Confusion with Exterior Only Appraisals....

[PrincessLeia]

@Terrel L. Shields, Thank you very much. That's what I was looking for. But this also doesn't say we are not allowed to use an EA about the condition.... It says we need adequate information.

The date of the latest version of the 2055 cert is 2005. So how long ago was "back in the day".

Actually, the last 2055 I did was in 2015. It was a pre-foreclosure. And I was unaware of the restrictions on these because I'd had my license for exactly 1 year, and my mentors didn't exactly "train" me. It was more like they took anything and everything they could get their hands on and they gave most of those to me, since I could do them myself without a shadow during the inspection... I was an "admin *****" for them and still, I predominantly worked for free. (I think I made $20 per appraisal when my "mentor" made $325). I honestly don't even think he was aware of this limitation on the scope of work. It wasn't until I got my license and started really digging into things, speaking with other appraisers, etc that I learned this and thus, stayed away from 2055s ever since then.

However, the second part of my question still stands.... How on earth are lenders supposed to get a pre-foreclosure appraisal for a property where there isn't a recent MLS and the appraiser can't get inside? This is obviously needed... So, how do we service our clients without committing appraisal sins.... Again, the form does not state we cannot use an extraordinary assumption. It says we need adequate information about the property characteristics.

 

[shrubberyvaluation]

Back in the day I did exterior only appraisals under the extraordinary assumption that the interior was similar to the exterior, or if there were recent MLS photos within the last 1 or 2 years, that the interior condition had not changed significantly from the date of the last sale. If we don't have interior access... how do we know? Hence, the EA.

Then COVID came along and we were not allowed to make assumptions. We were supposed to rely on homeowner's photos, etc. I did not feel comfortable with that & took a hard pass. I kept doing full interiors for the last several years.

Now, with the forbearance period ending, quite a few lenders need/want pre-foreclosure exterior only appraisals. I've searched the FNMA selling guide... it only mentions desktop appraisals and the various full interior appraisal forms... the Exterior only is suspiciously missing.

Can anyone update me on what the deal is with this? I feel like I missed something. The COVID rules are now over. Can we go back to making an EA about the interior condition of a property in order to complete an exterior only?

For instance: I have an order (I haven't accepted yet) to ascertain market value, I believe it's in pre-foreclosure. The last time the property sold was in 2009. Being distressed, the owners aren't going to let me in. And the lender needs to know what it's worth. How on earth are we supposed to appraise these if we're not supposed to use Extraordinary Assumptions about the interior quality/condition?

Thanks in Advance,

I've always turned down 2055 so I don't know. I heard tales of people trying to game it (not pre-foreclosures) by putting on a new roof, siding, exterior doors but the inside was not livable.

 

[shrubberyvaluation]

@Terrel L. Shields, Thank you very much. That's what I was looking for. But this also doesn't say we are not allowed to use an EA about the condition.... It says we need adequate information.


Actually, the last 2055 I did was in 2015. It was a pre-foreclosure. And I was unaware of the restrictions on these because I'd had my license for exactly 1 year, and my mentors didn't exactly "train" me. It was more like they took anything and everything they could get their hands on and they gave most of those to me, since I could do them myself without a shadow during the inspection... I was an "admin *****" for them and still, I predominantly worked for free. (I think I made $20 per appraisal when my "mentor" made $325). I honestly don't even think he was aware of this limitation on the scope of work. It wasn't until I got my license and started really digging into things, speaking with other appraisers, etc that I learned this and thus, stayed away from 2055s ever since then.

However, the second part of my question still stands.... How on earth are lenders supposed to get a pre-foreclosure appraisal for a property where there isn't a recent MLS and the appraiser can't get inside? This is obviously needed... So, how do we service our clients without committing appraisal sins.... Again, the form does not state we cannot use an extraordinary assumption. It says we need adequate information about the property characteristics.

They can either get it on a non Fannie Mae form without the pre printed certification restrictions or they can find someone willing to not follow the certs on their report.

 

[PrincessLeia]

Okay, I just spoke to a colleague and she clarified something for me. For the sake of a written record in case other appraisers have the same issue, I'm noting it here...

The issue with the 2055 is the check boxes in the reconciliation section. Yes, we CAN use an extraordinary assumption to complete these. We obviously want as much data as possible in order to be credible. And the scope of work in the form (as provided by DWiley above) states we need adequate information about the subject including condition. But there are circumstances where this is not possible, such as in this case with a property that was last sold in 2009 that is in pre-foreclosure.

The check boxes at the bottom of the form state: "As Is", " Subject to completion as per plans & specs," "subject to the following repairs," or "subject to the following required inspection."

