Confusion with Exterior Only Appraisals....

[PrincessLeia]

I have been getting some requests that I am interested in at least trying once. My issue is I haven't done one in nearly 5 or 6 years.....as an apprentice!
Product type: FHA 2055 exterior
Intended use: FHA/Ascertain market value

This interests me. I am very aware that after 1 I may decide I am not doing anymore. My issue is even though I did a couple as an apprentice, it has been so long I feel like I basically have never done one before. It is foreign to me.

I am not hopeful about this request in the slightest but it is worth asking. ANY CHANCE you or anyone has a sample file of the 2055 to use a reference or could you point me in the direction of a good resource???

I would pick my first one or few very carefully. The one that caught my attention was a property that was new construction in 2020 and sold on the MLS. Something like that I would try. Something that hasn't sold since 2000 and never been on the MLS, I probably would not even consider.

Gingerman, my takeaway was a few things:
1. You need GOOD data.
2. You should clear it with them first that you will NOT be checking As-IS. EVEN IF YOU HAVE GOOD DATA, You STILL must make EAs such as... EA that quality/condition hasnt changed significantly since last sale 2 yrs ago or whatever. Appraisal is subject to that EA. There is no such box.

If you check AS IS, youre taking full responsibility in case interior is destroyed or whatever. If you check subject to inspection, you're stating: i believe subject is probably in a Similar condition as 2 years ago. Appraisal is subject to that EA. I can give you a preliminary value now (such as with the case of a foreclosure that is still occupied), but will need to confirm once access is possible with a final or an update.

The biggest problem is, most companies will not accept that and will try to force you to change it. If you're up-front with it, you likely wont get the order. If you check that AS IS box, you are liable. THAT'S where appraisers get in trouble. The AS IS box is factually impossible to check on ANY Exterior. And yet, 99% of appraisers do it because of lender pressure & uncertainty in the appraisal process & general carelessness of not READING the forms. When these markets crash, and they WILL crash, it's going to get ugly for appraisers who do stuff like this (check the AS IS box when making any EAs).

So, your business decision is: is the potential headache worth the extra work? Only you can decide. There is no "template" that will save you. In my *personal* opinion, everything with an exterior rests on whether that AS IS box is checked or not.

 

[Lee Lansford]

Back in the day I did exterior only appraisals under the extraordinary assumption that the interior was similar to the exterior, or if there were recent MLS photos within the last 1 or 2 years, that the interior condition had not changed significantly from the date of the last sale. If we don't have interior access... how do we know? Hence, the EA.

Then COVID came along and we were not allowed to make assumptions. We were supposed to rely on homeowner's photos, etc. I did not feel comfortable with that & took a hard pass. I kept doing full interiors for the last several years.

Now, with the forbearance period ending, quite a few lenders need/want pre-foreclosure exterior only appraisals. I've searched the FNMA selling guide... it only mentions desktop appraisals and the various full interior appraisal forms... the Exterior only is suspiciously missing.

Can anyone update me on what the deal is with this? I feel like I missed something. The COVID rules are now over. Can we go back to making an EA about the interior condition of a property in order to complete an exterior only?

For instance: I have an order (I haven't accepted yet) to ascertain market value, I believe it's in pre-foreclosure. The last time the property sold was in 2009. Being distressed, the owners aren't going to let me in. And the lender needs to know what it's worth. How on earth are we supposed to appraise these if we're not supposed to use Extraordinary Assumptions about the interior quality/condition?

Thanks in Advance,

 

[Lee Lansford]

No EA is allowed--with the given that adherence to Fannie/Freddie requirements is the expectation of the assignment--unless X'ing the "subject to" box. Period.

 

[Lee Lansford]

Back in the day I did exterior only appraisals under the extraordinary assumption that the interior was similar to the exterior, or if there were recent MLS photos within the last 1 or 2 years, that the interior condition had not changed significantly from the date of the last sale. If we don't have interior access... how do we know? Hence, the EA.

Then COVID came along and we were not allowed to make assumptions. We were supposed to rely on homeowner's photos, etc. I did not feel comfortable with that & took a hard pass. I kept doing full interiors for the last several years.

