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2055 driveby, departures and scope (again)

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Farm Gal

Thread Starter
Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Umm folks getting back to that scope and departure thing....
at a MINIMUM even with the 'new 2055' I am still sticking in at LEAST some of the departures listed below: (further evidence why I call MINE 'Limited')

Seems to me the client is selecting "Fast" and "Cheap" over accurate: and that is what I am giving them in performing one of these driveby shootings... but IF it is now industry standard not to do all this and the boiler sort of indicates that we arent doing some of it and ...

Am I nuts or adding uneccesary boilerplate :oops: ?

We have not:
SR 1-2c considered any easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessment, ordinances, or other items of similar nature.
SR 1-2d considered whether an appraised fractional interest, physical segment, or partial holding contributes pro rata to the whole.
SR 1-2e identified and considered the effect on value of any personal property, fixtures or any intangible items that are not real property, but are included in the appraisal.
SR 1-3 considered the effect on value and use of the following factors:land use regulations, reasonably probable changes in land use regulations, economic demand, physical adaptability of the real estate. the highest and best use of the real estate is "as improved", unless otherwise indicated in the body of the report.
SR 1-3b appraised the land as though vacant and available for development to it's highest and best use and of improvements on their actual contribution to the site.
SR 1-4a valued the site.
SR 1-4b collected verified analyzed or reconciled any comparable cost data, comparable data on accrued depreciation, comparable rental data, comparable operating expense data, comparable rate data for capitalization and/or discount.
SR 1-4c based projections of future rent and expenses on reasonably clear and appropriate evidence.
SR 1-4d considered and analyzes the effect on value of any terms or conditions of the leases for any properties which may have leased fee or leasehold estate conditions.
SR 1-4e considered and analysed the effect on value of the assemblage of various estates or component parts of a property or refrained from estimating the value of the the value of the whole solely by adding the individual values of the differing estates or component parts.
SR 1-4f considered or analysed the effect on value of anticipated public or private improvements located on or off site, to the extent that market actions reflect such anticipated improvements as of the effective date of the appraisal.
SR 1-4g identified and considered the appropriate procedures and market information required to perform the appraisal, including all physical, functional and external market factors as they affect the appraisal, specifically at the client's request.
SR 1-4h appraised proposed improvements after examining and having available for future examination: plans specifications or other documentation sufficient to identify the scope and character of the proposed improvements; evidence indicating probable time of completions of the proposed improvements; reasonably clear and appropriate evidence supporting development costs, anticipated earnings, occupancy projections; and/or the anticipated competition at the time of completion.



Actual truth is one of these is PROBABLY tenant occupied and we told em up front and then had the GALL to put it in the report 8) and they are now sqealing about it... :roll:
 

John SRA

Junior Member
Joined
Jan 19, 2002
Lee Ann,

Interesting list.

It should be noted that all items in SR 1-2 are binding, so departure is not permitted from 1-2©, 1-2(d) or 1-2(e).

On some of the other things you may depart. However, the point of the previous discussion is that just because you use the 2055 (or ANY form for the matter) it does not automatically mean that there is departure.

Best wishes

JC
 

Farm Gal

Thread Starter
Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
hmmm.

John:
I got that list from a Harrison article many years ago with regard to "how to make the 704 USPAP compliant...

I guess I never thought further wrt the no departure permitted on SRT1-2~~, and by gosh you are the first to bring it up!

When you are forbidden contact with the owners or anyone directly connected with the property I don't know how one COULD consider a number of the items on that list, but mildly revising the statement to AVOID the departure part might be a good idea! THANK YOU!

I guess the point is that you haven't got a clue, the client wants fast n dirty, you don't get a 'real legal or survey' :? ...what's a girl to do?

I am goin to think on that one further.... any other takers???
 

