Extraction Method

[CANative]

Cert 4 doesn't say what you are saying. Neither does the FNMA Selling Guide.

 

[alebrewer]

Cert 4 doesn't say what you are saying. Neither does the FNMA Selling Guide.

Cert #4 says, and I quote: "I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison approach to value."

What did you think it said?

 

[alebrewer]

Oh, wait, it further says, "I further certify that I considered the cost and income approaches to value but did not develop them, unless otherwise indicated in this report."

Nowhere in that cert does it say that the appraiser's opinion of market value was based on, either wholely or partially, the cost approach to value...

 

[George Hatch]

you know, I made the statement once, when teaching CE, that the cost approach was meaningless - and was instantly chided by a gentleman who worked for the Texas Land Board, who asked me, "how would you propose appraising a state prison?" To which I responded - "Ok - maybe it is applicable in certain situations." Still don't think it has any merit for a residential home appraisal, 1004 or not. What you're doing sounds like much more than a residential assignment, though...

What's appropriate for any assignment will always depend in part on what the user expectations are. Hence the "assignment conditions" element of the SOWR. I don't appraise in the GSE lanes at all. IMO the reasonable answer is not always (by any means), but also not that rare. Where I will completely agree with you is that the 60-second version of the Cost Approach that a lot of appraisers stuff into their 1004s are meaningless. No mode of analysis works when the appraiser doesn't work the analysis.

Most of the SFR appraisals I've performed have been for portfolio lenders, and a large percentage of those were FRTs involving proposed construction or major remodels where both "As Is" and "subject to completion" valuation scenarios are hardwired into the assignment. Moreover, I am tasked to provide opinions per the definition of Insurable Value on some of my assignments across all property types other than land. You can't do one of those without getting into a Cost Approach analysis, either.

I've had the experience many times of completing a cost approach on a single pass that's completely independent of the Sales Comparison Approach but resulted in a similar conclusion nonetheless, simply by working the process and using the data as presented and without any additional iterations. And that includes appraising existing buildings in various stages of physical condition.

I have also occasionally used a Cost Approach analysis in order to demonstrate that a proposed development (including certain SFR builds) was not financially feasible, and other times in support of my HBU analysis. So the effective utility of a Cost Approach isn't limited to supporting a value conclusion developed in the Sales Comparison.

 

[CANative]

You said we are "certifying" that we gave no weight (dumb term I never use, FWIW) when that may or may not be the case. This is pre-printed stuff on a Fannie Form. The Selling Guide states:

"
Fannie Mae does not require the cost approach to value except for the valuation of manufactured homes. However, USPAP
requires the appraiser to develop and report the result of any approach to value that is necessary for credible assignment
results. For example, when appraising proposed or newly constructed properties, if the appraiser believes the cost approach
is necessary for credible assignment results, then the cost approach must be provided. Appraisals that rely solely on the
cost approach as an indicator of market value are not acceptable."

A GSE cannot trump USPAP.

 

[alebrewer]

You said we are "certifying" that we gave no weight (dumb term I never use, FWIW) when that may or may not be the case. This is pre-printed stuff on a Fannie Form. The Selling Guide states:

"
Fannie Mae does not require the cost approach to value except for the valuation of manufactured homes. However, USPAP
requires the appraiser to develop and report the result of any approach to value that is necessary for credible assignment
results. For example, when appraising proposed or newly constructed properties, if the appraiser believes the cost approach
is necessary for credible assignment results, then the cost approach must be provided. Appraisals that rely solely on the
cost approach as an indicator of market value are not acceptable."

A GSE cannot trump USPAP.

So, back to logic 101, if you certify that you placed 100% of your weight on the sales comparison approach, by logical conclusion, you're certifying that you placed 0% of the weight on the cost approach. How do you not get that? And, by the way, the Selling Guide does not trump your signed certification, so it really doesn't matter what the Selling Guide says - you're not signing the Selling Guide - you're signing the certification.

 

[djd09]

These same posters who circumvent Cert 4 , have no problems calling an appraiser a liar , when, they do not take an original comp photos.

 

[George Hatch]

IMO the forms work for the appraiser, not the other way around. I have zero hesitation to contradict a form's verbiage if/when the situation dictates it.

 

[alebrewer]

IMO the forms work for the appraiser, not the other way around. I have zero hesitation to contradict a form's verbiage if/when the situation dictates it.

In general, I'd agree. However, when you accept an assignment, and part of the SOW is that you report on the 1004, you're accepting an assignment condition that you will develop your opinion of value based only on the sales comparison approach. If that is an assignment condition that you believe will prevent you from producing credible results, you must recuse yourself from that assignment.

 

[CANative]

These same posters who circumvent Cert 4 , have no problems calling an appraiser a liar , when, they do not take an original comp photos.

Another stupid and useless post from you.

I didn't call Mr. Brewer a liar. I just said the statement he made was false because it wasn't true 100% of the time. When I was a noob, I did not respect the cost approach. Then I grew up.