2055 int/ext considered a limited appraisal?

[bradellis]

Ben,

Your quote: "The client is asking us to depart and to write a Limited Appraisal by default, there is no whim involved"

Sorry, man, but I disagree. The client is not asking us to depart. They are asking us to do an abbreviated scope of work.

Intended use, intended users, standard of value, effective date, relevant characteristics, and then assignment conditions.

In this case the assignment conditions do not include a cost approach.

Reference lines 426 thru 431 and lines 438 thru 446 of 2002 USPAP. The cost approach is not applicable in this type of assignment.

The "typical" 2055 assignment does not involve departure (it may, but does not automatically do so). Rathere, it is an abbreviated scope of work that does not require invoking departure.

Ben, this is the interpretation given by the ASB members who teach the instructors.

I am not making it up. You can check it out.

Brad Ellis, IFA, RAA

 

[Steve Owen]

bradellis, the lines you referenced are the same ones I referred to earlier in this thread.

426:

A specific requirement is not applicable when:

* it addresses factor or conditions that are not present in the given assignment,

* it addresses analysis that is not typical practice in such an assignment, or

* it addresses analysis that would not provide meaningful results in the given assignment.

The first exception sounds to me like a case where there is no data; for example, not enough solds while rented to get a credible GRM for the Income Approach in an SFR appraisal. A better example might be the cost approach on vacant land.

The second exception sounds like a case where most appraisers would not do this. An example might be doing a cost approach on a leased fee estate (although I'm not sure you could say that most would not do it. A better example might be doing extensive highest and best use analysis on SFR zoned R-1 in a subdivision.

The third exception sounds like a case where nothing could be gained from the use of an approach. An example would be doing the Income Approach on a hay field where eventual residential development is likely. There might be enough data, but sales indicate a much higher value than income will support and most appraisers would therefore not feel that anything meaningful could be accomplished by the approach.

None of thosse exceptions sound to me like you can skip specific requirements by limiting the scope of work and then saying something like, "with this limited scope of work, the typical appraiser wouldn't do it." Sorry, I don't see anything there that says you can skip approaches just because it's a 2055. An SFR is an SFR no matter what form you do it on; I don't think the form drives whether you depart when you leave out a specific requirement. Maybe there is someplace else in USPAP you can quote to support your point.

 

[bradellis]

Steve,

You are reading way too much into it.

When a client orders a 2055, they are really ordering a limited scope of work- not a limited appraisal. Big difference. So what do your peers do?

They do not do the cost approach unless they believe it to be required to produce credible results.

You are not departing and will learn that the minute you take the new 2003 USPAP national course.

Argue all you want, but you will just price yourself out of the market.

Brad Ellis, IFA, RAA

 

[Steve Owen]

Brad, I'm still operating under 2002 USPAP and will be until January.

Reading too much into it? I'm just reading what is there, if they change that next year, so be it.

Price myself out of business? It doesn't cost me one extra cent to type "Limited Appraisal" at the top of a 2055.

 

[Ross (CO)]

Steve, ..... I think Brad made a very subtle, yet poignant, remark regarding "pricing oneself out of business". After following a recent thread of postings in another category...concerning the soon-to-be acknowledged new scope-of-work aspect of how we might be able to accept and complete assignments in the future....it is my guess that we are going to be forced into an arena whereby our peers are going to satisfy clients' "goals" by doing pre-comp-appraisals in a 2 to 3-pg report and one would charge a reduced fee for this very abbreviated appraisal. Those not enabling this sort of product and clinging only to the old traditional reports at $300 to $400 each will be priced right out of existance ! As more and more examples come forth showing the likely failings of AVM's and BPO's, be they all so cheaply-priced and not per-se being completed by one licensed as an appraiser, we appraisers will have the liberty to perform the equivalent A.P.O. -- let's call it an Appraisers Opinion of Value -- and it will be expected that a greatly reduced invoice will accompany it. The evolution of our business is experiencing the combination of the cut-'em-off-at-the-pass technique and the squeeze play. Our product and related fees-for-service are being de-minimized. Now, fellow appraisers will be under-cutting their competition in $10 increments and not $50 and $100 increments. Yes, there are more changes ahead. Buckle the seat belts.

 

[bradellis]

Ross,

Very interesting post.

