2055 Exterior-only For Multi-family

[Ed]

I'm shocked...knowone has touched on the most "credible" value approach to a multi-family and/or income property is the Income Approach in my opinion. The Market Approach should be used as supoprt. A "drive by" will only give you market approach value conclusions. In order to develop a GRM, you need to measure the units, measure common area if applicalble, preview leases if available, determine if actual rent is in line with market rent, visually inspect the condition of the units. Way too many variables for a "drive-by" on a multi-family property. I've turned down assignments like this in the past and will continue to do so. I ask for an full interior inspection, otherwise, thanks but no thanks.

 

[TJSum]

The bottom line is 2/4 units are complex assignments. It is our call as the appraiser whether to do the cheaper drive by or to contact the client to let them know a full inspection is needed. If it is a mortgage lender just trying to save a buck, IMO refuse to do the driveby. As mentioned in other posts, of course if the situation does not allow for an interior, such as a retrospective, then cover it in the SOW and cover your hindquarters with your comments in triplicate.

As for all 2/4's being income properties, with the sales market data being secondary, that is not always true. Yes they are for the most part if you are talking about a 4-plex with all units rented out, etc. But many 2/4's are owner occupied main dwellings with minimal rents generated by a second unit in the basement level. This basement unit income is a positive feature, to help pay the mortgage for the owner, but it is still a "residential" property with the market approach being the main tool to use.

 

[Mike Garrett RAA]

I disagree that small income properties are complex assignments. Sure, they require more analysis including the income and expenses but this type of property is not really all that complex.

Unfortunately, most lenders fail to place emphasis on the income approach but rather look to the market or sales comparison approach. Just strengthens my notion that they really don't have a clue when it comes to appraisals.

 

[Carnivore]

Mike G,

I agree to a point. They dont care because they are more interested in Quick, Lean and Cheap than anything else.

I think that any residential income producing property can have the potential to be very complex. These are in most case subject to a written leasehold estate! That surely must have some effect on value. My point is that an appraiser would have to have those skills necessary to recognize the importance of a specific leasehold.

 

[davetheappraizer]

What about doing a drive by on a 2 family and using a 2055 form for a vacant REO property? Since they're just looking for an asset valuation and not using it for a loan transaction, then wouldn't it be ok to use the requested form to give them the asset value that they're looking for?
They're not interested in the possible income generated, they don't even want an OIS, they just want to know cold, hard sales figures.
ETA: Would the assignment need to be completed on the Old 2055 form since that is not used for lending transactions and the new one is supposed to be used only for loan purposes? Since FNMA will never see an REO report, does it really even matter what form it's put on because you just give the lender the form they request and specify in the Scope of Work that the purpose is not for a federally regulated transaction, but for Asset Valuation Purposes and the form used is per the client's request?

 

[Webbed Feet]

The bottom line is 2/4 units are complex assignments.

TJ,

I am with you man! I agree 1,000%. I do not feel that "Licensed" appraisers should ever have been allowed to do income properties. It should have been the place of only those who were certified from the very git go. It would have placed some meaning on the certified residential license a very long time ago.

And, I am also still waiting for the O.P. to bother telling us about the intended use and planned SOW. Until the poster does so, no answer at all might be correct without copious guessing on all our parts.. WHY we all have to guess over it is beyond me.

Yet again another crappy post lacking vital information from an O.P. to the forum.

Webbed.

 

[Mike Garrett RAA]

In and of itself, income producing properties are not necessarily complex in nature. Should these be limited to certified appraisers? I really don't think so even though it would mean more work for me.

Can a duplex be appraised with an exterior only inspection? Certainly...depending on the Scope of Work. Should they be appraised with only an exterior only inspection? Remains to be determined.

 

[Riick]

How the heck was it that FHA used the SFD form for 2-4 unit properties?
The form does not dictate the appraisal process.
The verbiage on a form can be either XXXX-ed out or specifically discounted in an addendum.