Now, with the forbearance period ending, quite a few lenders need/want pre-foreclosure exterior only appraisals. I've searched the FNMA selling guide... it only mentions desktop appraisals and the various full interior appraisal forms... the Exterior only is suspiciously missing.

Can anyone update me on what the deal is with this? I feel like I missed something. The COVID rules are now over. Can we go back to making an EA about the interior condition of a property in order to complete an exterior only?

For instance: I have an order (I haven't accepted yet) to ascertain market value, I believe it's in pre-foreclosure. The last time the property sold was in 2009. Being distressed, the owners aren't going to let me in. And the lender needs to know what it's worth. How on earth are we supposed to appraise these if we're not supposed to use Extraordinary Assumptions about the interior quality/condition?

Thanks in Advance,

Your scenario is different than an appraisal that has the Intended Use for new mortgage lending. This is why Intended Use and Intended User is so critical in our decision making. Other than using the most recent and best information available to you--and I understand that you are doing this and coming up short as to certainty--I'd suggest this: Assuming that you would not merely be taking a wild guess, assemble what you know and can reasonably assume to be so and present to your client the EA that you have to invoke in order to move ahead. I'd want that the client understands and accepts the EA versus not being aware and asking questions later. With the Intended Use beingvwhat it is and a single (right?) Intended User, you can explain away the non-compliance with language in the form that would prohibit such an EA (when not X'ing the "subject to" box).

 

[PrincessLeia]

Your scenario is different than an appraisal that has the Intended Use for new mortgage lending. This is why Intended Use and Intended User is so critical in our decision making. Other than using the most recent and best information available to you--and I understand that you are doing this and coming up short as to certainty--I'd suggest this: Assuming that you would not merely be taking a wild guess, assemble what you know and can reasonably assume to be so and present to your client the EA that you have to invoke in order to move ahead. I'd want that the client understands and accepts the EA versus not being aware and asking questions later. With the Intended Use beingvwhat it is and a single (right?) Intended User, you can explain away the non-compliance with language in the form that would prohibit such an EA (when not X'ing the "subject to" box).

I fully agree with communicating to the intended user. And i respect what you said re: the difference in intended users. But could you expand on that?

In other words, I wouldnt touch an exterior only for a refi or new loan because **In my opinion** 100% of the time an EA is needed. EVEN IF the subject was listed 30 days ago & cancelled, a LOT can happen in 30 days. The rear foundation can crumble, there can be an internal electrical fire that isnt visible from the exterior, etc. Since FNMA doesnt want you to use EAs, i would just decline these assignments.

But, with the economy & inflation doing what they're doing: I see a **real need** for exterior only appraisals on pre-foreclosure properties. And i think that need is about to increase, especially since homeowners had until july 30th, 2021 to request forbearance, and per data i
I've read, they could extend it for a total of 18 months. So, a lot of these are now facing foreclosure since they initiated forbearamce far earlier.

So, the lender/client needs to know market value for their internal decisions /foreclosure process but they dont have physical access to the property. In that instance, they dont have any other option but an exterior. So the point of my post was, how do we get around not making an EA when IMHO, they're vital on a 2055? Especially one where there's missing information.

Reading the pre-written form, it doesnt say you can't use an EA. It says you must have sufficient data. I believe using an EA necessary in all cases on a 2055, even WITH sufficient data. But for one to use an EA and then mark "AS IS" is highly misleading in violation of USPAP. So, are you saying because it's not going to the secondary market that the "you must not use an EA" doesnt apply? Or, are you just saying to discuss with client ahead of time.

I agree with discussing the EA and in my opiniom, discussing that you cant or shouldnt check "as is" box. The unfortunate part is I think most appraisers DO check it, not really thinking about it, and so lenders/clients wont accept these conditions. They'll order elsewhere. And i think those that are making assumptions and checking the as is box are opening themselves to liability.

 

[shrubberyvaluation]

I fully agree with communicating to the intended user. And i respect what you said re: the difference in intended users. But could you expand on that?

In other words, I wouldnt touch an exterior only for a refi or new loan because **In my opinion** 100% of the time an EA is needed. EVEN IF the subject was listed 30 days ago & cancelled, a LOT can happen in 30 days. The rear foundation can crumble, there can be an internal electrical fire that isnt visible from the exterior, etc. Since FNMA doesnt want you to use EAs, i would just decline these assignments.

