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2055 Drive By On A Duplex?

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Joe-NC

Junior Member
Joined
Feb 18, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Got a request to do a drive-by on a 2-family duplex (coverted older house) and report on a 2055. Client does not want an income approach or cost approach. I don't have a problem with drive-bys. I use Extraordinary Assumptions as defined by USPAP... but I don't think Fannie Mae allows a 2-family on a 2055. Am I correct? I'm not sure they want drive-bys reported on the other forms either. If the borrower doesn't live in the subject, that's another reason why I can't put it on a 2055, right?

Has anyone else run into this before. What would you do?
 
W

walt kirk

Guest
I don't know whether Fannie Mae allows it but I wouldn't do it. The typical motivation for a duplex purchaser is cash flow, how can you determine cash flow without an income approach? In my opinion a 2055 on a duplex would mislead the user of the report.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
No, won't do it. Forget about Fannie or Freddie requirements, it's a common sense and USPAP thing. The client is trying to get out cheap!! This sounds like an AMC order <_< is it??

What are they trying to hide by ordering a "drive by", or is it a pre-forclosure? I would offer a quote to do it on a 2-4 family form, or a short limited-summary narrative.
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Joe,

Fannie does not allow duplexes on a 2055. It's a single family form as per their instructions for a 2055 on their website.

Now for USPAP (and an exercise in futility)....you can do whatever you like to make the 2055 form USPAP compliant..... as to who's going to accept it, that's for you to find out by calling your client.....but it's not going to be Fannie...

Ben
 

Joe-NC

Junior Member
Joined
Feb 18, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Yes its a pre-foreclosure... and its an AMC. I've only been in business for a little over a year so I'm still trying to wean myself. :redface: I'm gaining some steady full fee clients slowly but surely. ;)

USPAP requires that we follow legitimate "Supplemental Standards" (i.e. Fannie Mae guidelines) so that's what I'm trying to learn about.

Since "the client has agreed that the performance of a limited appraisal service would be appropriate, given the intended use", I'm now trying to decide whether "the appraisal process to be performed is not so limited that the results of the assignment are no longer credible". :D
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
I am sure some will disagree but if you write your scope well enough and disclose the problems with and that client is aware of these you can do it. It might not be pretty or very accurate but again if you splain that in you scope and the client agrees to it it can be done. Plus of course all the assumptions.

I don't think I want to do it either thought. :mrgreen:
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Joe,

Is the property legally zoned to be a duplex? If not, then the 2055 would be appropriate.

If it's legally zoned as a duplex, then tell the client that if the underwriter determines an interior inspection is necessary later, or they want you to change to a multi-family report form, then it will become a new assignment with additional fees and NO guarantee that the value estimate will remain the same.

I don't know about the rest of you, but it's not unusual for me to get an exterior-only appraisal that comes back with an interior inspection request at a later date :angry: . It's also not unusual that I'll determine after that interior inspection that different comps are necessary and the value estimate could go up or down. More often than not if I tell the lender that extra fees are their problem if the assignment changes, they'll make a few calls and come back asking for a full inspection.
 

Randy Beigh

Senior Member
Joined
Jan 16, 2002
I agree with Jeff and Dee Dee.

It isn't the form that means anything. You could do an appraisal on a bar napkin if you figure out how to get all the stupid disclosures into it.

They are asking for a driveby on a pre-foreclosure. Use whatever form you are comfortable, but, charge them enough. And to go a different direction than others, they may not be trying to get off cheap, it's just that since it is a driveby, it is going to be pretty hard to use the 1004 or the 4 page report. Personally, I'm thinking the 2055 is the most appropriate form.
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Originally posted by Dee Dee@Jun 11 2003, 01:06 PM
I don't know about the rest of you, but it's not unusual for me to get an exterior-only appraisal that comes back with an interior inspection request at a later date :angry: . It's also not unusual that I'll determine after that interior inspection that different comps are necessary and the value estimate could go up or down.
Dee Dee,
This was FNMA intention from the beginning of the Desktop Underwriter Quantitative Analysis Appraisal Report format. I know i read it somewhere. But the idea is that the appraiser can start out with a drive by and then upgrade to an interior if need be, or to a URAR or 1025 etc and/or the underwriter can upgrade the report after review of the drive by report. Now what you charge for all of these different services is your business. Personally one of my big clients does it this way and they do not complain about the full fee for the upgrade, 75% of the time an upgrade is needed, works for me. :D
 

bradellis

Member
Joined
Jan 16, 2002
Read this string again and listen to yourselves.

You have a pre-foreclosure situation. Pre-foreclosure. Think the borrower is going to let an appraiser in? Not unless there is a chance for some sort of workout.

So there is simply no chance for an interior inspection. But, the lender needs a value opinion. Not going to get into why- you should all know that already.

Can you do a drive-by on a duplex on the 2055? Yes. (Someone said on a napkin- that works too if you add everything required in STD-2. )

Is this for Fannie? No. It has nothing whatever to do with DU. DU is for loan originations- not for foreclosure or workouts.

NOW- is this a limited appraisal? Not necessarily. The scope of work will tell you that. Will your results be CREDIBLE? Yep- if you do your job correctly. Remember that credibility depends upon the scope of work.

In fact, you could do differing scopes of work and conclude different value opinions and all might be credible- within the scope of work applied to each circumstance.

What do your peers do? They DO them. Is the income approach all that credible? Maybe- maybe not. Each market is different. The cash flow may or may not important. But do you even need the income approach to arrive at a credible opinion on a duplex?

Well, when was the last time you did a duplex in which the income approach was much different from the sales comparison approach and you used the income approach as your primary emphasis in reconcilaition?

Do the job for the client. They already know the limitations. It will be limted ONLY if you skip an approach that would be necessary for credible results- given the scope of work- and if your peers would do it. I'll tell you that no one out there is doing income approaches on drive-bys.

Don't forget your estraordinary assumptions. intended use/users, etc.

They'll foreclose on it, probably, and then you'll get in and you can give them a better opinion.

Brad Ellis, IFA, RAA
 
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