Drive By Appraisal Scope

[Jeff Horton]

Been a while since we discussed the Scope of an Appraisal. I am doing a 2055 Drive by. While I was editing the scope of my Appraisal in the Transmittal Letter I thought it might be a good time to get some input on the subject. I never fail to learn something from the group!

Here is the scope and some other verbiage I put in most of my drive-by appraisals. I must admit that I alway wonder if I have all the based covered on drive-by scope.
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In accordance with your request, I have personally inspected the exterior from a public street and appraised the property located at **** ******* Road, Albertvile AL.

Scope of Appraisal The accompanying report is based on an inspection of the improvements from a public street, data provided to the Appraiser by the client in the form or the first page of a previous appraisal report performed by another appraiser, investigation of the subject neighborhood area of influence, and review of sales data for similar properties. This appraisal has been made with particular attention paid to applicable value-influencing economic conditions and has been processed in accordance with nationally recognized appraisal guidelines.

The enclosed reports are the results of a Limited Appraisal Analysis according to Standard Rule 1 of the Uniform Standards of Appraisal Practice and the Appraisal is reported to you as a Summary Appraisal Report, in accordance with Standard Rule 2-2b. The Cost and Income Approaches were not utilized in this assignment. In compliance with the Departure Rule of USPAP, the appraisal process has not been limited by the lack of the application of these two approaches and the result of this assignment based on the stated assumptions is believed to be credible. The client has agreed to these limitations with the request for this report form.

The value conclusions stated herein are as of the effective date as stated in the body of the appraisal, and contingent upon the certification, assumptions and limiting conditions attached.

The Purpose of the this Appraisal is to estimate Markets Opinion of Value of the property in the present condition in terms of cash or in financial terms equivalent to case.

The intended use of this report is to determine Markets Opinion of Value for the use of the client listed in the report. This report may not to be used by anyone other than the client and his assignees for any purpose.

 

[Bobby Bucks]

Jeff I'll email you mine. I don't like posting them for all the world to see.

 

[Austin]

Here are a few extra ones I got from the E & O company to protect them:

The property is appraised as if free and clear of any existing financing. This appraisal report is prepared for the sole and exclusive use of the client to assist with the lending decision and is not valid for any other purpose. The appraiser is not a building or environmental inspector. This report should not be relied upon to disclose any conditions present in the subject property. The appraisal report does not guarantee that the property or improvements are free of defects. A professional building and environmental inspection is recommended if that is a concern to the client. The appraisal was performed without benefit of title report or survey plat and the physical features of land and improvements were taken from the public tax data records.

 

[George Hatch]

Overall, pretty good.

The enclosed reports are the results of a Limited Appraisal Analysis according to Standard Rule 1 of the Uniform Standards of Appraisal Practice and the Appraisal is reported to you as a Summary Appraisal Report, in accordance with Standard Rule 2-2b. The Cost and Income Approaches were not utilized in this assignment. In compliance with the Departure Rule of USPAP, the appraisal process has not been limited by the lack of the application of these two approaches and the result of this assignment based on the stated assumptions is believed to be credible. The client has agreed to these limitations with the request for this report form.

My only comment here is that you need to decide whether this appraisal analysis process has been limited from what you would normally do when appraising this type of property or not. In the first and last sentences you are saying it is limited, but the italicized sentence could be read to imply that it isn't. One way to clear it up a little would be to modify that sentence slightly as follows:

In compliance with the Departure Rule of USPAP, the appraisal process has not been unduly limited by the lack of the application of these two approaches, and the result of this limited process based on the stated assumptions is believed to be credible for the Intended Use and Intended User(s) identified below.

Italics added.


