Interesting personal thinking from an insider...

[maitca]

John:

First of all, call me Tim. We are all friends on the forum (I hope!).

Let me again respectfully disagree. As part of disclosure the appraiser must indicate that the appraisal is limited (or limited in its scope). Ergo, USPAP has a requirement that, if the appraiser departs, the appraiser must indicate the departure and indicate the the appraisal is limited. That's what I mean when I say that USPAP requires the appraisal be labeled.

As to the label "complete" you are right, there is no such requirement. Its inclusion may be a matter of explanation, courtesy, or clarification. However, I'm willing to bet that during the initial interview with the client, either the client or the appraiser clarifies the status of the appraisal so there is no confusion on the part of either party. Thus, in the engagement letter, there is a label (although not one required by USPAP).

Thanks for your thoughts. By sharing thoughts we learn.

 

[Bill_FL]

2003 USPAP does not state specifically that the report must be labled limited if the departure rule is invoked.

It does say however, that using the term "Limited Appraisal" makes clear that the assignment was somthing less than a complete.

I think that would be a "suggestion" to use it without saying you have to.

 

[maitca]

Bill:

Thanks for the post.

Lines 964 - 969 say (in part), "Use of the term "Limited Appraisal" makes clear that the assignment involved something less than or different from the work that could have and should have been completed if departure had not been invoked. The report of a Limited Appraisal must contain a prominent section that clearly identifies the extend of the appraisal process and the departure taken." (emphasis mine)

Forgive me for being a USPAP-weenie. This seems to me to be more than a suggestion. It does not, however, require that the appraisal be labeled as "limited"; but it looks like the "...prominent section that clearly identifies the extent of the appraisal process performed and the departure taken[.] is effectively a label.

I'm probably wrong. Just ask my wife.

Thanks for the interesting discussion.

 

[Fred]

Absolutely no requirement to use the term "limited"?

Standard 2-1 says
a- no misleading,
b- contain sufficient information for proper understanding,
c -clearly and accurately set forth any Limiting condition.
It seems reasonable for someone to call omitting the term 'limited' insufficient to meet any of these criteria.

Getting more specific about exactly what it does require-
2-1c says the setting forth of "limiting" conditions MUST be "clear"
2-2 says using "the term limited appraisal makes [it] clear."
So, first it specifically states what you absolutely must do (make it clear)
and then it specifically states how to make it clear (using the term 'limited appraisal').
Also, omitting the term 'limited' is not "ACCURATELY setting forth" the 'limiting' condition as required by 2-1c

The Departure Rule refers to typical practice is
- what other appraisers do and what the market expects to see
I think it safe to say that typical practice is to disclose with the word "limited" and typical review practice would be to disagree with omitting the term.

There is more, but that should be more than enough. Building an argument solely through the narrow prism of what a document does not specifically state the same as complying with what it does state and avoiding what it says to avoid.

 

[EDWARD BERRY]

BEN,

YOU IS USUALLY right, however your offer for us to cost out a house simply cannot work.

An accurate COST Approach comes FROM the market, EACH market.

Austin has the correct method.

Over the years, gather al the data on new new house, then after taking the knowns out (site, site imp etc.) that gives an over all $/SF.

Then break that down fre the components.

Then give the M&S book a proper grade catagory fot that property.

Thus, when an older with similar features sells the depreciation can be calculated. From that an effective age is determined.

7,500 appraisals done this way, some right on , some missed.

ed in arkansas.

 

[Ben Vukicevich SRA]

Ed,

I was just recommending the Cost Approach via the Marshall Swift method so that we could see how competently it would be completed following a standard format that requires very little thinking..the Marshall Swift 1007 form... just trying to prove my point that it can not be competently/accurately completed by a majority, even using the national and local multipliers.

