2055 Exterior only...call the homeowner?

[Dee Dee]

I have a request from a lender for a 2055 exterior only on a property. The homeowner's phone number is not on the order, and the lender says he doesn't feel it is necessary to contact and ask questions about the interior improvements since it's a drive-by. This is contrary to how I was trained, and without knowledge of any improvements I will have to assume that it's in average condition.
So...what do you folks usually do? Do you usually call the homeowner to get a description, make any adjustments for condition based on their information then disclose in the addendum who the source was, or just assume it's in average condition?

 

[Larry Lyke]

Dee Dee --

Use all the information you can find.

Unless you have reason to believe the property interior is not at least average, I leave the Homeowner alone.

A 2055 tells the UW that you didn't go inside by checking the right boxes.

You don't need any Addenda unless it's something very unusual, which might call for upgrading the appraisal report anyways.

 

[wyecoyote]

Dee Dee,

2055 exterior only inspections are relatively easy in my area. The county records while most of the time are accurate I rely on them for all information. And state so in the addendum. I also put down the quality and condition ratings provided by the county. As in cases where the county lists the house as low condition and fair quality that is what goes in the form and I disclose it in the report. Sometimes it causes a headache from LO's calling up and complaining about this but I tell them flat out that due to the exterior only inspection all reliance was placed on County Records for quality and condition ratings. Also I due pull up MLS for the comps and if the subject was a recent sale or is a pending/listing I will pull that also. However, my county that I work in is ususally up to speed on improvements.

Ryan

 

[Ross (CO)]

While the assignment is "drive-by" it is all too obvious that they are not expecting you to interact with the homeowner, although they very often put the phone number of the h/o on the order. I do not call the homeowner, and a home will have to be very, very new to get a good condition rating. Otherwise, sadly to say, it is only going to be "average", which I am sure torques them off. Say the subject is 15 to 20 years old, and the comps are likewise, yet they have descripive MLS text speaking about updated kitchens and baths, new carpet, new vinyl windows, new furnace. These comps are going to get reflective value enhancement to their condition because of those updates, and that will perhaps not bode well for the subject. Drive-by assignments are the ones where you had better take the conservative outlook toward valuing the subject. When you go glorifying (the interior of) a property you have not seen for yourself you take extra risk you do not need. It has been proven far too often to me that the homeowner (unfortunately) does not have the proper perspective about "valuing" his/her own property. I guess they call it sentamentality. ....And, yes, you go asking about certain aspects of a home and they just might not tell you what is so (ie. the truth). Then, some year later, if the manure hits the fan, it becomes..."you said"...."I did not say anything of the kind"...."but , Your Honor, he said..." Just make sure in the Summary of Sales Comparison, before you can carry over to any addendum page, that you state clearly that the "assignment did not require interior inspection of the property, as per request of the client, and therefore ...." Good luck.

 

[Anonymous]

DeeDee,

If the client doesnt want you to call, dont. This could be a pre-forclosure type appraisal. I do alot of them. The first place I start is with the county records. Then I go to my old MLS stuff and find the data for the last time the house sold. (hopefully it is there). Between the two I can usually get a decent description of the house. If I drive by and the house looks average outside, then I assume it is average inside and disclose this. I also state in the report that if the condition of the home is anything other than what I have had to assume, the value could be GREATLY affected. You must remember that the decision to proceed with an exterior only inspection is yours, not the clients. If I do not have adequate data to perform the exterior only inspection with reasonable assumptions, I decline the order as a drive by and offer to perform an interior inspection.

Good Luck

 

[Tim Hicks (Texas)]

My opinion is that the quality of a drive-by appraisal is less than that of an appraisal with a full inspection. The lenders know this. It is called a "drive-by" appraisal, not a "drive-by and call the home owner" appraisal. First, I have enough home owners lie to me when I inspect their property to cancel any faith I have in them telling the truth. How many times have you been told before inspection, that they have done this or remodeled that and when you got there it was really a "gonna do" item. When I do a drive-by appraisal, they can pretty much expect a "average" condition appraisal unless the exterior is below average. If they need "top dollar" on an appraisal, they should expect me to do a full inspection. I would not make any assumptions about any property without first hand knowledge. Believe me, the lenders know this and that is why they order the "cheapy" appraisals to save any money they can out of the borrowers pocket. That is just my opinion.

 

[Dee Dee]

It appears that the opinion is unanimous here.
I've done plenty of 2055's, just never had the lender seem this adamant about not 'bothering' the homeowner. Based on their 'magic number' it appears that they don't expect top of the market value, so they probably have a good idea what the condition is already.
Thanks everyone.

 

[bradellis]

Dee Dee,

Do not contact the homeowner. That is why you were not given a contact number, and you may have no way to know the reason for the appraisal (bankers do lie sometimes- surprise!).

Anyway, you make an extraordinary assumption about the overall condition based upon what you see from the street. Note that this is a limited appraisal reported (probably) in a summary format.

At the same time, it might be a good idea to engage your client over what they order and why. In some cases they truly do not want to ownr disturbed, but in many more cases this is just a matter of your fee.

Most of us have been, from time to time, uncomfortable with these drive-bys. Even though you make all the assumptions and disclose everything, I cannot shake the feeling that one of us will get hit with a lawsuit and some judge, who just got her/his home appraised for less than they think it was worth will rule for the plaintiff.

I had a very active client who ordered these. One day I asked if I could get into a home. He asked how much extra it would cost. On a lark, I said $25 extra. He then began ordering all of these 2055s with interior inspections! Made me happy and MUCH more comfortable.

Brad

 

[Douglas Mackay]

I agree with the general opinion here...as mentioned in one of the posts, you are making an extraordinary assumption with respect to the interior. I put this blurb on an addendum with all exterior reports:

EXTRAORDINARY ASSUMPTIONS:

As per client request, I have completed an exterior inspection only of the subject property from the public street. The data contained within this report is based the observed exterior condition and review of public records. There are extraordinary assumptions made that directly relate to the interior room count, size and condition. For the purposes of this appraisal it is assumed that the interior condition of the subject property is consistent with the observed exterior condition and that the information regarding the interior room count, size and condition is accurate. If any of these assumptions are found to be in error, it may alter the opinion of value.

 

[Will Granger]

Dee Dee,
When I get requests for 2055's, I tell them there is not enough information available to do an appropriate appraisal and need to upgrade to a 2055 interior inspection. If the property sold within the last year, I can use MLS and do a pretty fair job.
I guarantee if there is a big loss on a foreclosure of a 2055 appraised property, your lender is not going to confess that they only wanted a drive-by and you will see your name in print. My female dachshund barks at people she sees on the other side of the fence. 8) Be careful.......