Buggywhipmakers.com

[The Bob]

That's what this board would have been named if it were around 100 years ago. What is it with limited inspection reports and this board? Every time I see a post about "Drive By's" or the "2055" I want to scream. I can't believe it's 2002 and we are still discussing this. No wonder the clients want to replace us with an AVM. The facts are:

1. The client has a need for these reports and they serve a legitimate purpose

2. They are USPAP compliant.

Every profession is evolving, including ours. That's why it's called a practice. The trend towards limited/no inspection reports will continue.

 

[Warren Sumner]

As Will the trends towards E&O lawsuits and foreclosures!!

 

[Tim Hicks (Texas)]

Where can I order one of these buggy whips? I can't resist any new technology.

 

[Terrel L. Shields]

The question has always been liability. A doctor can diagnose you over the phone. He might be wrong. He has a better chance of being right if he sees you. He has no defense should you die of an ruptured appendix when he diagnosed you with a sinus infection over the phone. He does have some defense in due diligence should you have came to the office.

Likewise, the courts have upon occasion ruled that an appraisal must include all three approaches, and/or that an appraisal which includes all three approaches are superior to one that does not. Ditto for "limited" or "driveby" appraisals.

So you want to increase your liability dramatically so you can provide a client with the compliance document they want at a price they want to pay. They could not care less what happens to you, if you are fined, sanctioned, sued or barbequed.

There are only two reasons a client wants a minimum product. So they can pad the closing costs in their favor just that much more, and because a 2055 CYA's them. i.e. - It is more likely to "hit the number" and most regulators only check to see that an appraisal is in file, not verify that it is kosher.

I firmly believe that when, not if, the bubble bursts, there is going to be a lot appraisers hauled into court even over 2070 reports accused of "misleading" the lenders.

The higher fees I charge, the more clients I have obtained and the more income I have generated. Why should I deal with mortgage companies? They can get a 2070 or whatnot from a Realtor for far less than we can afford to charge.

ter

 

[Ross (CO)]

JimBob, .....You are so right, this industry of ours is changing. What more proof is there.....digital cameras today vs. going to the corner pharmacy twice each day with rolls of film and picking up prints. A decade ago we thought the SUV was only for a mere few vehicle makers who had the guts and genious to make those big "cars". Now, everybody (o.k., one may not be there yet) who has a line of cars also has an "SUV", even if they are small and look frail, stupid and ugly. There is a rampant failure of many to call some things "appraisals" when they are not appraisals by every semblance......as they did not involve an eyes-on full inspection of the property and 3 formal and complete approaches to a value conclusion.

I am not one who is on the "inside" for knowing what is happening at the top of the USPAP food chain, and all I can do is observe and read and draw some conclusions based on what my gut tells me. I suspect the rules are about to change. "Rules" change in the NFL, the NBA, and even in the game of lacrosse which I officiate each spring. Last year's rules do not over ride this year's rules. Do I like the possibility of seeing smaller fees for some of my services in the future ? Absolutely not. Wouldn't that be great if we got at least $300 for ANY service and "report" we submitted ?

If you were a painting contractor and some guy called you and asked you to paint only the east and 1/2 of the south side of his house, would you say you were sorry, would have to decline, and state that you only paint houses when you can do all four sides in the job order ? What if lots and lots of homeowners started ordering painting jobs with 1 and 1/2 sides being painted, would all painting contractors be out of work ? Some probably soon would be, and some would accept the job for doing 1 and 1/2 sides and create a written work agreement that states that the homeowner only wanted 1 and 1/2 sides to be painted and that task was satisfactorily done....please sign here, Mr. HomeOwner. No, I have not called my E&O carrier yet. No, I have not spoken directly with any one of the group of officials on out State Board. At present I am just, and still, an observer, as is each and every one of us.

 

[Terrel L. Shields]

Perhaps another analogy or two. If paint contractor only paints front and side, his fear may be that others seeing the job will figure he either was too lazy to do the whole job or was run off for doing a shabby job. Many contractors would eschew doing anything that might be visible and suggest to the general public that the quality of their work (which relates directly to the amount they can charge) is substandard. Likewise, a mechanic might refuse to guarentee his work with parts you bring him. Same reason. He is not going to vouch for the quality or condition of parts you bring. He is going to use quality parts because he does not want you coming back 3 days later saying it does not work and him having to stand behind his work for free over a defective part.

