Fannie Mae's instructions for 2055/2065/2095 appraisals

[Dave Smith]

There has been a thread in progress regarding doing an exterior 2055 without contacting the owner. The following quote is straight from Fannie Mae. If the appraiser can't get adequate information from reliable third party sources they are to contact the lender to upgrade to an interior inspection or withdraw from the assignment. It seems eems very clear that an exterior 2055 shouldn't be done if you don't have the information. No guess work, no assumptions, no way!!!

Exterior-only property inspections

The option for providing a streamlined appraisal that is based only on an exterior inspection of the property
(using Form 2055, 2065, or 2095) is based on Desktop Underwriter’s risk assessment of the mortgage and
the appraiser’s ability to obtain sufficient information about the physical characteristics of the subject
property from reliable sources. When Desktop Underwriter recommends an exterior-only property
inspection, the appraiser’s description of the physical characteristics of the property should be based on
what he or she considers to be reliable data sources for the property and location. The appraiser should
use the same type of data sources that he or she uses for comparable sales. Acceptable data sources
include the following:

multiple listing service (MLS) information,

tax and assessment records,

information from prior inspections or previous appraisal files, and

information provided by the property owner.

If the appraiser’s exterior inspection of the property does not provide sufficient information about the
subject property to perform the appraisal, he or she must also inspect the interior of the property or
withdraw from the appraisal assignment. Some of the reasons why an appraiser might choose to inspect
both the exterior and interior of a property include the following:

the appraiser cannot adequately view the property improvements from the street;

the appraiser is unable to reconcile significant discrepancies among the available data sources with respect to the
size, condition, or other factors about the property;

the appraiser observed apparent physical deficiencies or adverse property conditions during the exterior property
inspection; or

the appraiser needs additional information for a property that is undergoing renovation.

Although Desktop Underwriter identifies which transactions are eligible for the exterior-only inspection
option, appraisers are responsible for determining if adequate information is available about the property to
develop a reliable appraisal without inspecting the interior of the property. Appraisers cannot rationally
develop an appraisal if adequate information on the subject property is not available.

 

[Ray Ohler]

just relate that to about 1/3 of the certified appraisers in the US. I know appraisers here who "pride" themselves on the fact that they "will not get beat on a fee" because they collect the fee (in cash of course) AT THE TIME THEY DO THE "DRIVE-BY" INSPECTION. I ain't making this up. It happens. My reply, "well, since they were at the property when you did your drive-by, didn't you AT LEAST peek?". Answer "NO, they only wanted a DRIVE-BY. I give my client WHAT THEY WANT". :twisted:

 

[Tim Hicks (Texas)]

If you do an "exterior only" inspection, I don't care how good you are, you have no way of knowing the actual condition of the interior of the home. My personal experience tells me that many home owners are not honest when conveying their property condition to me. I do very few "drive-by" appraisals, but can guarantee that there is no way an appraiser can do as diligent a job on a "drive-by" as he can with a full inspection. The discrepencies on living area alone when compared to the County Tax Records makes any "drive-by appraisal" suspect. How many times have you done an appraisal where the home owner has bragged about their remodeled kitchen, but somehow failed to mention that their master bath was gutted or they have some other project that renders any completed updates nil? I submit to you that no assignment is appropriate for a "drive-by" appraisal. That being said, I have gotten better values upon upgrading to a "full" appraisal, but some lenders only want the cheap, less effective appraisal because of low loan amounts or other reasons. Yes, we control whether a "drive-by" is appropriate or not, but no appraiser can "guarantee" any property value without a full physical inspection. My x-ray vision just is not that good. Drive-by's are flawed, poor excuses for property valuation and should be regarded as such. Trying to color them as anything else is ridiculous.

 

[Doug in NC]

Tim,

I agree. The whole driveby concept is a big guess. I don't do many drivebys either. I try to discourage them by charging a driveby fee that is very close to the full fee. I don't like the driveby appraisal at all. Your tax square footage figure is often inaccurate, you have no real idea of the actual condition inside, and taking the homeowner's word for anything is a definite risk. Let's give the banks whatever they want though, they make all the rules.

Yet, I am told drivebys and the AVM are the future of appraising (at least until the foreclosures reach an all-time high). It will be a pleasure once I wean myself off of the traditional lender-loan appraisals. If I had to rely on them for all of my income for the next 5 years, I would definitely be getting out of this business. :x

Doug

 

[bradellis]

That original post, from memory, did not specify that this was a desktop underwriter program assignment.

If it was, comments are correct; if not, then an assumption is being made here that does not apply.

You can use this form for assignments that are not generated by Fannie. I did tons of them for home equity loans that had nothing to do with Fannie.

It is quite true that you cannot know the condition of the interior- even if you did speak with the owner. But, USPAP contains a provision for an extraordinary assumption that is fully usable in just this sort of circumstance.

Fannie Mae buys only about 13% of resdiential loans in the U.S.

Brad

 

[Red Blumenstock]

I too, am one who would not accept "drive-by" or "Exterior only" appraisal assignments. In my opinion, the potential for significantly increased liability simply made the assignment not feasible.

In my area, one of the primary means of home heating was oil. Some of the tanks were buried and some were above ground, but almost always in the rear of the house. In an "exterior only" inspection, how does one know that these tanks are not UST's or LUST's? If there is a LUST, and you make no mention of it, are you not subject to a suit from the purchaser who takes possession and then encounters a multi thousand dollar clean-up requirement?
This is not absurd. I was involved in an appraisal in which the owener was suing the former ower, the Realtor and the Appraiser for recission of the contract and payment of all expenses, because he had a $50,000 environmental cleanup in a $75,000 proprety.
There are many other possibilities also and you can be sure that when push comes to shove, the lender and everybody else is going to be looking for deep pockets and the appraiser is always suspect there. Why do you think lenders want to see the Errors and Omissions Insurance data.

I shudder to think what liability the "Drive-by" and "exterior only" appraisals are generating.

Red

 

[Ray Ohler]

The new "text messaging" AND "The New Economy"? Well, now the banks and lenders have "The New Spelling". E&O is their way of spelling PMI. :lol: Well, it would be funny if it weren't true.

 

[Francois K. Gregoire]

There has been a thread in progress regarding doing an exterior 2055 without contacting the owner. The following quote is straight from Fannie Mae. If the appraiser can't get adequate information from reliable third party sources they are to contact the lender to upgrade to an interior inspection or withdraw from the assignment. It seems eems very clear that an exterior 2055 shouldn't be done if you don't have the information. No guess work, no assumptions, no way!!!

Thanks for the information Dave. With just a little bit of communication with the Loan Officer and/or the Loan Originator and some marketing, perhaps the borrower will end up with something useful rather than a 2055/2075. If borrowers understood the small difference in fees (if any) which type of appraisal report do you think they would choose?

The St. Petersburg Times did a story on this in August, 2000.

THE DRIVE BY APPRAISAL