2055 int/ext considered a limited appraisal?

[Frederick R. Ruffell]

I put this comment on all 2055 reports:

THIS IS A LIMITED/SUMMARY APPRAISAL REPORT. .

Tim,
I just have one minor dissagreement. You should say THIS IS A LIMITED APPRAISAL - SUMMARY REPORT.
What I am trying to get at is that there are (per USPAP) 2 types of APPRAISALS Limited or Complete. And there are 3 types of REPORTS (reports are how you communicate the appraisal to the client) Restricted, Summary, and Self Contained.
I think all forms fall (or should fall) into the Summary Format, however I suppose you could use them as a restricted. Self contained is a narrative report. Please set me stright if I have this wrong.

 

[Tim Hicks (Texas)]

Frederick,

It is my understanding that "limited or complete" is a definition, not a type of report. The type of report is either self contained, summary or restricted. The USPAP compliance addendum in Alamode describes them this way. I see no difference in wording it one way or another since it is not two types of report, but a defined (one) type of report. Is this getting rather muddled or what? Hopefully, I have confused you and others as much as I am now. I am no USPAP guru, but I reserve the right to interpret what I think is right and be proven wrong. It is a Texas thing.

 

[Frederick R. Ruffell]

Tim,
You need to re-read my post and pay attention to the words that I have capitilized. I never said that Limited or complete refer to a report type they are APPRAISAL types.

 

[Frederick R. Ruffell]

Tim I was just browsing through USPAP and there may be one other type of REPORT and that is an oral report, usually associated with a review of an appraisal and it's report, and given in court testimony.
The way I interpret USPAP is that we are dealing with two seperate things here. APPRAISALS and REPORTS of appraisals (sometimes refered to as "appraisal reports" and "reporting options" in USPAP to further confuse us.)
Anyway I think it is a minor point and you and I both know what we are getting at.

 

[Richard Carlsen]

Tim;

I think you might consider changing your statement to "Limited Appraisal with Summary Reporting". This is technically more correct and less misleading. Remember you can also have a Limited Appraisal with Narrative Reporting or a Limited Appraisal with Restricted Use Reporting. What you are providing on a 2055 form is the Summary Report of the Limited Appraisal you did.

Small point but once I got that straight, it made things a lot cleaner in my mind.

 

[Tim Hicks (Texas)]

Richard and Frederick,

Your points are well taken. My purpose was to describe one type of report so as not to mislead about how many reports there are. If it was a limted/restricted, I would state it that way. I don't see how that is misleading. I think the USPAP police is splitting hairs on this issue. However, I see your points and may consider changing my wording to say the same thing with more wording. My goodness, does anybody who reads the report even care. 40% of my reports are CYA, USPAP and addendums that nobody looks at except me. It is amazing how interpretation of simple things can be complicated by simple reading.

 

[Jo Ann Meyer Stratton]

Printed at the top of the 2055 form is the following text:

"This Summary Appraisal Report is intended for use by the lender/client for a mortgage finance transaction only." So it is not necessary to restate that a Summary Report has been completed.

Then line 9 on page 3 of 3 is a statement about limited appraisal, subject to the Departure Provision which ends with (unless I have otherwise indicated in this report that the appraisal is a complete appraisal, in which case, the Departure Provision does not apply).

So matter whether you apply the Departure Provision to the appraisal or not determines whether you do a limited appraisal or a complete appraisal----but the report itself is a Summary. But you do need to clarify whether a Limited or a Complete appraisal process was completed.

Appraisals and appraisal reports are two separate items.

Appraisals are the processes that you do before preparing the report. The report is the method of communicating your opinions with the client.

 

[Mark Correnti]

A 2055 is a reporting FORMAT. The PROCESS is either complete or limited. If you are doing a 20 year old SF house the cost and income approaches may not be applicable therefore no departure is necessary. You still have a complete appraisal in summary format. I do have lenders that request me to do new construction on a 2055. The form does not allow me an area to display the cost approach. Does that relieve me from developing the approach? NO. It is relevant and I display it in a text addendum or attachment. You can do a 3 family on a 2055 if you want to. Just show your GRM x rents on an addendum and you are covered.
Recommended reading on this topic is "Understanding Limited Appraisal Reporting Options" by Coleman and Minnich and "Communicating the Appraisal, FNMA 2055 and 2065" by Joseph Minnich

 

[bradellis]

John Hassler-

I am a USPAP teacher- AQB certified. I'll try to clear this up for you.

It all revolves around the scope of work. That scope is between you and your client and involves the intended use, intended user, and standard of value.

After that, you then determine the effective date, relevant charcteristics and assignment conditions.

It is under assignment conditions that the question of departure arises. Does this assignment need a cost or income approach to be credible? What would my peers do in such an assignment? Etc.

If your scope of work is going to be very sparse and that is what the client wants, then you simply tell them what you did and why you did it. No departure- so long as your opinion is credible- and you must do whatever is necessary to esnure that it is credible.

You could do an appraisal, for example, on proposed construction for one client where they want the cost approach and for another who does not- and it would not constitute departure. Could even be the same property. Client 2 wants it because they are doing the construction loan (intended use) and client 1 is doing the take out loan (again, intended use).

Brad Ellis, IFA, RAA

 

[Steve Owen]

Tim, you hit the nail on the head concerning the difference between appraisal type and report type.

In my market, however, there is plenty of market data available from which to extract rates of depreciation. I have never done an appraisal on a single family residence where I thought the cost approach was not applicable. Of course, it might be weighted lightly in an older house or in one that also had functional or external obsolescence.

Often, in my market the income approach on SFR's is not applicable because of lack of enough data to produce a credible GRM. However, if the data is available, then the approach is applicable. I don't go for the contention I have sometimes seen on this forum that the approach is not applicable simply because the property is not being occupied as an income property.

For ease of administration, I have the language in text at the top of my 2055

Limited Appriasal, Summary Report

and also other applicable comments in the certification. If I ever get one of these where the cost and income approach are both not applicable, I will remove that language, but it hasn't happened yet.