Hybrid Appraisal Extraordinary Assumptions

[glenn walker]

In the old days we called them curb-appraisals - homeowner wanted a cheap estimate or range and we charged him $50 bucks just so he had something to argue with his Realtor about. No certification- No-photos and no appraisers rambling on about USPAP and liability--Now those were the days : ) LOL

 

[Terrel L. Shields]

So the Doctor does a virtual Visit(s) with you

They get to bury their mistakes. We get to face the board.

The presented "SOW" shows the very problem and as @George Hatch has apparently thought about what he just read.... Mainly you have to be an incredible wordsmith because you can screw it up with one word..BINGO. And think. This process has to proceed from assignment to assignment with each client, each assignment, each report. You write an individual scope of work long enough and guess what? You are going to have one AFU. Or two, or more. So you are going to have to spend this 20 - 40 minutes rewriting and getting approval/ approving the format. After all, the client has to approve your SOW, and you have to "determine" it...so to speak. With a gun to your head.

There was X amount of full fee work, period. There is a reduced number of mortgages. There is a lot of work that was appraisals as a substitute for an evaluation. Appraisers did them. Banks wanted an appraiser NOT some jake leg from a rubber stamping real estate firm, or the (quote/unquote) "real estate lending professionals, agricultural extension agents,..." they allude to. Great qualifications to be valuing property.

Most of the work I did from 1992 - 2014 was something that an "evaluation" could have been substituted for. These were not evaluations. They were non-Fannie Mae form APPRIASAL reports. Many were narrative. Those prepared by my helpers were generally forms using a non-lender form. They were all "appraisals". It is not the magic $250,000 that makes the difference. The difference lies in following USPAP for an appraisal and an Evaluation is that found in the AIG requirements.

The truth is about half the property appraisers need to drop their license then "do" evaluations. But if a crisis develops, the OCC, FED, and FDIC will be forcing their client banks to appraise every piece of property with a REAL appraiser. But the inevitable path, as demonstrated by the very Evaluation requirements below is the eventual valuation of property without even a human evaluator...See the last line in the IAG. The evaluation as the new appraisal is simply a set up for the elimination of all valuers and substituting a computer for value.

INTERAGENCY GUIDELINES FOR EVALUATIONS
An evaluation should contain sufficient information detailing the analysis, assumptions, and conclusions to support the credit decision. An evaluation's content should be documented in the credit file or reproducible. The evaluation should, at a minimum:

Identify the location of the property.

Provide a description of the property and its current and projected use.

Provide an estimate of the property's market value in its actual physical condition, use and zoning designation as of the effective date of the evaluation (that is, the date that the analysis was completed), with any limiting conditions.

Describe the method(s) the institution used to confirm the property's actual physical condition and the extent to which an inspection was performed.

Describe the analysis that was performed and the supporting information that was used in valuing the property.

Describe the supplemental information that was considered when using an analytical method or technological tool.

Indicate all source(s) of information used in the analysis, as applicable, to value the property, including:

• External data sources (such as market sales databases and public tax and land records);

• Property-specific data (such as previous sales data for the subject property, tax assessment data, and comparable sales information);

• Evidence of a property inspection;

• Photos of the property;

• Description of the neighborhood; or (???)

• Local market conditions.

Include information on the preparer when an evaluation is performed by a person, such as the name and contact information, and signature (electronic or other legally permissible signature) of the preparer.

 

[Mr Rex]

Check out the Solidifi Desktop Appraisal Report (4/17) available in most software packages. It's already in the pre-printed SOW & Contingent and Limiting Conditions.


