2055 for proposed construction?

[Verne Hebert]

hey doug in billings,

I am in the middle of something, however USPAP requires a cost approach; don' t make me sight the section ( it refers to "...when relevant..."). I convert to a URAR for more room to work. I don't use 2055 for anything with more than a normal house and a garage-that means about 5 of these little beauties a year here. If you gotta' go to addendum it should not be on a 2055--they are ordering this to save $50 - $100.




verne in kalispell

 

[Verne Hebert]

I just finished a meeting. Bob shame on you. You remind me of 85 % of appraisers I talk to...cost approach give me a break?" Like fred I also was a professional estimator and contractor along the way (with a few degrees and a few licenses also). Here nearly every property is complex, a case study. I always start with a cost approach-to get me in the ball park.

Remember the principle of substitution? We have vacant land, we have new construction, we have existing construction. I am not only lost without a cost approach, I don't fee comfortable not including them. If you know inventory the cost approach is huge-if no functional or external.

Go fred-you are the man.

 

[Ben Vukicevich SRA]

"Depart" and be glad.

The Cost Approach is not required on a 2055 for any stage of construction; proposed, new, whatever. It is a Limited Appraisal to begin with. The client doesn't want the Cost Approach, but if the appraiser feels the need to make it a complete appraisal, summary report, nothing is stopping you from completing the Cost Approach and accepting the liability for it. I, being lazy, avoid the extra liability completing the Cost Approach, so I don't complete one on new construction when a 2055 is requested.

FNMA states in their appraisal guidelines that they will not rely on an appraisal where the value is derived by the Cost Approach so why do it and go through the motions.

Fill-out the form and make "them" happy.

Ben

 

[Frederick R. Ruffell]

Ben,
You have an SRA designation and are telling us that the 2055 Form is a limited appraisal to begin with. Me without a designation knows that just aint so. A 2055 is a form used to communicate the results of an appraisal (limited or complete) in a summary format for mortgage origination. Just because an appraisal is reported on FNMA 2055 form doesn't make it a limited appraisal. Only you as the appraiser can make it limited by invoking the departure rule. This is how I read USPAP and the 2055 form.

 

[Ben Vukicevich SRA]

Fred,

Geez.... SRA has anything to do with it??? Well, I'm an RM also but I don't advertise that one..... probably makes me twice as dumb....anyway.

Sometimes I think AI and my fellow AI members are probably embarassed by my posts here but what the hell, here goes:

Read Item 9 (Item 8 is also of interest) in the Appraiser's Certification on the 2055. The page where we sign the form. Does anybody read the Certifications they so happily sign everyday? I never really read them prior to USPAP, but no more. I read everything... and try to comprehend it too.

Yep, the 2055 is designed from scratch to be a Limited Appraisal with the option of being a Complete Appraisal, if the appraiser desires. They even invoked the departure provision for the appraiser already in Item 9. T'was nice of them to keep us USPAP compliant. The appraiser has to remark/relabel it as a Complete Appraisal, if he/she foolishly upgrades it to one or if by default, it becomes one, say on a 80 year old home where the Cost and Income Approaches could be safely excluded without invoking the Departure Provision. That would be a Complete Appraisal and the appraiser would have to mark the 2055 as such.

Hey, I try to help out.

Ben

 

[Frederick R. Ruffell]

Ben I stand corrected (I think). Does USPAP not also say that the appraiser must clearly label the report in order to identify the appraisal as limited (or complete)? And if so does line 8 and line 9 of the certifaction satisfy this requirement?

 

[Ben Vukicevich SRA]

Fred,

I use Appraiser's Toolbox and on the cover page of any appraisal I complete, I use the freeform text feature to clearly state what type of appraisal has been completed and which report format has been used. I also place the same wording near the value. I get a little nervous with it buried way back in the certification in Items 8 and 9.

It's getting so hard to keep things straight these days. Mike Garrett posted in this thread about FHA and the requirement for a Cost Approach- which is correct as FHA always requires a Complete Appraisal with no departure. That's defined in 4150.2 under Scope. But FNMA and FHLMC allow departure, so by mutual agreement, you don't have to do a Cost Approach on a 2055 or a 2065.

Bob mentioned FRT's but FHA/VA/FNMA/FHLMC are not considered FRT's.-go figure that one out. Then you have the recent ruling by the big guys (FDIC,OTC,OTS,etc) that if the loan was intended for sale to FNMA/FHLMC,etc they still aren't considered FRT's even if the loans are portfolioed by a regulated institution so no "as-is" value (Statement 10) is necessary for new construction-what the hell is that???

So with all that confusion, me, I happily fill-out the forms they spent millions of dollars to design, throw in the required 2002 USPAP Addendums and let them go. BUT......

I've also changed the Intended Use on all my reports from "Mortgage Lending" to "Mortgage Underwriting" because I'm not going to explain all that non-sense FNMA form BS to a state board. Hey board guys--this is what they wanted to underwrite the loan-and that's what they got. Not misleading at all. That Intended Use along with the Intended User is also placed on the cover page with freeform text in Toolbox.

Ben

 

[bobburnitt]

This subject is getting tired.

And, I have never said that it is the best option, I have only said that it is legal, and appropriate under certain situations, and believe me, you can do it. ****Read the freaking form*******

If you don't like it, don't do it. It is as simple as that. They are done all the time. I have taken appraisal classes that discuss doing Limited Appraisals on proposed new construction. Trust me on that.

If you don't believe me, ask the ASB.

BB in Texas

 

[bobburnitt]

OK,

You guys are going on about something that has nothing to do with what we are discussing. FHA don't have a damned thing to do with it. Believe me you can do a proposed new / con on a 2055, that is all we have ever discussed.

The 2055 form has a provision for proposed / new. Look at the form, it is right there at the bottom, it asks you, as is, or, subject to plans and specs. End of story. It has nothing to do with an FHA, period. If I were doing an FHA on a proposed new / con, I would use the 1004 and do the cost approach as required (and that means-- is the cost approach customary in the market area, or it is required on dwellings less than a year old). But that is not we have been discussing. What we have been discussing is whether or not an appraiser can do a proposed / new con on a 2055. CONVENTIONAL, DAMN IT.

At this point, all I can say is, I have stated my point, and I know that a lot of people in this business agree / and disagree. However, I have explained this situation as best I can, so it is the end of the trail for me.

BB in Texas

 

[Blue1]

The REAL question: IMHO, is: What are you CHARGING for a 2055 form on proposed construction.....to me, if you are doing an "interior" then you should be charging just as much as as a 1004 and, if it's new construction, the Cost Approach should be included (IMHO) also. My clients would gladly accept a 1004 in lieu of a 2055 'cause they know that the fee is the same. So........what's up?