My new one for this year

[Tim Hicks (Texas)]

I have been appraising for over 12 years and every year something new or strange comes up. Friday, I get a REO appraisal assignment from a little used mortgage company. I examine the appraisal order and it is a five family property with five addresses that they want appraised. I call them back and tell them that I can not appraise it because it is more than a four family property. Well, the last appraiser did. I suggested they call the last appraiser. They can not because they have to use a different appraiser on the REO appraisal. And besides, he put it on the URAR form. I explained that I have not seen the property, but I politely declined the assignment. I just did a fourplex apppraisal in this city and had one comp within the last year. Some assignments are not worth any fee. What is your opinion?

 

[Terrel L. Shields]

Hearty agreement. 5 parties is an apartment by definition..commercial. Not comfortable doing it, don't.

I quess a question I always had was when you appraise (3) duplexes or fourplexes....is that 1 -4 family or apartment? These are often built on 3 separate lots, and sold as a block.

The 1-4 family definitions are not really very good, and subject to some debate as to what is what.

 

[Bobby Bucks]

Tim at least they requested it on the URAR form. I had an AMC send me a request a couple years ago for a 12 unit commercial strip center and they wanted a 2055 interior with 24 hour TAT and no comp photos. *lol* The AMC took the liberty of calling both agents to get in touch with yours truly to get the appraisal completed promptly. Believe it or not, but some days it is no fun here at the ranch.

 

[Stone]

I have been getting requests (and doing them) for hobby farms of 40 or fewer acres to be done on 2055's. The lenders I work for have an easier time selling the loan on that form, so I can do it. One benefit is that I have little use for the cost approach on old, fair to poor condition barns and outbuildings. If they want a cost for the buildings that are in useable condition, I do the cost for those and put that in the addenda. It is still better than doing a cost approach with 80 - 100 percent depreciation. Particularly when there are 10-12 buildings, and only contribute to the value in the market.

 

[Dale Smalley]

The Cost and income approaches to value are of little merit to the REO market. The info most needed is the AS IS market value and the repaired value. Then a decision on how to liquidate the asset can be made.
So do to a 5 unit on a URAR or 2055 interior is a reasonable request, but you will also need a repair addendum and some active listings. Most likely they are trying to price the property for sale. In theory the REO AS IS value + the repairs should be similar to appraised value when purchased.

 

[Carnivore]

Dale,

How would I as an investor interested in buying the subject determione if it was cost effective? If I was still interested how would I determine the rate of return was sufficient an in line withe market upon reading your 2005?

Thanks

 

[David S. Roberson]

Dale,

What's the purpose of the report, and who's the intended user? If it's REO, the mortgage holder won't be concerned with rate of return like an investor would.

 

[larryhaskell]

Andrew:

My take on Dale's comments were that the 2055 could be completed to give the current owner the as is & as repaired values so the could make the determination on how best to sell the property. The 2055 would not be completed for or have limited use to a potential buyer.

 

[Dale Smalley]

I have been working with the REO dept lately. These are properties that have already been foreclosed on and need to be sold. REO Real Estate Brokers are notorious for lowballing the values. That causes a wide variation from the appraised value when the loan was made to their estimate of how much they can sell the property for now. Therefore an REO appraisal is needed for the purpose of marketing the property for sale. So Andrew is right this report would not be right for an investor or buyer. The bank or the mortgage company is not interested in income or being a landlord. Of course they would be foolish just to give away valuable properties for less than market value. At some point we have to explain to the boss why a property is now worth 40% less than when they made the loan.

 

[Mike Garrett RAA]

I respectfully disagree! Income property is income property...be it single family residential, duplex, triplex, fourplex, or what ever. In order to properly compare the comparables to the subject property a prudent appraiser would consider the income and expenses. This is best reported on a small income form for those properties of more than one unit. For single family you could add those forms to the URAR.

For years VA and HUD permitted us to use the URAR but that was changed a couple of years ago. I am comfortable reporting up to 4plex on a URAR BUT the intended user of the appraisal report might be mislead. For that reason I prefer to do them on small income form. A side benefit to us is usually higher fees!

The cost approach should always be considered. Now you might choose not to include it in your appraisal .....but you should consider it. For me it is a personal choice to do the cost approach if for nothing more than establishing the land value AND defining the depreciation.

The more we try to simplify our appraisals and appraisal reports ... the more we open the door for AVMs.