Jim Bartley

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
Lee Ann,

I think you have mis read the intent of Standard 1. Under the comments to Standard 1-1 it states "This rule recognizes that the principle of change continues to affect the manner in which appraisers perform appraisal services. Changes and developments in the real estate field have a substantial impact on the appraisal profession........To keep abreast of these changes and developments, the appraisal profession is constantly reviewing and revising appraisal methods and techniques and devising new methods and techniques to meet new circumstances...."

The limited type reports like the 2055, 2065 and 2075 are nothing more than new products designed to meet new client needs. If the client is willing to place more of the onus on the borrowers credit, then why shouldn't they have less reliance on the collateral, resulting in the need for a less detailed collateral assessment? We may not agree with this trend, but who could argue it is not taking place?

As to your list, SR 1-2(e) states "Identify the characteristics of the property that ARE RELEVANT to the PURPOSE and INTENDED use of the appraisal"

The comment on SR 1-2(i)-(v) states "If the necessary subject property information is not available because of assignment conditions that limit research oppportunity (such as conditions that preclude an onsite inspection or the gathering of information from reliable third party sources), an appraiser must:

* obtain the necessary information before proceeding, or
* where possible, in compliance with SR 1-2(g), use an extraordinary assumption about such information.

An appraiser may use ANY COMBINATION of a property inspection and documents.........The information used by the appriaser to identify the property characteristics must be from sources the appraiser reasonably believes are reliable".

I think the phrase "reliable third party sources" is key when you do a typical "drive-by"
 

Farm Gal

Thread Starter
Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
What I am trying to do folks is rewrite my scope for a consistant client with same same assignement parameters...

I have hacked at it and thought I had a good un, and someone called me on some of it, so I stuck the old 704 disclaimer back in to cover my tailfeathers and John took an immediate shot at THAT... OK back to the drawing board.

Everyone hates useless boilerplate (including me)

So IS industry standard now to state the "client din't wan me tuh look at nuthin but thuh county record and an MLS list and thats it and I ain't resonsuble for the results"? :roll: And her's my license copper I promise never to exceed the speed limit agin! :(

OK Extraordinary Assumptions, and such and

then we are back to that Limited Appraisal thing:roll: !

I thnk we need a NEW 1004, 2055 and driveby class that nails it down a little closer instead of hacking around with new USPAP scope as a seperate issue for us lowly residential hacks anyway: seperation of these clases in this matter DOESN'T WORK!!!!! :evil: :evil: if that sounds like screaming bloody murder you got it right!

Ok I shall go quietly back to my work now. :oops:
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Lee Ann,

I'm not saying that the Emporer has no clothes, but the elements and references on that list are from an old edition of the USPAP. This section of the USPAP was updated a couple years ago and the current version no lists these elements under these references. No matter what you do, I'd use the references from the current version of the USPAP.

As a practical matter you couldn't depart from most of those requirements anyway, even if the USPAP would allow you to do it.

For example, if there is a significant covenant, restriction, encumbrance, etc. present and in effect on the subject property, you couldn't completely disregard it in your analysis because the reliability of your analysis would suffer too much. You might be able to run an extraordinary or hypothetical assumption if there were a legitimate reason to do so, but you would also have to disclose the assumption and indicate its effect on value everywhere in the report.

You also couldn't ignore a fractional interest, couldn't fail to analyze and consider the highest and best use, couldn't ignore the market's reaction to existing or anticipated public improvements, etc.. There have always been some elements of the appraisal process that we could not depart from because the resulting analysis would become so limited as to be useless.

Then we get back into necessary and applicable methods and approaches. In any given appraisal assignment there are going to be methods and approaches that are applicable. We can only depart or otherwise decline to include one of those applicable methods or approaches if it is not necessary to produce a credible result within your scope of work. This goes regardless if the appraiser is using the mechanism of invoking the Departure Rule to help define the Scope of Work, or not. Eventually, the ASB is going to probably eliminate the Departure Rule as being redundant to a properly written Scope of Work. In the meantime, I prefer to use it because it is available and it doesn't hurt to use it when you do it properly.