But, with the economy & inflation doing what they're doing: I see a **real need** for exterior only appraisals on pre-foreclosure properties. And i think that need is about to increase, especially since homeowners had until july 30th, 2021 to request forbearance, and per data i
I've read, they could extend it for a total of 18 months. So, a lot of these are now facing foreclosure since they initiated forbearamce far earlier.

So, the lender/client needs to know market value for their internal decisions /foreclosure process but they dont have physical access to the property. In that instance, they dont have any other option but an exterior. So the point of my post was, how do we get around not making an EA when IMHO, they're vital on a 2055? Especially one where there's missing information.

Reading the pre-written form, it doesnt say you can't use an EA. It says you must have sufficient data. I believe using an EA necessary in all cases on a 2055, even WITH sufficient data. But for one to use an EA and then mark "AS IS" is highly misleading in violation of USPAP. So, are you saying because it's not going to the secondary market that the "you must not use an EA" doesnt apply? Or, are you just saying to discuss with client ahead of time.

I agree with discussing the EA and in my opiniom, discussing that you cant or shouldnt check "as is" box. The unfortunate part is I think most appraisers DO check it, not really thinking about it, and so lenders/clients wont accept these conditions. They'll order elsewhere. And i think those that are making assumptions and checking the as is box are opening themselves to liability.

Instead the lender will find someone who doesn't know better or who is willing to play chicken with going against the certifications where they will be fine until a target comes on their back.

 

[Lee Lansford]

I fully agree with communicating to the intended user. And i respect what you said re: the difference in intended users. But could you expand on that?

In other words, I wouldnt touch an exterior only for a refi or new loan because **In my opinion** 100% of the time an EA is needed. EVEN IF the subject was listed 30 days ago & cancelled, a LOT can happen in 30 days. The rear foundation can crumble, there can be an internal electrical fire that isnt visible from the exterior, etc. Since FNMA doesnt want you to use EAs, i would just decline these assignments.

But, with the economy & inflation doing what they're doing: I see a **real need** for exterior only appraisals on pre-foreclosure properties. And i think that need is about to increase, especially since homeowners had until july 30th, 2021 to request forbearance, and per data i
I've read, they could extend it for a total of 18 months. So, a lot of these are now facing foreclosure since they initiated forbearamce far earlier.

So, the lender/client needs to know market value for their internal decisions /foreclosure process but they dont have physical access to the property. In that instance, they dont have any other option but an exterior. So the point of my post was, how do we get around not making an EA when IMHO, they're vital on a 2055? Especially one where there's missing information.

Reading the pre-written form, it doesnt say you can't use an EA. It says you must have sufficient data. I believe using an EA necessary in all cases on a 2055, even WITH sufficient data. But for one to use an EA and then mark "AS IS" is highly misleading in violation of USPAP. So, are you saying because it's not going to the secondary market that the "you must not use an EA" doesnt apply? Or, are you just saying to discuss with client ahead of time.

I agree with discussing the EA and in my opiniom, discussing that you cant or shouldnt check "as is" box. The unfortunate part is I think most appraisers DO check it, not really thinking about it, and so lenders/clients wont accept these conditions. They'll order elsewhere. And i think those that are making assumptions and checking the as is box are opening themselves to liability.

If an appraiser is

I fully agree with communicating to the intended user. And i respect what you said re: the difference in intended users. But could you expand on that?

In other words, I wouldnt touch an exterior only for a refi or new loan because **In my opinion** 100% of the time an EA is needed. EVEN IF the subject was listed 30 days ago & cancelled, a LOT can happen in 30 days. The rear foundation can crumble, there can be an internal electrical fire that isnt visible from the exterior, etc. Since FNMA doesnt want you to use EAs, i would just decline these assignments.

But, with the economy & inflation doing what they're doing: I see a **real need** for exterior only appraisals on pre-foreclosure properties. And i think that need is about to increase, especially since homeowners had until july 30th, 2021 to request forbearance, and per data i
I've read, they could extend it for a total of 18 months. So, a lot of these are now facing foreclosure since they initiated forbearamce far earlier.

