FHA does not allow Departure?

[Farm Gal]

From another thread on the general forum about 2055's:

FHA does not allow Departure and always requires a Complete Appraisal.

Ben, I respectfully disagree!

HUD specifically does NOT want a complete appraisal on their REO FHA appraisals which are completed 'as is' rather than 'subject to'. They instruct the appraiser to present the land value, but instruct the appraiser not to complete the cost approach. (I generally do it anyway and retain in my workfile as a check on myself).
BUT IMNSHO

FHA's are Not always required to be complete appraisals

.

Ok maybe you are considering and not developing therefore still complete but is it possible that this is a limited? But if the client say not to perform the work it CAN result in a limited appraisal with departure? yes, no?

 

[Ben Vukicevich SRA]

Lee Ann,

See I told you we had a dilemma in the 2055 post and that I'm not a USPAP guru.... Those guys never seem to jump in on this HUD stuff and USPAP. Now I know why HUD never turns any appraisers over to the state appraisal boards-no one can figure out how to prosecute under 4150.2. Damn, I'd even get up early to go to a state board meeting to see those guys try to grip an appraiser on USPAP via 4150.2 violations. That would be better entertainment than the forum here.....

Read Page 4-3 in 4150.2. Under Scope, they want a complete appraisal with no departure. Then you have the old rule about no Cost Approach on homes over 1 year old which directly conflicts with the Complete Appraisal requirement in some instances where a Cost Approach would be applicable to your peers, like on that 13 month old home. :lol: :lol:

Then turn to Page A-3 and read the Cost Approach for REO's which says it's "generally" not required but if justified, to follow the specifications outlined in Chapter Four. So we turn to Page 4-5 and look at the chart and bingo, check out the last box for existing, regardless of age. It says "market acceptability of cost as an indication of pricing and value" is the test.

So, I guess a Complete Appraisal is always required. If Cost is applicable, you must do it to make it complete. If it's not applicable and you throw in a statement like "the Cost Approach is not applicable due to the inherent difficulty is estimating accrued depreciation in older homes, (or in your REO scenario,) "for REO properties which typically exhibit excessive depreciation," then it is still a complete appraisal as you stated in your post.

Hey, it's FHA. What do I know????

Ben

PS

Read the paragraph below the chart on Page 4-5, that's of some help also.

 

[Farm Gal]

:lol: :lol: :lol:
Thanks, Ben:

I knew you could rise to the occassion!

You ALWAYS get the FHA guru award! 8)
USPAP guru trainee award is hereby bestowed :wink:
for ability above and beyond the capabilities of normal men and women to reconcile the vagaries of HUD vs the hax of USPOOP!
(always the hard part) :roll:

Me I jus' listen in on training sessions, and do what the client and intended user printed instructions say-ed to do and try to stay on the right side of USPAP at the same time!

Now I gotta go read my homework so's I can quote chapter and verse too

 

[Ben Vukicevich SRA]

FHA Guru??? :?:

Me?? 8O

Nah. My kids call me the "font of useless knowledge." :lol: :lol: :lol:

I like that title better.

Seriously, if you follow the HUD instructions for REO's, who's gonna know and who's gonna complain. Not HUD... Take the money and run.

Now you have entered into one of my real pet peeves. I really don't want to reconcile HUD and USPOOP. I really think that if the intended user sits down and writes you an detailed appraisal instruction book, then we shouldn't have to deal with USPAP at all. USPAP should be for FRT's and John Q. Public appraisals and that's it. Ben's first page of USPAP would be: If the Intended User is a GSE or government agency and has written an appraisal guide, then USPAP is null and void. Follow their book. That's it. Ben's one page, simplified USPAP for residential appraisers.......

FHA/VA/FNMA/FHLMC all have their own appraisal books. They really don't need USPAP and can sanction their appraisers faster and better than the states. So what do you think of that idea from the font of useless knowledge?????

Wouldn't life be great without USPAP-just blindly doing what the intended user wanted????? without looking over your shoulder and wondering about USPAP compliance.

Ben

 

[Farm Gal]

FHA Guru??? :?:
Ben's first page of USPAP: ----------- Follow their book. That's it.
-------------------
Wouldn't life be great without USPAP-just blindly doing what the intended user wanted????? without looking over your shoulder and wondering about USPAP compliance.

