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2055 Exterior

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Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
If the property is of the right age, I have to do a cost approach for the workfile, whether it is reported or not.

To elaborate on what Richard and a few others said, if it is a limited appraisal and you take departure then you do not have to do a cost approach as long as you can come to a credible opinion of value without one. If you cannot come to a credible opinion of value without the cost approach then you are not allowed to do that assignment as a limited appraisal.

The 2055 has its place, and that place is when there is plenty of data on both the subject and the comps, sometimes even on rather unusual properties as long as the right comps can be found and verified. The exterior only inspection also has its place (with plenty of caveats) and my only problem with it is when appraisers use it where it shouldn't be used.

Walter, I suspect what happened to you was that the loan underwriting determined that value of the property was already reasonably well known and the property owner was considered to be an excellent risk. Now, you still shouldn't do a 2055 if the form is not appropriate for that property, but the fact they replaced the 2055 order with a 2075 indicates that they really don't care what you think the value is. I would not automatically upgrade a 2055 to a 1004 withou discussing it with the client first; however, I've never had your experience of having a 1004 turned down and I'm not really sure what happened to you there. I suspect that the dummy who changed the order to 2075 was reading their guidelines and not applying logic.
 

Judy Whitehead (Florida)

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Well, I have always done a cost approach on a 2055, whether or not I included it in the report. Of course I must make some assumptions when doing the cost approach, such as condition, and assumptions that the property records and perhaps the MLS information is correct. Therefore, I never consider my 2055's as being a limited report, since I've used two approaches to value, whether I include the cost approach in the report or not.
 

xm39hnu

Senior Member
Joined
Jul 10, 2003
Professional Status
General Public
State
Florida
Darrell Hignite...
Now here is the question, Since he didn't inspect the property(inside) and it was new, is it a limited appraisal? Sure it is!
No, it isn't. (I may be new at this, but I ain't asleep :) ) Thank you Rich Heyn and Jeff Horton! Darrell made me start to think I'd missed something in the USPAP class. Where such is necessary for a credible opinion, absence of an inspection does not create a Limited Appraisal, only an incomplete one. Departure, appropriately taken, is the only time an appraisal can be called "limited."

Darrell, again...
The cost approach is very very important on new homes, but some appraisers will still do 2055's or 2065's because that is all the lender asked for...remember if you are the appraiser, you should decide what form you should use. I also charge the same for 2055's, 2065's, and 1004's, after all, I charge for the "APPRAISAL", not the form.
You bet! They ask us for an opinion of value, and that opinion is independent of the form used. For individuals, we use a narrative report (allows more room for explanations, and is easier for non-professionals to digest). But I'll give'em whatever form they like, and attach a Sears catalog of addenda to make sure the USPAP cops are happy. Recent construction always gets a cost approach; even if it isn't reported, it's in my workfile for the USPAP cops.

Jo Anne, once again you've nailed it. You and the others who responded have helped to confirm my own conclusions that these durn things are at least as much work as a 1004, if they're done right. Inspecting the interior is way easier than digging up data and making inferences from it, then documenting and qualifying those inferences for the report. We've always charged the same amount for an appraisal, regardless of the form requested. When we tell a new client that the 2055 exterior will cost exactly the same as a 1004, they generally tell us to go ahead with the 1004. Canning the responses and dropping them in does save some work, but revision and editing take some of that savings back.

BTW, unless properly commented, that 1004 is a restricted use report.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Arrrrghhhhhhh....shades of the USPAP instructor's class.

a 2055 isn't an appraisal, it's the form the appraisal is reported on.

Has anyone read the certification on a 2055????

Don't even mention ..."departure" it's on the way out.

Thank God we don't get but a couple of requests for a 2055 report a month, I think there is too much that can go wrong with an "exterior only" inspection. If I have to, I use a big disclaimer concerning my source of information (public record, old MLS, former inspection, etc).
 

Darrell Hignite

Sophomore Member
Joined
Jul 16, 2003
Professional Status
Certified Residential Appraiser
State
North Carolina
Jim, You are still new at this, you do an approach to value if it's applicable and doing the cost approach on a new home is applicable. Therefore if you don't do the cost approach on a new home, You HAVE departed. Yes departure is on the way out, but if you depart by not doing the cost approach, you have a limited appraisal.......Many appraisers consider the cost approach, but don't do the cost approach, because it is not applicable, so it is a complete appraisal.....

Remember that the cost approach may be the best approach and often times is on new construction. If you don't use the cost approach on new construction, then you have invoked the departure rule and you must explain WHY you have departed.