So, the lender/client needs to know market value for their internal decisions /foreclosure process but they dont have physical access to the property. In that instance, they dont have any other option but an exterior. So the point of my post was, how do we get around not making an EA when IMHO, they're vital on a 2055? Especially one where there's missing information.

Reading the pre-written form, it doesnt say you can't use an EA. It says you must have sufficient data. I believe using an EA necessary in all cases on a 2055, even WITH sufficient data. But for one to use an EA and then mark "AS IS" is highly misleading in violation of USPAP. So, are you saying because it's not going to the secondary market that the "you must not use an EA" doesnt apply? Or, are you just saying to discuss with client ahead of time.

I agree with discussing the EA and in my opiniom, discussing that you cant or shouldnt check "as is" box. The unfortunate part is I think most appraisers DO check it, not really thinking about it, and so lenders/clients wont accept these conditions. They'll order elsewhere. And i think those that are making assumptions and checking the as is box are opening themselves to liability.

Fannie/Freddie has the prohibition against an appraiser invoking an EA unless X'ing the "subject to" box. It's been that way forever. So, if the assignment calls for such adherence (e.g., most appraisals for a loan that's headed to the secondary market), no EA (unless X'ing the box). The prohibition is found in the paragraph immediately prior to the SCOPE OF WORK paragraph in the appraisal report form. However, your assignment is not for the secondary market; Fannie/Freddie are not parties to the appraisal. Thus, you are not limited by the prohibition; thus, why it is that I suggested a particular course of action in my earlier post. What else?

 

[Lee Lansford]

I fully agree with communicating to the intended user. And i respect what you said re: the difference in intended users. But could you expand on that?

In other words, I wouldnt touch an exterior only for a refi or new loan because **In my opinion** 100% of the time an EA is needed. EVEN IF the subject was listed 30 days ago & cancelled, a LOT can happen in 30 days. The rear foundation can crumble, there can be an internal electrical fire that isnt visible from the exterior, etc. Since FNMA doesnt want you to use EAs, i would just decline these assignments.

But, with the economy & inflation doing what they're doing: I see a **real need** for exterior only appraisals on pre-foreclosure properties. And i think that need is about to increase, especially since homeowners had until july 30th, 2021 to request forbearance, and per data i
I've read, they could extend it for a total of 18 months. So, a lot of these are now facing foreclosure since they initiated forbearamce far earlier.

So, the lender/client needs to know market value for their internal decisions /foreclosure process but they dont have physical access to the property. In that instance, they dont have any other option but an exterior. So the point of my post was, how do we get around not making an EA when IMHO, they're vital on a 2055? Especially one where there's missing information.

Reading the pre-written form, it doesnt say you can't use an EA. It says you must have sufficient data. I believe using an EA necessary in all cases on a 2055, even WITH sufficient data. But for one to use an EA and then mark "AS IS" is highly misleading in violation of USPAP. So, are you saying because it's not going to the secondary market that the "you must not use an EA" doesnt apply? Or, are you just saying to discuss with client ahead of time.

I agree with discussing the EA and in my opiniom, discussing that you cant or shouldnt check "as is" box. The unfortunate part is I think most appraisers DO check it, not really thinking about it, and so lenders/clients wont accept these conditions. They'll order elsewhere. And i think those that are making assumptions and checking the as is box are opening themselves to liability.

 

[NJAPRAZE]

Gingerman, my takeaway was a few things:
1. You need GOOD data.
2. You should clear it with them first that you will NOT be checking As-IS. EVEN IF YOU HAVE GOOD DATA, You STILL must make EAs such as... EA that quality/condition hasnt changed significantly since last sale 2 yrs ago or whatever. Appraisal is subject to that EA. There is no such box.

If you check AS IS, youre taking full responsibility in case interior is destroyed or whatever. If you check subject to inspection, you're stating: i believe subject is probably in a Similar condition as 2 years ago. Appraisal is subject to that EA. I can give you a preliminary value now (such as with the case of a foreclosure that is still occupied), but will need to confirm once access is possible with a final or an update.

