dictates that the same level of analysis is probably necessary for a new appraisal, (plan on putting in a grid into the report).

I would not rely on the pre-printed SOW and certification on the form for USPAP compliance. By itself, it is woefully inadequate.
I would not simply check a box without the necessary communication to support that conclusion.

Yes, I charge much more for an update than what most lenders typically pay (which I hear is between $100 and $150). I don't charge as much as the original report, since I can incorporate much of the original document into my new appraisal.

That's how I see it. :new_smile-l:

 

[gregb]

Agree with Denis. Oh, and Denis what about that pesky "Summary Appraisal" term that is embedded in the form? Do you have a comment that over-rides that description for the new appraisal report?

 

[hastalavista]

Do you have a comment that over-rides that description for the new appraisal report?

You know I do!

Even though the FAQs say it isn't necessary, I have a short sentence that states the report is consistent with SR2-2 "Appraisal Report" reporting format (or, something like that ).

 

[Webbed Feet]

Where is this labeling? I'm afraid it doesn't show up on my copies.

Jack booted USPAP thugs have been known to have no mercy on Ducks who so willfully disseminate such easily debunked BS, on principle alone.

I did indeed post "second half" when I should have posted "first half."

Here is a copy for you.

http://www.HUD.gov/local/nd/library/1004dappraisalform.pdf

There is no longer something called a Summary Appraisal and the term "Update" has always been a misnomer.

 

[VolcanoLvr]

One of the primary problems with the 1004D 'Update' ... which by the way, is the ******* child of the old "442" form - that # is on the blasted form also ... so it's heritage is in providing an 'Update' to the lender ............ is that appraisers loose sight of the big picture, and get bogged down in USPAP minutia.

Please, someone, send me the name of any appraiser who has ever been sanctioned by an appraisal board only for providing the 1004D/442 Form just the way it was designed by the beloved GSE's.

That's the only reason appraisers get their knickers in a knot over how much back-up material to provide with this portion of the form, when all the lender wants to know is IF THE ORIGINAL APPRAISED VALUE HAS DECLINED. That's all they care about. They don't give a moldy fruitcake about all the other material, photos, etc., that far too many appraisers think MUST be provided.

In deference to my fellow west coastie Denis, a complex assignment exists if it is that at the very beginning, and continues to be complex if a request is made to answer the question on the form. The appraiser has to do necessary research both at the front end with the original assignment, and at the back end when this form is in play. The fact that it is complex does not drive 'what' needs to be included when the 1004D form is submitted back to the lender.

Is this stupid form out of strict compliance with USPAP? Yes. Oh well, so be it. Thank the GSE's for caring about appraisers' responsibility.

I'll say this again ........... just complete the blasted form the way it's designed, and send it ONLY back to the client. Appraisers are not being paid enough to do a complete new appraisal report with associated exhibits, grids, etc., when answering 'yes' or 'no' is the only item in play. Either that, or just refuse to do this kind of assignment for the hundred bucks or so that is offered ..... and loose a client in the end.

Or just quit doing mortgage lending assignments all together. That way you won't have to wring your hands and fret about not fully complying with Std 2 when this issue arises within 4 months of completing the original appraisal.

(By the way ........ I do pay attention to USPAP for all other 'form' and private narrative assignments ......... but I don't get worked up about it when using the 1004D Update.)

Edit after submittal: [the **** word starts with a b and ends with a d, in case you're interested.]

 

[hastalavista]

............ is that appraisers loose sight of the big picture, and get bogged down in USPAP minutia....

Landsafe & BoA were fined $350 million because they accepted appraisals that failed to follow that USPAP minutia.

You can advise appraisers to sign the one-page form and send it off if you want.
I'll advise them to do what you'd say in any other situation: "If you are going to do an appraisal, you need to make sure you comply with the USPAP."
In the case of an update for a mortgage loan using the 1004D form, there is a lot of supplemental that needs to be added in order to be consistent with SR2-2; without that supplemental, the 1004D creates a non-USPAP compliant Appraisal Report. Period. :new_smile-l:

(I understand your frustration with the form and the GSEs, but I'm surprised at the advice :mellow

 

[CANative]

Quite an eruption from the Volcano. And all of it very bad advice. Sorry Volcano... just saying.

The top part of the 1004D is an appraisal. The value opinion is stated as a benchmark to a prior value. It has to comply with the same requirements as the first appraisal.