Hypothetical Site Size -- Appraising only 5 acres from larger tract.

[Fred]

Michael,
Thank you for compliment.

What does the ASB do? Release a bunch of FAQ to confuse/shroud the issue.

In 2000, I was glad to see the words "as is" finally make an appearance in an ASB document (Statement-10), even if it was by way reference the federal regulatory agencies. I can't find anything in the required, tested knowledge that speaks about where the term "as is" comes from, what it means (no hypohteticals) and any plain-speak addressing the idea of how to know when the hypothetical is necessary (like it wouldn't be credible without one).

That said, I was never happy to see SMT-10 in USPAP, because I never could figure out how to put into to report that I was using standards that were both contained within USPAP and somehow supplemental USPAP at the same time. I thought SMT-10 should be an AO.

Now, that will happen as an entire package of changes to this is being proposed by the ASB in the exposure draft of changes to 2006 USPAP. The concept will make it even more incumbent on appraisers to have even more knowleddge that the Appraisal Foundation does not have in its Body of Knowledge, uniform standards or other communication.

The short of it is that the Supplemental Standards Rule will be deleted, the definition of Supplemental Standards will be modifed, SMT-10 will be re-written as an AO and perhaps become a more generic opinion about standards that add something to USPAP. The way these changes seem to be shaping up, it will no longer be possible to say that contradicting some Fannie form crap violates USPAP because of the Supplemental Standards Rule, because there won't be a Supplemental Standards Rule.

Depending on what goes into that AO, the chasm between the basic survival (followign orders) they teach in form-filling school and what an appraiser capable of protecting the public trust must know will either grow or shrink. I plan to give the ASB input on what I think needs to go into that AO and it will include some plain and generic statements about "as is value." I am also thinking this issue has to include mention of the other side of the coin, hypothetical conditions.

There are three threads this week on the same point. This, the barn thread that you were in, and another on whether one should capitalize actual income or market income for as is value (and that one is a poll split 50-50.

 

[hastalavista]

Denis

And in a world where you have to support that your scope is appropriate, isn’t that definitive? When something is unsupportable, in't it self-evident that no one will be able to come with support?

It is.

I used to believe that there could be a legitimate purpose for a lender to know the HC value prior to making a lending decision. I haven't found one, and unless I do, I now consider there isn't a legitimate purpose.

(Greg- Copy me on that postcard, if you don't mind!)

 

[Fred]

I used to believe that there could be a legitimate purpose for a lender to know the HC value prior to making a lending decision. I haven't found one, and unless I do, I now consider there isn't a legitimate purpose

That's my exact thoughts. I'll believe it if someone can come up with one. I can, however, think of a whole bunch of illegitate ones.

 

[Don Clark]

Throwing a monkey wrench

Just to throw a monkey wrench into the fray....the new 1004 forms are used by VA for their "Liquidations"/foreclosure appraisals. When an appraiser cannot get in the property, the property specific form(1004,1073,1025) is still used. then you have to ammend the report by stating that the certifications that apply to an interior inspection, sketch, etc do not apply. There are other examples of how we not only can but must deviate from the "rules" that fannie Mae has laid down when using the new forms. Let fannie argue with VA, I will not. However, if the forms are used for a conventional loan, I would stick with what Fannie Mae requires.

 

[Mary Tiernan]

and on to another appraiser they go . . .

The Credit Union representative I was speaking of phoned me personally and asked why I would not utilize the new 1004 form. I explained Fannie's rule about hypothetical spltis, and the wording in the Limiting Conditions.

Well, says she, I don't understand as our other appraisers have done it this way on the new forms for us.

Well, says I, I believe your other appraisers are not performing adequately for you, and I refuse to do the report this way as I would be providing a misleading report and could get my license revoked. I told this lender where the statements are in the Limiting Conditions, why any use of an extraordinary assumption or hypothetical condition other than that preprinted on the form would be converse to what I was attesting to by signing the report, and on and on . . .

Says she, I must talk to my supervisor and my client.

A little while later, she phones to say, they are just going to have another appraisal completed. . . . .

ARGH!!!!!!!!!!!

 

[hastalavista]

Says she, I must talk to my supervisor and my client.

(my bold)

Too bad you cannot talk to her supervisor; or, better yet, the EVP/CEO of the credit union. They are a Federally Regulated Institution (most probably) and are regulated by the NCUA, which signs on all the inter-agency regulator letters.

Many credit unions have jumped on the sub-prime bandwagon, offering 2nds and HELOCs. They are not as well versed as the mainstream lenders or the mainstream sub-prime lenders; this is not a "dis" against the industry, but rather a fact that as an industry, it is a relatively new venture.

Their learning curve will drastically accelerate when the regulators start auditing portfolios (this is not a question of "if", or even "when", but rather, "who's next on the list").

 

[Mr Rex]

Alamode allows me to put the words copyright diagonally across my report and provides a pre-printed addenda that explains a little about copyrighted material. Where is the scarlet letter, that says this report has been violated by a lenders request, and the nice neat pre-printed, done under protest addenda, for us form filling keyboard jockeys? They want hypothetical, when will the form providers provide us with the ability to paste Hypothetical across our reports? With that and the Copyright thing diagonally in the opposite direction (X), it will be almost useless, as it should be.

 

[Hall McClenahan]

A little while later, she phones to say, they are just going to have another appraisal completed. . . . . ARGH!!!!!!!!!!!

Is this not the type of information the Fraud department of Fannie Mae wants a heads up on?

 

[CANative]

they are just going to have another appraisal completed. . . . . ARGH!!!!!!!!!!!

I doubt if this issue will resolve itself anytime soon.

Back when I joined the forum in 2003, one of my first gripes was the 5 out of 20 appraisal. I was shot down by most of the forumites and I had very few allies. Back then I was so new to the business that I didn't even know why this was wrong for lending purposes. It just didn't "feel" right and I supposed I was miffed about having to do more work that I wasn't going to get paid for. It was especially irritating when they would come back days or weeks later.

The issue can only be understood by extensive reading and re-reading of USPAP, correspondence from the regulated institutions, GSE directives, documents, FAQ's and other communications as well as long term peer discussion of the topic. And even after that, I'm sure there are many appraisers with impressive credentials who follow this forum that will disagree completely but they lack any source data to argue the point in their favor. So they stay quiet. And appraiser's who don't keep up with current peer practice... Forget it.

So how can you argue the point with mortgage lending desk jockeys? You can't. It's too easy for them to just

have another appraisal completed. . . . . ARGH!!!!!!!!!

 

[Ms. Janet]

I taught Santora everything he knows.

Yeah, but you still haven't taught me everything YOU know.

I'll send you a post card.