SCOPE OF THE APPRAISAL: The scope of this appraisal consists of identifying the characteristics of the subject property that are relevant to the
purpose and intended use of the appraisal, as previously addressed. For the subject, this is accomplished by reviewing public record data, prior
appraisal files and/or other documentation from a disinterested source and which is considered reliable from the appraiser's perspective and cannot
include Leasehold properties, site areas in excess of 40 acres or multi-family properties. For the comparables, the data is derived from similar sources,
reviewed for relevance, selected for use through a maximum pre-determined set of criteria (within a single mile in proximity, within 6 months time
frame unless specifically addressed within the body of the report, and when the value is concluded, the sales must fall within 15% range of the
final opinion of value). The report is either failed or the final opinion of value is then reconciled.
In developing this appraisal, the appraiser has incorporated only the Sales Comparison Approach. The appraiser has excluded the Cost and Income
Approaches to Value, due to being inapplicable given the limited scope of the appraisal. The appraiser has determined that this appraisal process is
not so limited that the results of the assignment are no longer credible, and the client agrees that the limited scope of analysis is appropriate given
the intended use. The data sources for the comparable sales may include public record data services, multiple listing services, automated valuation
models and/or other data sources that become available and are deemed to be reliable. The confirmation of comparable sale data; i.e., closed sale
documentation and property characteristics, is via public data sources and multiple listing services, as appropriate. The appraiser has not viewed the
sales in the field. The data is collected, verified and analyzed, in accordance with set parameters as defined within the scope of work identified and
the intended use of the appraisal.
In the absence of an inspection, the appraiser has made some basic assumptions, including the following:
The subject property is assumed to be in average overall condition and generally conforms to the neighborhood in terms of style, condition,
construction materials and in external and economic factors.
There are no adverse environmental conditions (hazardous wastes, toxic substances, etc.) present in the improvements, on the site, or in the
immediate vicinity of the subject property.
There are no significant discrepancies between the public record information or other data source and the existing site or improvements.
ANALYSIS OF ANY CURRENT AGREEMENT OF SALE, PRIOR SALE WITHIN THREE YEARS AND RECONCILIATION: Unless otherwise
noted, the appraiser has no knowledge of any current agreement of sale or any current or past listing agreement. Prior sales of the subject property
within three years of the effective date of this appraisal have been researched and reported on the appraisal report (in the Transfer History section)
if available from MLS or public record sources. The appraiser has reconciled the quality and quantity of data available into an indication of Market Value, in
accordance with the intended use and scope of the appraisal.
STATEMENT OF CONTINGENT AND LIMITING CONDITIONS: The Appraiser's Certification that appears in this report is subject to the following
conditions:
1. The appraiser will not be responsible for matters of a legal nature that affect the subject property.
2. The appraiser assumes the title is good and marketable and, therefore, will not render any opinions about the title. The property is appraised on
the basis of it being under responsible ownership.
3. The appraiser will not give testimony or appear in court because he or she performed this appraisal unless specific arrangements to do so have
been made beforehand.
4. Except as noted herein, the appraiser has not made an exterior or interior inspection of the subject property. The appraiser assumes that there are
no adverse conditions associated with the improvements or the subject site. Unless otherwise stated in this report, the appraiser has no
knowledge of any hidden or apparent conditions of the property or adverse environmental conditions (including the presence of hazardous wastes,
toxic substances, etc.) present in the improvements, on the site or in the immediate vicinity that would make the property more or less valuable,
and has assumed that there are no such conditions. The appraiser makes no guarantees or warranties, express or implied, regarding the condition
of the property. The appraiser will not be responsible for any such conditions that do exist or for any engineering or testing that might be
required to discover whether such conditions exist. Because the appraiser is not an expert in the field of environmental hazards, the appraisal
report may not be considered an environmental assessment of the property.
5. The appraiser obtained the information, estimates, and opinions that were expressed in the appraisal report from sources that he or she considers
reliable and believes them to be true and correct. The appraiser does not assume responsibility for the accuracy of such items that were furnished
by other parties.
6. The appraiser will not disclose the content of the appraisal report except as provided for in the Uniform Standards of Professional Appraisal
Practice.
7. Unless otherwise noted, the appraiser has assumed that the subject real estate’s zoning classification complies with local zoning code.
8. Unless otherwise noted in this report, my opinion of reasonable exposure time at the market value stated in this report is equal to the indicated
marketing time noted on page 1 of this report.
APPRAISER'S CERTIFICATION: The appraiser certifies, to the best of my knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal,
impartial, and unbiased professional analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties
involved.
4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
5. My engagement in this assignment was not contingent upon developing or reporting predetermined results.
6. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent
event directly related to the intended use of this appraisal.
7. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
8. I have not made a personal inspection of the property that is the subject of this report, nor did I make inspections of the comparable sales.
9. No one provided significant professional assistance to the person signing this report, unless otherwise noted and acknowledged within this report.
10. Unless otherwise noted in this report, I have performed NO services, as an appraiser or in any other capacity, regarding the property that is the
subject of this report within the three-year period immediately preceding acceptance of this assignment.
APPRAISER
Signature
Name
Company Name
Company Address
Telephone Number
Email Address
Date of Signature and Report
Effective Date of Appraisal
State Certification #
or State License #
or Other (describe) State #
State
Expiration Date of Certification or License
ADDRESS OF PROPERTY APPRAISED
APPRAISED VALUE OF SUBJECT PROPERTY $
LENDER/CLIENT
Name
Company Name
Company Address
Email Address
04/17

 

[hastalavista]

Back to the OP post, was this EA on a URAR form, or not?

