Appraiser Vs Inspector

[Don Clark]

B) Saw this topic on another forum and was astounded at the comments. Seems some appraisers do not believe it is their job to really inspect a property beyond determing the room count, measuring it, and making some general notes. So, I was wondering what this forums take is how extensive an inspection needs to be done?

For example, I usually look in the attic, the crawl space, or at least take a few photos of the interior of those areas. Also, some said it would violate state law for appraisers to estimate repair cost :blink: But, VA and FHA requires their appraisers to do just that in many cases, and in particular, for REO/Foreclosure/Liquidation appraisals. They also require(in the case of FHA) to estimate whether or not a roof has at least 2 years of remaining life. My question would be, how can appraisers estimate a cost to cure without a fairly comprehensive property inspection, and therefore form an opinion of value based on actual condition? Now, for those appraisals such as a desk top appraisal as well as a drive by with no interior inspection, an appraiser can make an extraordinary assumption and limiting condition that the property is in marketable condition. But, would one just make that assumption when you have actually seen the interior and know that is not true but believe you are not either qualified or it is "not my job" to estimate repair cost or depreciation?

Many of the cases I have read involving an appraiser being sued revolve around this subject. In one case an appraiser could not prove the property was in average or marketable condition and had to settle a claim$$$$$$$ In another case an appraiser had interior photos and the testimony of a neighbor to attest to actual condition. But, would not a good inspection with notes taken at the time, with items of deferred maintenance have also been useful in both cases? I guess this really bother me to think that there are some appraisers who are so cavilier about the idea of inspections, what I have always considered to be part of my job.

What say you?

 

[Robert Anderson]

Don,

My property inspection is pretty much the same as yours. I suspect that MOST appraisers do this much.

To me a more significant question is whether the appraiser should check to see if the heating and air conditioning systems work; look for plumbing leaks under sinks, tubs, and toilets; test electrical sockets; try-out kitchen appliances, and the like. I don't do these things, but many appraisers do.

On the topic of documenting interior condition, the following "Claim Alert" is an excellent discussion of the importance of digital photos:

http://www.liability.com/claim_detail.asp?ClaimID=90

Bob Anderson

 

[Pat Butler]

There are a lot of assumptions in any appraisal. And it is assumed that a property doesn't have any defects that aren't apparent to the appraiser. For every item that can be inspected, there are always other items that are going to be missed. Even a home inspection doesn't cover every area. Appraisals would cost a lot of money if appraisers were required to also do a very comprehensive appraisal. Remember too, that any potential buyer of a property is only going to be doing a limited inspection of the property.

 

[Pamela Crowley (Florida)]

I take pictures of any crawlspaces.
I try to see the attic an take pictures if I do.

I take pictures of almost all rooms and specific photos of ANYTHING that could or does influence the value - including all items that need repairs. I do FHAs by the book.

I include: "Appraiser is not a home inspector and reports only those items that are readily visible and obvious; if further information is wanted regarding the condition of the subject property, professionals for those items in question would be necessary."

More will be added about the overall or specifice condition(s) depending on what I see.

 

[Farm Gal]

Don:

I possess more construction knowledge than most appraisers. I worked new and remodel construction for over a decade, and then went on to 'personally inspect' over 15,000 properties after they had natural disaster damage, and while they were in the process of repair!... This gets you a REAL look at the "tire pressure and under the hood" of a house, cause things break "first and worst" where they are weak to begin with!

I have been seriously advised by professionals in the litigation end of this business _not_ to act as a super informed individual or to claim ANY special knowledge in my appraisals. I a have a carefully written disclaimer that says I "didn't DO no stinkin' home inspection".

Some appraisers, notably folks like Doug Smith from Montana, have found that such disclaimers fail to protect the appraiser from nuisance suits on items of which the appraiser could NOT have reasonably been expected to have knowledge... Getting tagged for the removal of asbestos insulation is NOT reasonable. Judges and arbitrators need educating.