:twisted: yes, YES, YES! :twisted:
I vote you as Chief in charge of fixing the problem, I will write letters on your behalf and pass the hat to keep you in place....

 

[bradellis]

Ben,

Read further in the book 4150.2. Departure is allowed if you explain why. Don't have my manual handy, but it IS in there.

Also, the HUD REOs do not prohibit the cost approach. That would be an M&M thing. But, on 2-4's they want a rent schedule, and then they want an income approach! Guess they do not go into these properties.

Can you figure out a way to do an income approach on an "as is" basis where the property is uninhabitable? What is the economic rent on an uninhabitable property? Zero. So zero x GRM = zero. DUH?

Mad Mel is the chief of DUH. Watch for his new RESPA ideas. Extra DUH. Oh well, It is all a part of the War on Terrorism. No?

Brad Ellis, IFA, RAA

 

[Ben Vukicevich SRA]

Brad,

Ha!!!

Show me yours (from the book) and I'll show you mine.....

Me first...

Read for additional reference to what I already posted...Page 5-1 under Departure from HUD requirements:

It says you can depart from HUD requirements (whatever they are) but states at the bottom of the same paragraph that--Departure from USPAP is not permitted for an appraisal submitted to HUD.

We got to get on the same departure level!!!!!. I'm now departing to do two appraisals....I'll look forward to your response when I get back..

Maybe Mad Mel will let both you and I rewrite the new 4150.3, coming to an appraisal forum near you in the spring of 2005........Now that would be a book. Hell, we could even let Brad Pack write a chapter--maybe the one on Significant Digits and Rounding. I always loved that Chapter. Never figured it out but loved to read it.....Where is Brad #2 or is he Brad#1, I forget??? He's been very silient.

Keep thinking Summary Complete, Summary Complete for HUD

Ben

 

[bradellis]

Ben,

Yep, I was just atlking about departure from HUD guidelines.

I did have a discussion with Drew Smith when the handbook was done. They were aware that it needed some modifications. And we could argue all day over whether or not omitting the cost approach is departure or not. I say, and teach, do it. it is easy, doesn not ake any time at all and then there is never a question. Others say that the scope of work is defined by HUD, and that it is not necessary, and most FHA appraisals do not contain it (true).

But, then I was never one to go along with others!

Brad #2 is doing fine. Talked to him yestrerday and he is doing some HUD reviews so he will not be commenting too much- too busy.

By the way, the revision of the handbook is done but HUD will not release it.

All the best,

Brad Ellis, IFA, RAA

 

[Mike Garrett RAA]

Since when does the cost approach not apply? You can develop a cost approach on any property....it just might not be the best indicator of value and carries less weight then the market data approach.

USPAP says the appraiser should consider all approaches to value and then decide which ones apply. Two statements I love to see in an appraisal are:

1. "the cost approach was not developed because it was too difficult to determine depreciation" Isn't that what we are paid to do?
2. "the income approach was not developed due to a lack of rental data"
<span style='color:red'>Give me a break, what you really are saying is...."I am too lasy to go find the data".</span>

In my not so humble opinion...every appraiser should do a cost approach in every appraisal. How else do you determine the land value in older developed areas where there are no lot sales?

This has served me well over the years as a statement why I do not develop an income approach:

<span style='color:darkred'>"The subject serves it's best function as an owner occupied single family residence; therefore, I have not developed the income approach to value"</span>

Thus sayth the old guy....who likes the cost approach as a vehicle to demonstrate the principle of substitution when setting the upper end of the value range. Did I say that correctly? The mind is the 2nd thing to go, and I can't remember the 1st!

 

[bradellis]

Mike,

Anyone who knows me knows how firmly I believe in the cost approach. I virtually always do them, except for obvious circumstnces, like condos, where data does not exist to value the undivided interest in the common elements. But, you were looking for an exception, so here is one I think is legitimate:

An historic home where the historic nature of the home is attributable only to the improvements. If, say a Frank Lloyd designed and built home were destroyed by fire, one could never replace the contributory value of that achitect's skills. You could replace it, of course, but it would never again be a Frank Lloyd Wright built home, althoug the design portion might remain.

This would be ne the times in which I would not deem the approch to be applicable.

Just last week I had a guy tell me he could not do one on a 24 year old ranch because it would violate USPAP. I kid you not.

Brad Ellis, IFA, RAA