If the Departure Rule is invoked in order to produce a limited appraisal process, the Specific Rules being departed from should be itemized and the reasoning explained as to why, while they may be applicable, they are not considered necessary to produce credible results within the context of the assignment. For example, if you were going to depart from a complete appraisal process by not developing a Cost Approach and you chose to use the Departure Rule to do so, you might consider something like the following:

I do not anticipate the preparation of a complete appraisal, that is one that does not invoke the Departure Rule of the Uniform Standards of Professional Appraisal Practice, without additional authorization.  It should be clearly understood that this limited appraisal has a lower level of reliability than an appraisal that does not invoke the Departure Rule.

Departure from specific requirements in the USPAP included:

SR 1-4(a) The appraiser did not value the site because the Cost Approach was not employed.

SR 1-4(B), (ii) (iii)  The appraiser did not value the improvements because the Cost Approach was not employed at the client’s request and because it is not a primary valuation method for a 30 year old office property in the local urban office market.

Obviously, you would put your own reasons in for why you didn't think an applicable method would be necessary for a particular assignment.


Now, using the Departure Rule is one way to limit the scope of work for an assignment. Personally, I still use it in addition to scope of work disclosures because it's very specific. However, the use of Departure is not the only way to limit that scope. There are a lot of (reasonable) people who view the Departure Rule and the concepts of Complete Appraisal vs. Limited Appraisals as being clumsy and outdated substitutes for a well-written Scope of Work. It is ironic that The Appraisal Foundation spent so much time and effort to delineate the differences during the '90s, but is now working toward doing away with these types of 'labels' in favor of simply identifying an appropriate Scope of Work based on the needs identified and defined by the Intended Use and Intended Users. There will always be binding requirements in the USPAP, but any 'additional' Specific Requirements for an assignment will be a function of the engagement within the context of the aforementioned Intended Use and Intended Users. The good thing about this is that an appraisal will end up being an Appraisal; no longer defined with other modifying adjectives, but instead defined by its Scope of Work. The bad news, if you can call it that, is that appraisers will have to be a lot more specific and direct in explaining their scope of work decisions than would have been required in the past when relying solely on Departure. This Scope-oriented approach will end up being simpler to implement, but require greater understanding (by appraisers) of the available options and underlying criteria than has heretofore been required.


George Hatch

 

[Bobby Bucks]

Jeff also bear in mind that with mine you only need 3 comparables sales. With Austin's you'll need at least 47. I'm unsure how many George requires.

 

[Austin]

We forgot the most important part: The hypothetical condition that the property is assumed to be average or whatever condition.

I have an appraisal on my desk at this moment I am doing a drive-by on. The last time I was in the house was in 1962, when I was about 16 years old. I remember it vividly. This is a two-story home with a large front dormer. I was delivering drugs for a drug store. I went to the door to deliver the drugs and collect the money. Two elderly ladies came to the front door but refused to take the package. They said I had to come inside and go up stairs and talk to Mary. I went up the steps and Mary was sitting in a rocking chair looking out this dormer with her back to me. I am looking at the picture of the dormer as I write this. She had the Bible in her lap and was praying: “Oh dear God, you know my needs and you know I cannot live without that medicine and you know I don’t have the money to pay for it. Thy will be done. Amen.” At the time I was making 75-cents per hour. That prayer cost me about 4 hours work but God saw that she got the medicine.

 

[wyecoyote]

Austin,

We forgot the most important part: The hypothetical condition that the property is assumed to be average or whatever condition.

Would this not be an extraordinary assumption not a hypothetical.

Since a hypothetical assumption is that which is contrary to what exists and an extraordinar assumption is which is based upon an assumption if found to be false may affect the opinions and conclusions of the apprasial.

Ryan

 

[Austin]

Ryan:
Good man: I just wanted to see if any one was paying attention.

 

[Mike Garrett RAA]

And what, pray tell, is wrong with the language in the certification on the 2055 form for the scope of the work? At our last 4 hour seminar put on by Liability Administrators their attorney said...."avoid like the plague writing this stuff yourself". Good way to put your, ahhhhh, well you know in a sling! We are appraisers...not lawyers. Appraisers appraise, lawyers write weasel words.