I do what is required in case of a FHA appraisal, including the "minimum of head and shoulder entry" and but on 'normal' lending, I do NOT stuff my shoulders let alone my head into dark cavities. If I can walk in it, I look, if there ain't no open door, I don't. Buyers don't, and neither do my peers in THIS work area. I follow local practice... well almost

I am there to 'view the home' as would a prospective homebuyer (who frankly is dumber than dirt about what is important to look for in a home ).

Now I also owe SOME fiduciary duty to my lender client: and that takes place with my disclosure to my client. When _I_ see any present conditions or observed maintain ace issues which will seriously adversely effect the structure in the immediate future, or the marketability of the property within a 'reasonable time frame' I mention what I saw and SUGGEST an inspection by a professional. The client is then advised. What they do with that advice is entirely up to them. Usually it is give my phone number to the listing agent who promptly calls and screams :gunfire:"You will never work in this town again!"... Apparently they are now approaching correct! Other appraisers get the calls, some agents refuse to let me on the property.

Sadly most clients do NOT WANT TO KNOW. I have been verbally abused by both 'sales agents' and lender representatives... and have lost a tremendous amount of work through my practice of advising the client. This has NOT attributable to anal nitpicking of potential future flaws, but simply for reporting what I did observe to be fiduciary or health issues. I never set any conditions or unreasonable concerns. Matters not.

Should an appraiser "do" more when they have the knowledge and training? It is my opinion that the answer is YES. Is the client willing to receive the news?
Apparently not, at least not in my experience.

I had TWO clients who really wanted the truth. One was recently acquired, we'll see how that pans out.

The other has elected to go with the lowest bidder and feels that +/- 10% of value is 'good enough' for government work. No more FHA REO work for me. I cannot perform due diligence for $250 per report. Full INSPECTION as per HUD specs and a properly researched appraisal with cost to cure ain't possible at that fee structure.

I am seriously considering turning in both my spouses and my FHA certs.

An appraiser friend just bought a home SHE said was easily valued at 70K which is sound and requires only a 'paint and carpet' remodel... She paid 42K. How does $23,000 in instant equity sound to YOU all? And that assumes she hires the painting from the highest bidder and gets it done right,a nd buys high class carpeting.

Hell I didn't make that much last year from scrambling though the basements and attics and developing FHA REO reports. And she don't even have to get her little finger dirty!

Don, if you are consistently performing full 'inspections' and full disclosure reports to clients who value the information, I commend you. Frankly that is the sort of work I LIKE to I only wish that more clients in this area wanted the same service.

dang - those italics can get unruly! modified to fix fonts

 

[Tawfik Ahdab]

Saw this topic on another forum and was astounded at the comments. Seems some appraisers do not believe it is their job to really inspect a property beyond determing the room count, measuring it, and making some general notes. So, I was wondering what this forums take is how extensive an inspection needs to be done?

For example, I usually look in the attic, the crawl space, or at least take a few photos of the interior of those areas. Also, some said it would violate state law for appraisers to estimate repair cost But, VA and FHA requires their appraisers to do just that in many cases, and in particular, for REO/Foreclosure/Liquidation appraisals. They also require(in the case of FHA) to estimate whether or not a roof has at least 2 years of remaining life. My question would be, how can appraisers estimate a cost to cure without a fairly comprehensive property inspection, and therefore form an opinion of value based on actual condition?

For FHA appraisals, the inspection you describe is standard. However, it is not so for ordinary appraisals. Let me be clear. In Oregon, a head and shoulders inspection, with testing of the mechanical, electrical, and plumbing systems, isconsidered a home inspection, for which an appropriate license is required (the licensee must also have or have had a contractor's license in the state).

The ONLY reason the FHA inspection is allowed for appraisers to conduct is due to a jurisdictional exception explicitly granted by the Contractor's Board, since these federal requirements trump state laws.