No; I would have thought most would know if it were, I'd post that.
The only way to do a hybrid appraisal on a 1004 is if (a) another appraiser inspects the property and signs on the left with a supervisor signing on the right and (b) if the appraiser who inspects the property is a trainee, they must be employed by the supervisor or the supervisor's firm (a trainee cannot hire a supervisor and pay the supervisor to sign on the 1004 form destined to the GSEs.

 

[Terrel L. Shields]

Where in USPAP does it say an appraiser has to inspect a property to do an appraisal (or if you want to go there) an evaluation?

An evaluation requires a photo and a property inspection

4. Except as noted herein, the appraiser has not made an exterior or interior inspection of the subject property.

In doing so, these are NOT evaluations. They are appraisals.

 

[Mr Rex]

Not from what I have read. https://www.appraisalinstitute.org/assets/1/7/guide-note-13.pdf

 

[TRESinc]

Not from what I have read. https://www.appraisalinstitute.org/assets/1/7/guide-note-13.pdf

he must be confusing evaluations with chicken coop appraisals...

 

[Terrel L. Shields]

Not from what I have read

Read closer. My exact quotes are directly from the IAG...and AI is quoting it verbatim. Their are evaluations, and there are appraisals. An appraiser does an appraisal. If an appraiser does an evaluation, they need to sign off and call it an appraisal (restricted or not). There is a required inspection by someone, and required photos which are not required by an appraisal.

he must be confusing evaluations

Are you unable to read? Rex is having some trouble with that this morning, too.

If you do an "evaluation" then you are violating mandatory laws in every state but two.

 

[djd09]

The AMCs are your partners. They will pick the inspectors based on the price. Working together will make dreams come true.

 

[hastalavista]

I especially don't like the idea of assuming HBU or assuming the property is worth more in its current use than as vacant.

I saw that too and I had an issue with it.
However, here is the full SOW printed on this form which states that the H&BU was analyzed (I've bolded that section and identified a typo in the report's pre-printed SOW) (and, again, for the benefit of all, this is not a 1004).

SCOPE OF WORK: In preparing this appraisal,
- Read an exterior inspection report for observable subject features. - Researched subject's current neighborhood, market trends and distressed
transactions to determine their impact on the subject marketability and current value.
- Did not inspect the interior or exterior of the subject property or comparable properties, but instead relied upon secondary data sources for verification of relevant characteristics.
- Identified and verified subject characteristics from a reliable data source such as MLS, County/City records, GIS, and online data sources.
- Researched comparable sales and listings from reliable data source(s) such as MLS, County/City records, etc.
- Verified subject prior transfers and current/recent listing history and provided findings within the appraisal report.
- Analyzed comparables that were similar to the subject and provided support for adjustments, conclusions, and data exceeding customary guidelines or conditions.
- Cleary [Denis Comment: typo in the form here; "clearly" is misspelled] stated additional assumptions that pertained to this assignment and stated opinions and conclusions about the subject.
- Researched and developed the Sales Comparison Approach. The cost and income approaches have been omitted from this appraisal assignment due to not necessary for credible results.
- Determined the highest and best use of the subject is its current use. If an additional/alternative HBU was found during the research of this assignment it is disclosed in the text addendum.
- Performed an analysis of exposure time as related to the amount of time the subject would spend on the market to bring a hypothetical sale as of the effective date of my opinion of market value.
- Developed a market value opinion and provided information that was used in developing my conclusion.
- Explained my reconciliation analysis that included support for conclusions and which method, analysis, or comparables were given most consideration.
- Provided state specific jurisdictional disclosures as required including my full license number assigned to me by my state appraisal licensing board.

Here's the comment about H&BU (Note that it allows the appraiser to state something else if that is the case; my bold):

Unless otherwise noted in the appraisal report, the highest and best use of the subject as currently improved is its current residential use. It is assumed a typical buyer would a) keep using the improvements the way they currently exist; b) make no major modifications to the way the subject currently exists and c) would not demolish the existing improvements to obtain a vacant site.
Although some alterations and updating is considered typical by market participants, the highest and best use analysis found no uses (physically possible, legally permissible, and financially
feasible) that would bring a significantly higher economic return to the owner(s) of the rights to the land.

In the context of the SOW (the appraiser has determined the H&BU) the assumptions of continued use with "some alterations and updating" isn't unreasonable. Indeed, in many of my H&BU statements, I'll make a similar comment:

The likely buyer of the subject is an owner-user. As-is, the subject's condition and configuration meets market acceptability for its buyer pool. No major remodeling or renovations are required: The likely buyer would maintain the improvements, using a normal maintenance schedule, replacing short-lived items when needed. A specific buyer may update/upgrade some of the major components (kitchen, baths) during their occupancy.



The definition of value is not the GSE's version; it is the one used for FRTs.
I did not see anywhere in the report where modifications, additions, or alterations to the SOW were prohibited.