Class over. :D
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
If these dudes can determine a market value from an AVM, or as the new buzz-word is called, a CVI, then an exterior-only drive-by is a functional enhancement for concluding a more-reliable opinion of value ! The client defines their assignment as your need to only drive-by the property, and take the best photos you can, and make the best observations that you can, from that reduced perspective of not going inside the home. Be sure you remind the reader/client that your report of exactly what was asked for, with clear announcement of ALL the data sources you availed within the context of your development of your opinion, and in closing be sure to remind them once again that you gave them the best of what they ASKED for. They already KNOW that the reporting format they have requested does not involve the portrayal of a cost approach. I sure would like to learn how one can possibly get any handle on the depreciation aspects appropriate to do such a cost approach if the inside of the home is off-limits to your eyes !

Scope of Work has given us all the opportunity to reasonably accept, and complete, drive-by assignments without writing volumes of extra un-needed addenda. It is simply an assignment positioned somewhere between a 1004 and a CVI. One can do CYA with a select and minimal number of effectively worded sentences placed in several locations within the report. I do not believe that drive-by's always require 3 full legal pages of addendum comments. Tell the reader what was asked of you, tell and show them clearly what you used to come to your conclusion, and then close by reminding them of what they asked for. Drive-by's are the very assignment that create a Scope of Work whereby you can, and should, take a very conservative approach to concluding a value opinion. Proper comparable selection can again be your best-friend in portraying the "market" when you report on a property your client feels you have no need to see (the inside of). Remind them of what they asked for. Remember, the reader,client/underwriter is always there to "review" your drive-by report and they would never pass it along to the next entity if they were not 100% at-ease with what you submitted. If there is any reason that they are uncomfortable, un-sure of, un-clear about, or simply can not make sense of the opinion of value you have presented.....they will order an up-grade to a full interior inspection and you get a second assignment for the same address. Right ? ..... How can that be ?, because you report tells them that they got exactly what they asked for. Scope of Work, it has opened the door for a client's acceptance of "responsibility" in the ordering process. Now, if we can just get "estimates of value" removed from orders !
 

John Wilson

Junior Member
Joined
May 1, 2003
Professional Status
Certified Residential Appraiser
State
Illinois
Originally posted by Jim Plante@Aug 12 2003, 06:09 PM
Those who order them seem to think that they're less work, and therefore command a lower fee. (Hah!)

If the property is of the right age, I have to do a cost approach for the workfile, whether it is reported or not.
I do plenty of these, and frankly, they are less work.

For 2055's exterior only it's no sketch and no cost approach, that's less work in my book.

Per USPOOP, taken right from the FAQ's on the main page, you do not need to keep anything in your workfile that was departed from.

Question #1:

A client has requested that I perform a limited appraisal with the only departure being omission of the cost approach. I have determined that while the cost approach is applicable, it is not necessary to develop a credible appraisal. Although I am not reporting it, must I develop and retain a copy of the cost approach in my workfile?

Response:

No. USPAP does not require appraisers to develop or retain a cost approach in this situation. The
Record Keeping section of the ETHICS RULE states, in part:

.the content of a workfile for a Limited Appraisal need only reflect consideration of the USPAP requirements from which there have been no departure and that are required by the specific Limited Appraisal assignment.

If you depart from it, you don't need to file it........... ;)
 

Darrell Hignite

Sophomore Member
Joined
Jul 16, 2003
Professional Status
Certified Residential Appraiser
State
North Carolina
John,

If you considered the cost approach and found it to be not applicable, then you have not departed (used departure rule).

If the client asked you to do an appraisal and not to consider the cost approach, you would still have to consider it, and disclose that the client asked that you not use the cost approach. Then it would be up to you to see if it is applicable, if the cost approach is applicable, and you didn't use it, then it is departure and a limited appraisal. If you considered it and found it not to be applicable, then it is not departure and is a complete appraisal.

Sounds very confusing, haha, but just because you don't use the cost approach because it's not on the form, like the 2055, 2065, does not mean that it is not applicable. If they order a 2055 like in my example above, if it is on a new house, then the cost approach should be done.

Happy Appraising :D
 

xm39hnu

Senior Member
Joined
Jul 10, 2003
Professional Status
General Public
State
Florida
I agree with the comment Mike Garrett made: quit using the term "departure." This makes a lot of sense to me. If an approach is applicable, then use it. If it isn't applicable, don't.

I suppose if TAF adopts something like this, we'll all be arguing about when an approach is applicable :)
 

Darrell Hignite

Sophomore Member
Joined
Jul 16, 2003
Professional Status
Certified Residential Appraiser
State
North Carolina
It is just a matter of time before departure is gone. TAF is hoping to delete it soon like the glossary...all we will do then is explain what we did...
 
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