For non FHA/VA appraisals, the inspection standard is quite different. The standard I use is that of an "experienced owner of real estate". This actually comes from a highly regarded instructor from the Appraisal Institute, an author on appraising homes. I think this standard is reasonable and does not presume that the appraiser has expertise beyond that merited by training and subject of specialization. Thus, I note the quality and condition of components in a non-intrusive manner. Were I to test the systems, I could be open to a charge of unlicensed activity. Now if I suspected something, I might do it, but it wouldn't be automatic or obligatory. My limiting conditions cover me for failing to note these items, as long as I applied reasonable due diligence in my observations of the surfaces.

That's my take on the subject.

 

[Marty Skolnik]

I agree with you, Don. Robert, I think that most appraisers do an "Ole" (that's supposed to sound like a cheer at a bullfight) for an the inspection. A "whiff". An "air ball".

I ask my class (I teach Intro courses at a local community college here) about what their mentors/bosses require for an inspection and I ask them to bring in copies of their companies' inspection forms to pass around. I also ask them if they had had appraisals done of their house recently and to describe the inspection that they had observed.

Almost uniformly, the inspection forms from these companies are usually limited to either using the front page of the URAR itself or an office-made form that has similar looking check-off boxes that only cover the URAR boxes and fill-in-the-blanks, as well as a place to draw the exterior dimensions of the house. The inspections that my students have observed consist of a brief walk-through of the house, a picture or two, and a couple of "hurrumps" and "hmmmms" from the appraiser.

If you take too long to inspect the subject property, you can't churn out your 2 or 3 appraisals a day. Time is money. And the URAR form only requires that you check boxes and fill in certain blank spaces. The Skippies ask, "Why do anything beyond that?"

Here's why. At some point that appraisal will end up in court in a bankruptcy or foreclosure hearing and you, the appraiser, will be required to testify about how you got to your value. (I don't mean "you" as someone on the Forum -- I mean "you" in a generic sense!) And, you don't know which appraisal will end up in court. That's the beauty of it all. And, if inflation starts to kick in and rates rise and people lose jobs, there will be more and more defaults and foreclosures.

When I work on an appraisal I try to think about what questions the opposing attorney is going to ask me and I try to do the appraisal accordingly. Those of us that have been appraising since the 70s and 80s remember the boom and bust cycles. And, it's always the appraisal that you "short-cutted" that ends up biting you in the rear 2 years later.

Appraisers today aren't expecting anyone to seriously care about their appraisal reports. If the client is a mortgage broker and the number is hit, they think that they'll never hear from that appraisal again. If they are doing an appraisal for a bank with a staff of reviewers, I think appraisers tend to be a bit more careful because they know that the Feds or the bank will look at the report a bit closer.

I dunno... I'm just rambling trying to avoid writing this next report....


Marty Skolnik
Baltimore, MD

 

[DTB]

Many of the cases I have read involving an appraiser being sued revolve around this subject. In one case an appraiser could not prove the property was in average or marketable condition and had to settle a claim$$$$$$$


Last time I checked the defendant doesn't have to PROVE anything. The plaintiff does.

Might want to get an attorney who also believes this. :lol:

 

[Pat Butler]

Lee Ann- just a curious question. How long did it take you to inspect those 15,000 properties? I would assume if they were damaged that the homeowners would be in a rush to get their house fixed, so there wouldn't be a lot of time for you to get in to inspect.

Nothing more than a brain teaser, but it would take at least 7,500 hours if you were to take 30 minutes at each house. That would be over 3 years worth of inspections based upon a 40 hour week. Were they all damaged?? Why would someone wait up to 3 years to get their house inspected on that basis?

 

[Otis Key]

When I've assisted other appraisers on FHA orders and when I used to do VA appraisals, I would look all the time. As most of my work is REO/foreclosure with an occasional relo, sale and/or refinance, I don't do that. I base it upon the definition that's provided by the certification and limiting conditions:

".....informed buyer and seller........."

I'm not a home inspector and in fact, I clearly state so in my report and expanded comment pages. I don't want or need that added liability. Most of the time I will look to see and if there's something wrong, then I will comment and explain. I won't say if there's insulation in the attic, walls or floors. It's always unknown, unless there are plans & specs or a tag in the garage, of which I reference the source.

I'm not a home inspector - I'm an appraiser.