When Steve finds out that the clients will be demanding a complete appraisal- only without cost and income approaches, he might be stung.

As far as AVMs go, they are already pretty cheap. If you buy them in volume, the price is insignirficant to the overall cost of developing the appraisal. And they will become less expensive rather than more expensive.

BPOs will not change much. They are about $100 now for a drive by. Not going to be too many brokers willing to do that work for less.

APOs, eh? I've been touting this for a while now. Why leave the work to brokers, IF an appraiser wishes to do them. A BPO generally takes about an hour. So, an appraiser could produce an APO in the same time. Might well be that one could earn as much that way- but it would certainly depend upon many factors.

Note that when one solves for "price" USPAP calls that a fact and not an opinion. Therefore, it is a valuation service and not part of "appraisal practice". So ethics applies, but no standards.

I know many will want to argue with me, but that come from the USPAP instructor course as an answer to a very specific question.

Watch out for hand grenades, now.

Brad Ellis, IFA, RAA

 

[Ross (CO)]

Brad, .....Thanks for the reply. My mention of the A.P.O. really should have been the A.V.O. with no intention of offering "price" comment but to offer a value comment. It all referred to the 2 to 3-pg. pre-comp-appraisal being given as an example of a possible acceptable and compliant assignment option which may, for all we know, be asked for by clients after the new "changes" are posted as of Jan. 1st, 2003. That little devil called the comp-check may have a face-lift over the Christmas-New Years vacation week and re-emerge as a new and legitimate product ordered by clients and completed in full compliance by state-licensed appraisers across the land. It just may be the new low-cost product which the pensive client will pursue if they have had some bad experiences with AVM's and BPO's or any other acronym for a non-appraiser-sourced-appraisal to satisfy a loan decision. The appraiser now gets to develop new templates in their reporting software so that on Jan. 2nd at 8:00am he or she can begin performing this new version of an appraisal. Those in the USPAP Instructor classes are getting some sneak-peak at what might be on the horizon before that date. One problem will be ..... just what official name is the industry going to give this new kid on the block ? It has to be catchy, and cute, at the same time. It may soon be possible to tell your appraiser acquaintances....."Heh, Joe, I had a six-pack before 5pm today! " "What, you had 6 beers before you ended your work day ?" "No, No, No, I did six appraisal reports for a new client today." Ohhh ..........And, Brad, when I was speaking about fee under-cutting.....I was envisioning prospective clients calling to ask what our fees are for "doing a 6-pack", having one apprasier say he'd do it for $300 and find out he lost out on getting the order to another willing to do the same for $290. It can only go down from there. Have a safe and relaxing weekend !

 

[bradellis]

Ross,

Thanks.

By the way, you can start on your templates now- the "changes" are already in place- its just that the profession needs to get caught up.

And yes, you are quite right- alternate products are already on the horizon as lenders seek to tailor their valuation products to the specific loans on each property. Many will be lower priced. Our job, in doing this work for the lending community, it to make sure we give them what is truly necessary and avoid all the garbage that we used think was needed but really was not.

I have often said that I could not care less if I do one full blown assignment and 5 desk top deals in a day- so long as I can bill out an appropriate amount. In some cases you might see lenders ordering 3 limited scope deals in lieu of one full blown one. That should not impact volume for the individual appraiser- again just more assignments at lower scopes and lower fees- but hopefully, enough to float all of our boats.

The good news is that it appears that appraisers will be the valuation professionals of choice well into the future. Assuming of course, that we get off our high horses and listen to what this business community is telling us.

Brad Ellis, IFA, RAA

 

[Frederick R. Ruffell]

Has anyone brought up what FNMA has said about their own forms, Specifically Part XI, Section 203 of the Fannie Mae Selling Guide (04/12/2002) the first two paragraphs. We should all read them!
I quote "Although the scope or extent of the appraisal process is guided by our appraisal report forms, the forms do not limit or control the appraisal process. The appraiser's analysis should go beyond any limitations of the forms, ..."
Thanks goes to Pam Crowely and her FNMA/freddie mac forum for having this type of data and disscussion.

 

[bradellis]

Frederick,

I'm doing a one day USPAP update as part of the SoCAl NAIFA Ed Conferece in San Gabriel- 9/14/15.

You can get more data from Tim Cullen, IFAS, an appraiser in San Diego.

Brad Ellis, IFA, RAA