I personally think the reason we hear "you can't use an extraordinary assumption" is because you can't use an EA and then mark "As Is." It is contradictory. It is either AS IS or it is NOT AS IS if you use an EA. That said, I dont even know why the 2055 form has an "As Is" box... that seems asinine. But there you have it... it's there.

So, the most appropriate box to check would be the "subject to the following required inspection" so that the appraiser can verify the interior condition once the owners are evicted and the foreclosure process is underway. Doing so gives the client an idea of the current market value with the extraordinary assumption caveat. And checking the inspection box gives the appraiser an "out" in the event that the interior does not match the EA. So everyone is covered. The problem is, most clients don't want you to check the "subject to" boxes. I suspect enough appraisers have completed these incorrectly in the past and lenders expect it to be "as is."

That said, I will inform my client that I need to check the "subject to" box because there is insufficient data requiring an extraordinary assumption. My thoughts are, they will likely cancel the assignment.

Normally, I too would pass on 2055s. However, with the 18 month forbearance period ending, interest rates going up, etc, I think we're going to be seeing a lot more of these in the future. I appreciate all of your responses above. Thank you.

 

[PrincessLeia]

Never were we able "to assume" current Value from past information.
I have had exactly the same situation. When I contacted the lender-rep'... she said just DO IT as countless other appraisers DO.
I responded with the last information was from many years ago (just like your example). She huffed & puffed, actually got irate.
She said IF I found it necessary, she would send the appraisal she had on file. It was FROM 2002.
My response was " Did she need a RETRO-appraisal from 2002?"
Round-&-round, she became more irate. So I copy-pasted the exact verbiage from the FORM INSTRUCTIONS she had ordered. LOL!!
She said she had NEVER heard of That and SHE had never been questioned. And sorta...Who in the Hell-was-I?

We parted ways. So, this brings a point of contention = THE THIRD PARTY WILL ORDER ANYTHING because it is just 1 PROPERTY on their LONG LIST to get Assigned. THEY DO NOT CARE! And with the NEW FORMS...they will NOT CARE.

HOW much time does ONE appraiser spend on finding out (FREE of charge) Information to EVEN DO the service?
Upgrade THE FORM type? Then re-negotiate the (proper-fair) FEE and then they GO SHOPPING for CHEAPER.

YEP that is sure to SAVE TIME. Same old spin. Shortage of appraisers my arse.

Dear Ramrcdk,

If this were a standard refi, you bet your @$$, I'd just make them upgrade to a full. But this is a pre-foreclosure. So, the homeowners won't let you in and the lender needs to know a market value. Hence, why I posted this. There is a need for exterior only appraisals on pre-foreclosures regardless of how much data we have about the interior or not.

Good for you for sticking to your guns and educating her. I too have done that. I've also lost clients. lol. In most cases, they were bad clients anyway and my life is a lot calmer without them in it.

 

[Dublin ohio]

So, the most appropriate box to check would be the "subject to the following required inspection" so that the appraiser can verify the interior condition once the owners are evicted and the foreclosure process is underway

Would never work. No lender would agree to that. It would be months before you could go back and do an interior. Why would you need a pre foreclosure appraisal to begin with. Just wait until you have possession.

 

[shrubberyvaluation]

Would never work. No lender would agree to that. It would be months before you could go back and do an interior. Why would you need a pre foreclosure appraisal to begin with. Just wait until you have possession.

I never understood the point of a pre-foreclosure appraisal. If the borrower is not paying, why does it matter what the collateral is worth at that point in the decision on whether to foreclose or not. guess if

 

[Dublin ohio]

I never understood the point of a pre-foreclosure appraisal. If the borrower is not paying, why does it matter what the collateral is worth at that point in the decision on whether to foreclose or not. guess if

In house accounting. You have to know the value of your non performing assets.

 

[James Mpls]

I wonder how many people have been incarcerated for performing 2055 HUD pre-foreclosures with an EA.

Hahaha!

 

[Gingerman]

I have been getting some requests that I am interested in at least trying once. My issue is I haven't done one in nearly 5 or 6 years.....as an apprentice!
Product type: FHA 2055 exterior
Intended use: FHA/Ascertain market value

This interests me. I am very aware that after 1 I may decide I am not doing anymore. My issue is even though I did a couple as an apprentice, it has been so long I feel like I basically have never done one before. It is foreign to me.

I am not hopeful about this request in the slightest but it is worth asking. ANY CHANCE you or anyone has a sample file of the 2055 to use a reference or could you point me in the direction of a good resource???

I would pick my first one or few very carefully. The one that caught my attention was a property that was new construction in 2020 and sold on the MLS. Something like that I would try. Something that hasn't sold since 2000 and never been on the MLS, I probably would not even consider.