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Another VA appraisal review question(s) on Cost Approach and Income Approach.

MMing5000

Thread Starter
Sophomore Member
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Oct 24, 2013
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Appraiser Trainee
State
California
The AMC had assigned me to perform field review on a VA appraisal even though i had informed them i am not VA approved appraiser.

Subject is a 7-year old upper-end tract dwelling (valued in upper $800k-$900k) in a newer subdivision less than 8 years old built by a major developer. Sale price in the development/subdivision ranges from high $700k for smaller 3 bedroom properties to $1.2M for golf course frontage properties. In other words, subject is fairly typical within the subdivision, which is mostly owner occupied.

The OA is an old timer (over 20 years experience) with a respected designation, indicated that the Cost Approach is not particularly reliable and thus not utilized, and that the Income Approach lacked sufficient GRM data therefore was not utilized.

I can understand not developing the Income Approach due to insufficient related rental and sales data, but can the Cost Approach be skipped on a 7 year old dwelling simply because the OA had noted the Cost Approach is "Not particularly reliable"?

Any VA appraisers out there to share some light on this matter?
 

sputnam

Senior Member
Joined
Apr 24, 2012
Professional Status
Certified General Appraiser
State
North Carolina
The determination as to which approaches are necessary to produce credible assignment results belongs to the appraiser. In a review, if you think that Sales Comparison Analysis alone isn't adequate for credible results then, it's appropriate to say so. There is no requirement that the appraiser develop and report the Cost Approach. I usually do, simply because it can provide good support for several adjustments.
 

gregb

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Professional Status
Certified General Appraiser
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California
From the VA handbook-

Cost Approach​


Change DateFebruary 22, 2019
  • This Chapter has been revised in its entirety.

a. Not Required by VA​

The cost approach is not required for VA purposes, but may be completed to supplement the indicated value in the sales comparison approach.

b. Site Value​

If the cost approach is provided, the appraiser must estimate the site value through sales comparison, allocation, or extraction. If the cost approach is not completed, a site value must not be provided.
 

MMing5000

Thread Starter
Sophomore Member
Joined
Oct 24, 2013
Professional Status
Appraiser Trainee
State
California
From the VA handbook-

Cost Approach​


Change DateFebruary 22, 2019
  • This Chapter has been revised in its entirety.

a. Not Required by VA​

The cost approach is not required for VA purposes, but may be completed to supplement the indicated value in the sales comparison approach.

b. Site Value​

If the cost approach is provided, the appraiser must estimate the site value through sales comparison, allocation, or extraction. If the cost approach is not completed, a site value must not be provided.

Thank you GregB! Your response closes this discussion.
 

alebrewer

Senior Member
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Joined
Mar 11, 2008
Professional Status
Certified Residential Appraiser
State
Texas
Cert #4 on the 1004 (assuming this appraisal was reported on the 1004): "I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison approach to value." Notice that the appraiser certified that 100% of his weight was placed on the SCA (again, assuming that it was reported on the 1004).
 

MMing5000

Thread Starter
Sophomore Member
Joined
Oct 24, 2013
Professional Status
Appraiser Trainee
State
California
Cert #4 on the 1004 (assuming this appraisal was reported on the 1004): "I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison approach to value." Notice that the appraiser certified that 100% of his weight was placed on the SCA (again, assuming that it was reported on the 1004).

In my opinion, a dwelling that is only 7 years old is considered to be fairly new, therefore the cost approach is applicable. Additionally, even if the OA indicates the Cost Approach may not be reliable, it should still be developed to support the opinion that it is not reliable.
 

GWISC

Junior Member
Joined
Dec 3, 2014
Professional Status
Certified Residential Appraiser
State
Wisconsin
I was on the VA panel for several years. I do not remember non-VA panel appraisers doing VA reviews. Usually, the VA Regional Loan Centers have their own reviewers on staff. I would call the local VA Regional Loan Center and ask them if you are supposed to review a VA appraisal? You would not necessarily have to give your client's name away, but I would inquire just the same. I would tell them you are not a VA appraiser, but have been assigned a review of a VA appraisal. See what they say.

Federal VA appraisals usually have specific language inserted into the narrative that you may not realize is supposed to be included. You would not necessarily be able to spot something that was omitted either. I would at least indicate your lack of knowledge in your SOW within your review report and what you did to familiarize yourself with a Fed VA appraisal. The reader should know that you may not be entirely familiar with the subtle nuances of a Fed VA appraisal.
 

GWISC

Junior Member
Joined
Dec 3, 2014
Professional Status
Certified Residential Appraiser
State
Wisconsin
I see you are an appraiser trainee reviewing a 20 year veteran with designations. Be very careful with your wording. You also need to have support for your conclusion that something was omitted which would have made the report more credible, reliable. I know of at least one appraiser who was turned into the state for a review in which he subjected too much of his personal pet peeves into the review (20 years ago, and yes he was disciplined). Don't assume the OA was wrong in their approach to exclude the cost approach. Some appraisers don't do cost approaches on houses beyond the age of 2 years. Others complete the cost approach on 100+ year old properties. If it is necessary for credible assignment results then an approach must be completed.
 

MMing5000

Thread Starter
Sophomore Member
Joined
Oct 24, 2013
Professional Status
Appraiser Trainee
State
California
I was on the VA panel for several years. I do not remember non-VA panel appraisers doing VA reviews. Usually, the VA Regional Loan Centers have their own reviewers on staff. I would call the local VA Regional Loan Center and ask them if you are supposed to review a VA appraisal? You would not necessarily have to give your client's name away, but I would inquire just the same. I would tell them you are not a VA appraiser, but have been assigned a review of a VA appraisal. See what they say.

Federal VA appraisals usually have specific language inserted into the narrative that you may not realize is supposed to be included. You would not necessarily be able to spot something that was omitted either. I would at least indicate your lack of knowledge in your SOW within your review report and what you did to familiarize yourself with a Fed VA appraisal. The reader should know that you may not be entirely familiar with the subtle nuances of a Fed VA appraisal.

i had indicated the VA report was prepared by an OA with a respected designation, and i think that alone impressed you to believe the VA report was credible. I have reviewed many appraisal reports in my area over the years and can safely conclude that most appraisal reports prepared by appraisers with designation contain vague languages filled with errors and are not at all impressive that apper to have been completed within 10-15 minutes because they believe their designation is what makes their appraisal report credible rather than the contents of the appraisal report itself. As like most appraisal reports prepared by an appraiser with a designation it contained many errors and omissions including basic data such as lot size, dwelling size, and age, Another quality issues in the appraisal i had reviewed by this OA was that he used 1 comp with similar model as the subject and adjusted upward by $30k for subject's superior interior upgrades without itemization, and the other 2 comps significantly larger and selectively adjusted the values downward to meet the value he wanted. It was a very poorly prepared report needlessly to say. But i had only noted raised the neighborhood concern because i have never reviewed an appraisal where the entire city is considered to be a neighborhood containing very different market segments ranging from 90 year old cottages on one end of the city to new subdivisions on the other end of the city near the beach. Don't ever let a person's designation impress you or blind you. Judge the appraisal by the contenents, not the designation.
 

Scott R.

Member
Joined
May 6, 2006
Professional Status
Certified Residential Appraiser
State
California
I agree with you about designations. I have several but they alone, do not make me or anyone a better appraiser.

With that being said I find it interesting that any company would allow an appraiser trainee to review any appraisal report, especially a VA appraisal report. Not saying they don't....just saying it's a bit hard to believe they would.
 
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