FNMA guide lines

[Frederick R. Ruffell]

Are there any FNMA or USPAP guidelines/regulations that would limit the use of a limited report (i.e. no cost approach used) on a "new construction" (i.e. less than one year old)?

 

[Oregon Doug]

I'm understanding your post to ask 'what in USPAP would preclude me from using the limited appraisal format (2055/no cost approach...) in appraising a newer home (less than a year old)?' If that's correct, I would suggest a quick read of SR1-2(f), lines 597/8 in particular and then look at SR1-1 (a) & (b). Then you can go on to the reporting standards also...

As a working appraiser (one of your peers), I typically would include a Cost Approach in the appraisal of a newer home (less than a year old).

That's how I see it,

Oregon Doug

 

[Ray Ohler]

My question would be : Why WOULDN'T the cost approach be required, especially in the valuation of a new or newer construction property? If the original post was simply to find a way to report the appraisal results on a 2055 form, an addendum could always be supplied doing the cost approach (assuming it was applicable). Then again, you might DO the cost approach and just report the results somewhere on the form. I don't think THAT would be misleading.

 

[Ben Vukicevich SRA]

Guys,

I got gripped-up on the same thought by the USPAP gurus on the forum awhile ago. I used the same thinking, it's a new or recently new home, my peers would typically do a Cost Approach, so I did one on an Addendum.

Not to worry evidently. The client is not asking you for one so you don't have to develop one by mutual agreement

Read Items 8 and 9 in the 2055 Certification.

Ben

 

[Farm Gal]

I would do one, mention that I did one and stick it in the file. They want a copy they can pay extra :twisted:

They told me not to give it to 'em, doesn't preclude my working it up on my own.

I prefer to ascertain reasonable compliance with professional practice.

 

[Ben Vukicevich SRA]

Lee Ann,

Me, being a basically lazy guy, has to ask why would you want to do a Cost Approach and then assume the liability for it when the client (O' Great FNMA or FHLMC) says it's OK not to do it......nor do they want it. I also have to ask why we do Cost Approaches anyway when FNMA/FHLMC will not lend on a value derived by a Cost Approach but that's a different story......

Depart and.. be thankful. Else you must change all the wording to "complete appraisal".........That's too much trouble for me......They designed the form so nicely as a limited. Just another Addendum to insert that no one cares about...then if the report type stated is not prominent or is confusing to the reader. ..Oh, boy. USPAP and defining report type stuff. You know those famous words....Let it be.... :lol: :lol:

Ben

 

[Ray Ohler]

"mutual agreement" doesn't apply if an approach is applicable or appropriate. Maybe if you're doing a 60 year old property where the cost approach may not be applicable/appropriate the certification would CYA. I still say, if its appropriate in the valuation, you should still DO a cost approach and, at the very least, report the findings somewhere within the report. And, in keeping with accordance with No. 9 of the Appraiser's Certification, include the definition of a "complete appraisal".

PS - Ben, if you read #9 all the way through, it states ....(unless I have otherwise indicated in this report that the appraisal is a complete appraisal...)

 

[Farm Gal]

Ben:
Anything over 5 years is unnecessary to develop (in my opinion) Between 1-3 around here (slow grow market, not a lot of sales and disparate competing subdivisions) is in my opinion due dilligence, and frankly has made me take a second look at a few which had 'something else' going on. I have caught a few strange occurrances when taking a closer look at the lot sales than I would have done if just developing market approach... I tend to run with lot/area generalities in the market grid, for cost approach I am more likely to crunch a few more specific numbers.... doesn't take all that much time to 'rough one out'.

I would not fine tune a cost approach to the degree I'd do if submitting to a client, but as a yardstick under the circumstances mentioned if in MY market, YOU BET!

Your market conditions may vary and no warrenty about national applicability is intended

 

[rtubbs]

I echo Ray's and others comments. If the cost approach is applicable and necessary (as with new construction), I give them a complete appraisal on the Form 2055. I just include the M&S Square Foot Cost Form.

If the cost approach is applicable but not necessary to produce credible results, I invoke the departure provision and give them a limited appraisal.

Most of the appraisal requests that I see asking for a Form 2055 are generated from the Fannie Mae Desktop Underwriter or the Freddie Mac Loan Prospector with a check box to indicate a full appraisal or a drive by appraisal. I doubt that loan officers using those systems know what a limited appraisal is and certainly wouldn't know what a departure provision was. I'm not sure that when we say "as mutually agreed to..." that the requestor knows what they're agreeing to.

 

[Ben Vukicevich SRA]

Here you go. Read the FNMA 2055 crap.


The Uniform Standards of Professional Appraisal Practice require appraisers to identify their appraisal reports as a self-contained report, a summary report, or a restricted report by stating the applicable category at or near the beginning of the appraisal report form. The Appraisal Standards Board has expressed the opinion that Form 2055 is consistent with a summary appraisal report. However, when the appraiser does not develop the cost and income approaches to value because we do not require that they be developed, the appraisal is considered a limited appraisal that is subject to the Departure Provision of the Uniform Standards if these approaches to value would otherwise be applicable under the Uniform Standards. On the other hand, if the cost and income approaches to value are not applicable because the omission of these approaches for the particular type of appraisal assignment is not a departure from the Uniform Standards, the appraisal will be considered to be a complete appraisal (and the appraiser must so specify in the appraisal report).


I just follow blindly............


Ben