Cost Approach For 2055 Exterior Only Form

[STEVE POON]

I have been asked to provide cost approach for 2055 exterior only form. In my opinion, it is not applicable for 2055 exterior only form.

Would someone please advise?

Thanks in advance.

 

[Otis Key]

First question is: Why oh WHY are you even doing a 2055 on the new form?

Next: They want it for insurance! That's not what your providing on an appraisal that shows market value!

 

[STEVE POON]

The form is NEW Fannie Mae Form 2055 (03/2005) version. If the cost approach is applicable, I would complete it. But, for exterior inspection only, how could we provide the creditable total estimate of cost new.

The Cost Approach would be highly unreliable and might be misleading, right?

 

[Annemieke Roell]

First of all I would like to second Otis' question as to why oh why you are doing them.

Second, without inspecting the interior I don't see how you can do a proper cost approach without a whole bunch of assumptions.

I would explain to the client that there is insufficient data to support a value of opinion based on the CA. However, if they insist on having one I'd be happy to arrange for an interior inspection and convert the 2055 to a full URAR. For an additional fee, of course, plus a second trip charge.

 

[Couch Potato]

The cost approach is not now, nor has it ever been part of the typical scope of work for a 2055 whether done as a drive-by or with an interior inspection. If it is a request being made before the appraisal is done, tell them to order a 1004 with a normal fee. If it is being made after turning in a 2055 report, tell them to order a 1004 for an additional fee (probably less than a normal 1004, but when added to the 2055 fee is more than a normal 1004 fee.)

 

[Webbed Feet]

Mr. Poon,

You are obviously not up on the latest. ... There are so few situations where anyone other than a crazy person would ever use the new 2055 that it's barely worth even considering agreeing to use that form anymore. ... If you use it you are required to verify virtually everything you use in it with a disinterested third party... There are so few cases where most appraisers are going to be able to do that it's not practical with the liability any longer. With the time involved attempting to do it ya might as well just inspect the dang thing.

Not being able to invoke additional Extraordinary Assumptions and the new 2055 is like mixing oil and water... You either need to read up on the liability you are taking or your really desparate for work.... If you are not well enough informed about that property to be saying you do not see how you could do a valid cost approach without inspecting the interior.... Then there is no way you have enough "Third Party" verified information to do a exterior based appraisal reported on the new 2055.... the only way you could do so would be by using EA's that are not allowed in the certifications.

Someone wants you to provide a replacement cost based on unconfirmed data for insurance purposes... Your client should not have ordered an exterior only.

Barry Dayton

 

[Ross (CO)]

How young is the subject property ? Have you personally already done a full-interior appraisal on that property within, say, the past 1 to 2 years ? ......and can therefore rely upon YOUR prior workfile to avail your observation notes and apply such toward any CA now.

You might simply communicate that the client's desired and requested "scope" for your work does not allow adequate data to be obtained and therefore any reliable CA can NOT be performed. Share that it would be inappropriate for your "market value" opinion to be applied in any manner by which it could render any bias or influence toward the cooperative insurance-related decisions being made between property owner and their hazard insurance provider. (Have the hazard insurance provider calculate a replacement cost to compliment their needs within the policy being written or augmented.)

An assignment upgrade to full-interior is the only sane way that you can provide Fannie's "not required" information for the extended benefit of the client......and since the new form is being requested then it has a predominant destination likelihood of being Fannie, so a rendering of estimated site value still remains a piece of needed information. Wouldn't that be nice though, if you actually did have true market sales of similar vacant lots nearby from which that estimate could be (better) supported......and you are not working in some subdivision that was completed when we were landing a man on the moon !

These new 2055's are catalysts for disaster, and I'm not doing them. Aside from their CA request just how comfortable are you with certifying to the interior aspects, rooms, features and conditions ? Do you have good data ? Have you seen this home's interior before ?

 

[Fred]

Steve P,
I’ll bet they want the cost approach for insurance. Why don't yo ask them.

Mr. Dayton,
Unless Fannie is an intended user, you can change any of those conditions listed in the form’s boilerplate that do not apply.

 

[CANative]

 

[Webbed Feet]

Mr. Ross,

Even if I had inspected the property six months ago I would still want to use a EA that nothing significant had changed since my last viewing of the property. .. Trying to do exteriors with the new 2055 with what's on that form, and it's new certifications is a complete non-starter to me.

Mr. Santora,

Refusing to use the new 2055 at all for exterior only stuff just makes more sense. ... I know some are trying to marry up the new 2055 with the old 2055's certifications instead of using the new 2055 certification pages. ... I would feel that to be another receipe for disaster. ... If some MB slips through one like that Fannie for any reason at all could force that lender to buy back the loan later due to incorrect certifications. ... At a later date I would feel it to be a hard task for the appraiser to then prove the engagement allowed use of the new 2055 with the old 2055 certifications.... Some of the stuff people are pulling they better get in writing from their client before hand it was disclosed and agreed to.

Barry Dayton