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Any Dangers In Using Extraordinary Assumptions For A Drive-by?

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Gulf Coast

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Joined
Feb 4, 2013
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Appraiser Trainee
State
Florida
An AMC called and asked if I could do a drive-by for a pre-foreclosure. I had the same call a month ago for the same property but told them there is no public data on the home as far as bedrooms, bathrooms, etc. They didn't even have a prior appraisal to give me. The order was put on hold and then canceled. Today they called again and asked if I could do the appraisal using extraordinary assumptions about the physical attributes of the home. So, what do you folks say about this? Is this too dangerous? Advice appreciated. Thanks!
 

Mike Kennedy

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Sep 28, 2003
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Certified Residential Appraiser
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New York
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hastalavista

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May 16, 2005
Professional Status
Certified General Appraiser
State
California
Sometimes a drive-by is the only practical option for a client. So to make such a request isn't by itself unreasonable or illegitimate.

However, IMO, the 2055 (which is primarily designed for mortgage loan origination) is not a good vehicle to communicate results for anything other than a property that would "fit" into that bucket. Let me be clear: I'm not saying that one couldn't do an REO valuation for a lender on a 2055; what I am saying is that the same level of confirmation about the subject's physical characteristics that would be expected for a "loan" should be available for the REO property if the requirement is to put it on the 2055.

If the client gets rid of the 2055, then the appraiser and client are free to develop a SOW that (a) would be credible; (b) meets the clients needs; (c) complies with the USPAP; and (d) wouldn't need the same expected level of physical characteristic confirmation that a Fannie 2055 report requires.

Clients, understandably, want to have appraisals communicated in a package that they are familiar and comfortable with. Unfortunately, for many, their comfort level is limited to GSE pre-printed forms.
Many clients (even sophisticated ones) look at the GSE forms as only a communication device. The pre-printed SOW, etc., however, creates development requirements along with the reporting requirements. That is where the disconnect lies; not so much in how the forms communicate results but what the forms require (or the expectations they imply) to develop the results.
 

Tom D

Senior Member
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May 22, 2015
Professional Status
Certified Residential Appraiser
State
Pennsylvania
my big pre client is asking the use to determine 'internal market value' for the client. not for loan origination. be sure to check the 'other' box on page 1. you are safe as long as you spell out what you are 'assuming' in the appraisal such as condition, room count, etc. and the type of assignment. got this comment from an article "This is an extraordinary assumption, the use of which might have affected the assignment results." also, they normally want 'average condition' assumed with no REO comps used. that would be a distressed value. mckissock has a decent class on REO, and the different value definitions with their requirements. not a hard class, but there are different meanings of value with a pre REO & REO assignment.
 

Terrel L. Shields

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May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Your assumptions must be valid and specific to the property.
 

bnmappraisal

Elite Member
Gold Supporting Member
Joined
Nov 9, 2011
Professional Status
Certified Residential Appraiser
State
Florida
Clients, understandably, want to have appraisals communicated in a package that they are familiar and comfortable with. Unfortunately, for many, their comfort level is limited to GSE pre-printed forms.
(my bold) and this is why, IMO, it may be "dangerous" (to use Gulf Coast's term) to complete the drive by appraisal. I agree with the rest of Denis's post and others, that it is possible to complete an exterior only appraisal on a property given a proper SOW. The problem, as I see it, regarding the OP's situation is that this is for a GSE client (AMC/lender) so the pre-printed 2055 may not be the best form for this situation.
 

Peter LeQuire

Elite Member
Joined
Jan 3, 2005
Professional Status
Retired Appraiser
State
Tennessee
Your assumptions must be valid and specific to the property.

...and ought to be consistent with any built in SOW requirements and with any built in assumptions, limiting conditions and definitions. I know that this issue gets danced around, but I don't believe that the fact that a client is going to use an appraisal to evaluate its position before initiating foreclosure (or any other intended use not related to a GSE transaction) allows an appraiser to dismiss the GSE requirements with an extraordinary assumption. If a client is going to use it for a use not related to a mortgage loan, there's no business reason (other than the convenience of the client and the AMC) to not allow an alternative report format (or form). A plain language reading of the GSE forms can lead to no other conclusion than that the documents are unequivocal: since the forms themselves say that their terms cannot be modified.
 
Joined
Jun 2, 2007
Professional Status
Certified General Appraiser
State
Florida
An AMC called and asked if I could do a drive-by for a pre-foreclosure. I had the same call a month ago for the same property but told them there is no public data on the home as far as bedrooms, bathrooms, etc. They didn't even have a prior appraisal to give me. The order was put on hold and then canceled. Today they called again and asked if I could do the appraisal using extraordinary assumptions about the physical attributes of the home. So, what do you folks say about this? Is this too dangerous? Advice appreciated. Thanks!
No, you can do it. The extraordinary assumptions would be your assumptions about the interior to complete this assignment. If your assumption is that it's a functional 3-BR/2.5-Bath and the interior is in average condition then that's your extraordinary assumption. Identify the issue - no interior description - what you did to resolve it (asked client, public records, MLS, etc.), what your extraordinary assumptions are (physical description), and then conclude (in this case) that actual conditions could have a significant but indiscernible impact on your observations and conclusions. Good luck!
 
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