Is this a USPAP Violation?

[Valleydude]

I am doing a date of death appraisal not for a loan of a 4-unit small income property. The general purpose Small Income Property form is inadequate in the rental comparable section because it does not illustrate each individual unit's rental amount whereas the Fannie form does. However, the Fannie form has language hardwired in it about being for loan purposes which is misleading to the client and a USPAP violation. The old version of the Fannie form does not have any language about being for loan purposes and does not have an attached certification or limiting condition. There is a generic certification and limiting conditions that can be added with no language about being for loan purposes. The only issue is that the old Fannie form does say it's a Fannie form on the bottom of each page. The question is, is it still a violation of USPAP to use the older Fannie form for a non-lending assignment?

 

[George Hatch]

You can add the individual unit rent breakdown in an addenda or as 1-liners in the comment field. That's the cleanest and simplest fix. But, you can also do it the hard way by hacking around the Fannie form.

In general, "the form" isn't what makes an appraisal report usable and not misleading to its users; the appraiser does that. It's common for appraisers to employ hacks to overcome the weaknesses of a form within the context of that particular assignment. In any case, the form is supposed to work for the appraiser, not the other way around.

 

[Valleydude]

You can add the individual unit rent breakdown in an addenda or as 1-liners in the comment field. That's the cleanest and simplest fix. But, you can also do it the hard way by hacking around the Fannie form.

In general, "the form" isn't what makes an appraisal report usable and not misleading to its users; the appraiser does that. It's common for appraisers to employ hacks to overcome the weaknesses of a form within the context of that particular assignment. In any case, the form is supposed to work for the appraiser, not the other way around.

Thanks for the reply. What do you mean by "hacking around" the form?

 

[George Hatch]

Things we do to clarify or even contradict the verbiage or structure of the forms.

Personally, I despise the 1025 because the SC grid uses the sale price as the dominant unit of comparison (all adjustments are applied on the line item basis to the sales price itself). Meanwhile, the 71a/71b and the old 2-12 unit multi-family form that preceded it all operate without an actual adjustment grid and the appraiser is working with the other units of comparison (price/unit, price/room, price/sf and GRM). Which actually works better when your comps don't share exactly the same number and mix of units.

 

[Valleydude]

Things we do to clarify or even contradict the verbiage or structure of the forms.

Personally, I despise the 1025 because the SC grid uses the sale price as the dominant unit of comparison (all adjustments are applied on the line item basis to the sales price itself). Meanwhile, the 71a/71b and the old 2-12 unit multi-family form that preceded it all operate without an actual adjustment grid and the appraiser is working with the other units of comparison (price/unit, price/room, price/sf and GRM). Which actually works better when your comps don't share exactly the same number and mix of units.

Thanks again for the reply. Just spoke to BREA and he said what you said. Best to make the GP for work because the old Fannie form, although having no language about being for loan purposes, still may imply to someone that it's for a loan.

 

[sputnam]

USPAP doesn't mention which forms you can or can't use to communicate an appraisal. The issue with using Fannie/Freddie forms for an appraisal when the Intended Use was something other than lending is exactly what you mentioned... the built in language. Using a Fannie/Freddie form may require a lot of additional commentary over riding and clarifying some the preprinted language. Or.... you can just use the GP form or write a narrative. Personally, I think the GP form is greatly superior to the Fannie/Freddie forms. Not sure why more appraisers don't use it for non lending work... unless they are simply unwilling to do the extra work it takes to get used to it.. and to maybe create templates for it.