Surveyors are expected to perform to one standard AND BE RIGHT. Title Insurance and opinions are expected to be to one standard. Anyone hear of lenders cutting corners on surveys. "gee, mr. surveyor can't you just run a quick wheel over the boundary lines with your hand compass and call that a survey? and charge only $200??" Or, "Standard Title, please write a legal for the property. Don't worry about checking records, we're pretty sure there are no liens, so just certify it.....and if you find a lien, CALL BEFORE YOU PROCEED. We will not PAY IF YOU GO FORWARD."

In my opinion, the 2055 is a substandard product, approved by fannie mae or not. Further, if you certify that you did an exterior inspection, but only as a drive by, the question is did you really do an exterior inspection. No, you inspected the front and possibly that part that is visible from the road. Few subdivisions in my region have alleys. Many have wood fencing. Can you tell what is even there? Pool? Covered patio? whole back of house without siding?

In court when the lawyer questions you about the Exterior inspection that you CERTIFIED THAT YOU DID, and asks what was in the back yard and what was the condition of the [roof, septic, pool, etc.] whatcha gonna say? "Well, your honor, when I say I did an exterior inspection, I really meant was an inspection of 65% of the exterior and I have not a clue about anything else."

It is what you did not see that magnifies your liability, not what you do see. Any appraiser who even does 2055s, in my book, is capable of doing el cheapo work [and that includes me]. It is like comparing a $69.99 Macco paint job to real craftsmanship from a reputable paint shop. We are undercutting ourselves without any reason to do so. If appraisers refused to do 2055s, then let the brokers do BPOs for $50. When the default rate points its finger at brokers then the clients will want real appraisals.

 

[Pamela Crowley (Florida)]

Excellent post Terrel. I really enjoyed your analogies and you are correct. Except... the lenders are setting us up to get us out of their way. For every deal where we don't agree with the Realtor who applies pressure to the loan officer and us and the LO applies that pressure on us to do the WRONG things, they claim that we don't know what we are doing. Too often, due to the lack of proper education and enforcement, they are right.

Two things are badly needed - not just for appraisers but for our whole society.

#1) Take the choice of the appraiser OUT of the hands of ANYONE that has something to gain when the deal closes.

#2) ENFORCE the already existing laws.

I agree with you completely regarding the 2055, especially the drive-by only. I will do them but the fee is the same the URAR because I do just as much or more work in order to do it properly plus have to add those disclaimers that are necessary because they wanted less than what I really should do. My interior 2055s are complete appraisals in my workfile, most often the report format is a limited appraisal. I do not plan on bending over for anyone to do the 'comp check' 'appraisals' no matter how 'legal' they make them appear to be. These are just one more appraiser 'set-up' to use the Appraiser's E&O for next to nothing, that's all. It's beyond my comprehension that any self-respecting Appraiser would do these. Unfortunately, there are now way too many that have no self-respect.

 

[Steve Owen]

Ter, I thought about replying to this question last night, but got tired and put it off. You said it better than I could have.

It's not that the 2055 isn't a valid product for some circumstances. IMHO the problem is appraisers who don't have enough backbone to speak up when this product is ordered under circumstances where it should not be being used.

Cookie cutter sub-division, lots of data, apparent good maintenance, etc.; I have no problem doing a 2055 (with lots of disclaimers), especially in a case of low loan to value ratio. But, if there is anything at all unusual, I will tell the client they need a complete appraisal.

 

[The Bob]

I agree with those who stated a 2055 should not be used if you believe it would lead to a faulty conclusion. As I have posted elsewhere on the forum, the criteria for when a 2055 is used is incorrectly based on the borrowers credit, not on the type of property, as it should be. As appraisers we need to be aware of this and notify the client if an upgrade to a URAR is warranted. I am fully aware that there are those appraisers who will do as instructed no matter what. This topic is not about when a 2055 is appropiate. Its about how our industry is evolving in repsonse to changes in the lending industry. You may not like it, but you can be assured it will continue. I certainly have enough confidence in my integrity, knowledge and ability to give the client what they want at a price that is satisfactory to both of us.