Now as far as abstracting costs from the market, you must have very consistent builders out there in Arkansas. Out here, they will hide closing costs and concessions anywhere in the price of the home to make the deal. How do you handle concessions? Unless you have a contract showing the options on each home, market abstracting costs is just blowing smoke. How do you account/abstract for luxury options that you'll never know about like granite counter tops verus formica, upgraded hardwood flooring versus standard carpeting? You can't. It may have been an alright technique in the old days ( 1950's Levittown suburbia) when people didn't put all these upward price skewing items in their homes but today, forget about it. How about silly things like the buyer needs extra money to close but doesn't have it but really wants the house at any price...so they and the builder agree to charge a "heavy" lot premium to cover closing costs? I've seen them all. How about the national builder that uses their mortgage company to make a profit for them? You know. The ones that will give away thousands in free options, a free finished basement, a free rear sunroom, if you use their mortgage company? They will skew effective prices lower because they are making more profit on the mortgage end than on the building end. Ever notice how every major builder has their own mortgage company? They just shift profits back and forth between companies so that you'll never abstract anything accurately. How about national builders that don't have a clue about market value? They're out there. Are you going to abstract costs from them? Example: I have one builder mortgage company client that hasn't a clue as to the market. Their main goal in life is to meet the unit goal set for them by the national headquarters each year so they can get a bonus at year end..and keep their jobs. The national division sets a percentage profit they must meet and that's all they do. They figure their cost to build, plus the land and add the profit requirement, then wonder why they sold stuff so fast. They're happy and the national division is clueless but happpy also. Is that a market cost? Nope.

So without interviewing the builder and knowing all the inside dope, you'll never know about concessions or freebies and most won't tell. All you get to see is the recorded deed which is not much help. No, I'll still stick with the appraiser is not competent to estimate Cost New. Only a local builder or architect or other recognized expert is truly qualified to do so. Just for a hypothetical-If you went to court and you only did the Cost Approach, wouldn't you want an expert to Cost New the improvements for you? I would because I don't have a license in that area. I'm not a recognized expert at cost estimating and the MS book isn't going to measure up to the problem at hand, if the other guy opposing me is a cost expert.

Ben

 

[EDWARD BERRY]

BEN,

I understand what you are talking about.


WE are in a backward State, but we see these houses go up, know the builders(no national, all local,) know the Realtors, know the abstractors. lenders, appraisers, etc.

Thus all them blinds, counter tops, etc are known to someone that will talk.

They proably violate the privacy acts, they work with us VERY good.


Lucky in Arkansas.

 

[Carnivore]

Ben,

You really have hit the nail on the head in regards to what a cost approach should be able to do for us. Right now, I am having a time ferreting out concessions. These builders know exactly what they are doing. Town homes and condos are doing something new. Outside maintenace in the past was the HOA total responsibility utililizing maintenance reserves and ect. Now one developer has lowered his fees(being more competitive) in monthly cost but given some of the maintenance directly to the homeowner(deck and porch repair and upkeep.) I understand others our beginning to do the same and look for even other areas to cut.

One builder has joined MLS and is now reporting the sales prices incorrectly. My reviews are catching appraisers not checking two sources for verification. And He is also showing rediculous upgrade prices.

And they think AVM's are the answer. Yea right, Boy am I glad this is going on, its skewing AVM's as we type at this forum.

 

[maitca]

Steve:

Read my post again. You'll see we agree. Thanks.

TIM

 

[Ross (CO)]

Andrew - C, ........So right you are about many a new home builder or new and developing condo project. The condos may be more secretive. It's like "pulling teeth" to get simple questions answered about final sold prices, possible concessions of financing, and upgrade incentive offers. How conflicting is it to differentiate true value from upgrades that one buyer paid for....versus similar upgrades that another buyer got for free ? I guess one waits till these units experience a first re-sale for their equilization to set roots in that market area. No wonder they get distraught when we use first re-sales with enhanced completion details and maturity in the market.....and can recognize that those buyer #2's are getting the better deal. Some developers do not post their available inventory in the MLS and strive to sell units out of their on-site model unit sales office. Many listings they might eventually create can be chock full of errors about the sold price, and whether a base level gets finished or not before sale, etc. So true, just the perfect mis-information to take AVM's down the wrong road. I did a townhome report in January, where project desparately trying to up-price their product with the surrounding custom SFR's on nearby streets, not necessarily succeeding at it, and then wheeling-and-dealing to sell off units nearing completion as compared to the subject-homeowner's grandiose vision of re-fi'ing at a new and enhanced value level. He bought in early in the project, about 3 weeks before Sept. 11th, '01, and now is seeing how major events and cyclic economics can be connected. Sorry, the value increase curve may require several more years of your ownership.....then again, the market just may decline.