With of without the use of the Departure Rule, when an appraiser is considering not devloping an applicable approach to value or use a method that would otherwise be considered applicable to an assignment, they can only do so if the omission is not one of the elements that would be considered necessary to produce the credible result. So in a 2055 situation, the omission of a Cost Approach might be considered by some to be applicable to an appraisal of an SFR, but most people would agree that it is not a necessary approach (under most circumstances) to produce a credible appraisal, so long as the reader has agreed that the limited appraisal process is sufficient for their intended use. This omission could be accomplished by invoking the Departure Rule against SR 1-4b in the Scope of Work, along with an explanation as to why the Cost approach was eliminated; or by writing the Scope of Work but without specifically invoking Departure (technically it can be done) accordingly. You could also decline to develop an income approach if it wasn't applicable (market segment is almost totally owner-user) or if it was applicable (yeah, some buyers are investors) but not necessary (there is no lease encumbrance and you're valuing the fee simple interest). However, you would not be able to ignore the Income Approach on the house if there was a long term lease encumbrance because you would be valuing the Leased Fee interest. In such a situation, you couldn't depart even if you wanted to because that appraoch would be considered necessary to determine the value of the leased fee interest; ignoring it would result in a possibly inaccurate and certainly misleading valuation.

Likewise, you would not try to eliminate the Sales Comparison Approach for a 2055 appraisal on a house under any but the most extreme of cases because most everyone considers it necessary to produce a credible appraisal on a house. Sure, there are the mechanisms for Departure on this approach to value, but such an exclusion would fail the test of necessity, thus rendering that option out regardless of what the client wants.

In terms of limiting your liability in an appraisal because you chose (for whatever reason) not to do an interior inspection on the structure, you should write your Scope of Work in such a manner that the reader can clearly understand that as a condition of this omission you have been forced to make certain assumptions about the design, quality and condition of the interior; and that should additional information come to light in the future that you reserve the right to amend your analysis and report accordingly. IMO, the biggest thing we need to fear is the potential for a reader to think that the exterior drive-by style of inspection is in any way equal to physically measuring, walking through and photographing the interior.

The other thing to remember is that
"where information about the physical characteristics is not available through the opportunity for a complete inspection or from reliable third party sources, an appraiser has the duty to obtain the necessary information to develop the appraisal before beginning or withdraw from the assignment" AO-2, lines 20-24)
Of course, this begs the question "what do you consider to be a reliable third party source of information?" But that's adifferent subject for a different rant.

So I guess my whole point here is that in writing your Scope of Work and communicating what you did and didn't do, make sure that you don't try to avoid all responsibility for every other sundry issue there is just because you didn't get inside to physically measure and inspect the interior. Stick to what you did and didn't do.

Sorry for the legthy diatribe ( I really gotta cut down) on this, but I wanted to paint the picture for you. When you only have crayons to work with, it takes a lot longer.

George Hatch
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Mr Hatch,
as always you seem to have "spelled it out". I have one question and that is when is the 2003 USPAP available in print?
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
I got a notice from The Appraisal Foundation last week that instructor manuals and the 2003 edition of the USPAP would be available in November, which starts this week. I'm sure if sent an order in now, you'd have one in hand by Thanksgiving.

George Hatch
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
I am not sure how this applies to you Lea Ann and what you are doing. I think many Appraiser mess up by writing to many disclaimers and saying to much.

As a home inspector one of the things I was taught was state what you see and nothing more. If you see a damaged shingle say you saw a damaged shingle. Don't elaborate on what could have caused it, what could happen or anything else. The more you say the more you may have to answer for. If you get sued your statements may come back to huant you in court.

I think the same thing applies in writing our scope of work. State what you did and what you didn't do. State any assumptions clearly and don't say to much!

I TRY to keep any statements I make short and consise. Lawyers don't need any fuel and I am afriad that many Appraisers mess up by trying to write disclaimers are actually opening a door to cut their own throats.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
:idea: Good post Jeff.
That may give some indication as to why the GA Realtors contract form is over six pages long. 8O
NC is one legal page, front and back. :wink:
 
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