The biggest problem is, most companies will not accept that and will try to force you to change it. If you're up-front with it, you likely wont get the order. If you check that AS IS box, you are liable. THAT'S where appraisers get in trouble. The AS IS box is factually impossible to check on ANY Exterior. And yet, 99% of appraisers do it because of lender pressure & uncertainty in the appraisal process & general carelessness of not READING the forms. When these markets crash, and they WILL crash, it's going to get ugly for appraisers who do stuff like this (check the AS IS box when making any EAs).

So, your business decision is: is the potential headache worth the extra work? Only you can decide. There is no "template" that will save you. In my *personal* opinion, everything with an exterior rests on whether that AS IS box is checked or not.

Been reading thru the thread and disagree with most folks here. A fundamental question or part of the process in each assignment is to understand the purpose of the report/request -- and then guide the client to the product/service that will best meet their needs. If the client is seekin to ascertain general market value as of the current/effective date based on a limited scope exterior viewing and not for lending purposes (i.e. where FNMA may be an intended user), but rathe - for accounting p--- why can't this be done? Because of a form???

I fully agree with communicating to the intended user. And i respect what you said re: the difference in intended users. But could you expand on that?

In other words, I wouldnt touch an exterior only for a refi or new loan because **In my opinion** 100% of the time an EA is needed. EVEN IF the subject was listed 30 days ago & cancelled, a LOT can happen in 30 days. The rear foundation can crumble, there can be an internal electrical fire that isnt visible from the exterior, etc. Since FNMA doesnt want you to use EAs, i would just decline these assignments.

But, with the economy & inflation doing what they're doing: I see a **real need** for exterior only appraisals on pre-foreclosure properties. And i think that need is about to increase, especially since homeowners had until july 30th, 2021 to request forbearance, and per data i
I've read, they could extend it for a total of 18 months. So, a lot of these are now facing foreclosure since they initiated forbearamce far earlier.

So, the lender/client needs to know market value for their internal decisions /foreclosure process but they dont have physical access to the property. In that instance, they dont have any other option but an exterior. So the point of my post was, how do we get around not making an EA when IMHO, they're vital on a 2055? Especially one where there's missing information.

Reading the pre-written form, it doesnt say you can't use an EA. It says you must have sufficient data. I believe using an EA necessary in all cases on a 2055, even WITH sufficient data. But for one to use an EA and then mark "AS IS" is highly misleading in violation of USPAP. So, are you saying because it's not going to the secondary market that the "you must not use an EA" doesnt apply? Or, are you just saying to discuss with client ahead of time.

I agree with discussing the EA and in my opiniom, discussing that you cant or shouldnt check "as is" box. The unfortunate part is I think most appraisers DO check it, not really thinking about it, and so lenders/clients wont accept these conditions. They'll order elsewhere. And i think those that are making assumptions and checking the as is box are opening themselves to liability.

Been reading thru the thread and disagree with most folks here. A fundamental question or part of the process in each assignment is to understand the purpose of the report/request -- and then guide the client to the product/service and communication format that will best meet their needs. If the client is seeking to ascertain general market value as of the current/effective date based on a limited scope exterior viewing and not for lending purposes (i.e. where FNMA may be an intended user), but rather - for accounting purposes / getting an idea of potential liab on their bal sheet --- why can't this be done, assuming sufficient data is available? Why can't an EA be invoked if an appropriate GP form is utilized, the intended use and/or client imposed restrictions are adequately explained? How is making assumptions about the subj any diff than the assumptions we make about assessor or 3rd party data that is incorp in an SCA grid for any comp reporting purpose?? Is not every opinion of value essentionally based on some inherent "current assumptions" ?? I believe such a report can be produced to meet the client's needs... for as the appraiser -- is it not our job to determine understand the valuation problem and - if possible - provide a solution? Why can't a report be "checked" - "As-Is" - when based on assumption or EA o rlimiting condition? How is this any any diff than checking "subj to" for new construction... which may similarly be based on assumptions or EA or lim condition about the finished product? The keys are understanding the problem, documentation/explanation, & appropriate reporting -- all contributing to a credible anaylsis and the production of your valuation solution. Caveat is if there is insufficient data avail... but that is a decision you need to make with each case.

 

[sputnam]

With no EA allowed, how are you going to certify that the property meets minimum FHA standards?