2055 Exterior Only

[Indiana Jones]

I haven't done a drive-by since I was a trainee. I want to make sure that I CMA. What verbage do you put in your reports that you would recommend I use?

 

[Mark R. Evans]

Can you be more specific as to what (verbage) you are looking for.

 

[Randolph Kinney]

Besides the photographs of the subject front and street, and all comparables, you need to pay attention to your data sources for the described conditions and amenities, GLA, and lot size. Be sure to note if you have enough activity in your market area / neighborhood to warrent a 2055 exterior only.

 

[George Hatch]

I think what you're looking for are the steps taken by the appraiser to effectively communicate exactly what the process does and doesn't entail. You want to make sure that the reader understands that an appraisal that is developed as a result of this exterior-only observation may not be as accurate as one developed with a full interior/exterior inspection/observation process.

The way we perform these appraisals is by relying on some additional assumptions. Rather than personally inspecting the entire property and measuring it like we normally prefer to do, we assume the information about the subject size and GLA and room count that we're obtaining from our data sources is reasonably accurate. Since we don't see the interior, we are assuming the interior quality and condition is consistent with what we see on the outside and, when appliable, with how it is described in an MLS listing or an interview with the current owner. These additional assumptions are necessary because of the conditions of the assignment, but if they are in error they can have an effect on the value opinion. They aren't typical assumptions, so we call them extraordinary assumptions.

They's why we address any extraordinary assumptions that are used in the appraisal report, and why we tell the reader that if these assumptions prove to be incorrect it may have an effect on the value opinion. It's a useful CYA for us because it reminds them that they get what they pay for - they wanted the abbreviated inspection process so they need to understand the additional limitations that go along with that process.

 

[Mark R. Evans]

Make sure that you specify not only that this is an exterior only observation, but that you are basing value under the assumption that the interior finish is commensurate to the exterior condition. So if you observe the exterior to be well maintained and clean, then you assume that the interior finish is well maintained and clean.

 

[Mike Garrett RAA]

the best CYA is not doing them!

 

[Dan Leggett]

If your state has adopted the ANSI standards for measuring you need to use their Statement of Finished Square Footage - Declaration 3 to be compliant with their standards. I agree with George, put it in your Extraordinary Assumptions and maybe echo to your Scope of Work statement.

 

[Phil Rice]

what you're looking for are the steps taken by the appraiser to effectively communicate exactly what the process does and doesn't entail

I call this "scope of work". It is a really good idea to have a scope of work in every appraisal report. If you do a good job of explaining what you did, and what you didn't do, the CYA will take care of itself. IMHO, you do not need lengthy disclaimers about GLA.

For example:

"I got a good (careful/critical) look at the front and both sides of the subject house from the street (see photos). I did not see the inside and I did not measure the subject. I was unable to get a good look at the rear. Assessor records shows the house to be 1,852 sq ft. In this area, assessor is usually accurate, and my visual inspection tends to confirm the size of the subject property.

My inpsection of the subject lasted about 10 minutes (or 10 seconds). I pulled the assessor field card from my online connection. There is no record of the subject in MLS. There was no other source of data for the subject"

 

[Indiana Jones]

I definately have a Scope of Work. I explained that I only viewed the property from the street, no measurements were taken, assessors records were used for square footage. All that good stuff.
Then in a sperate paragraph, I put that I reserve the right to change my opinion based on an interior inspection that proves these assumptions to be wrong, blah, blah, blah.

Other than that, do you guy put anything else in there that I may be overlooking. Like I said, I just want to make sure I CMA.

Thanks for the replies.

 

[Carnivore]

Originally posted by George Hatch@Jun 7 2005, 11:19 AM
It's a useful CYA for us because it reminds them that they get what they pay for - they wanted the abbreviated inspection process so they need to understand the additional limitations that go along with that process.

George,

I certainly agree with what you have said.

My bet would be that instutional investors dont have a clue that there portfolios include these types of limited restricted use reports. The portfolio is judged not only on the credit but also the collateral.

Imagine two portfolios, both of supposed equal collateral value;

One is secured with collateral valuations that are 100% full URAR/2055 Interior.

The other is secured with a mix or even worse ALL 2055 exteriors or less.

Assuming they judge risk. Which portfolio would suffer a greater discount to raise yield? Which one is less more likely to perform poorly? Which portfolio is more predictable?

Do they even know or understand that there is a difference?

I suggest that they dont have a clue.