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One way to get economy of scale

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Steve Owen

Thread Starter
Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
I generally don't like doing 2055's. It's not that I have anything against limited or drive-by appraisals in their proper place. It's more a matter of many companies ordering the least amout of appraisal work based on the borrower without paying attention to the property being appraised. I have the same problem with one commercial client, who always tries to order a limited summary appraisal, but often on oddball properties that I don't feel comfortable doing that way.

As an example, the other day a good client ordered a 2055 Interior for a semi-rural property. I called him to ask, "Do you want a drawing with that interior inspection?" Yes, he did. "Okay, but I just thought I'd let you know that if I have to measure and draw, the fee for a 2055 is the same as for a 1004." He told me to go ahead and do the 1004.

When I got to the property, it was a completely remodeled farm house - probably 90 years old, but like brand new, inside and out. It also has a storm shelter with gazebo on top, a two car detached garage, several other outbuildings, cross-fencing, and a chicken house next door (possible external obsolescence). This property needs a complete appraisal to provide a credible opinion of value, in my opinion. A 2055 whould have never been ordered to start with, but the mortgage company, in some big city, ordered it that way because the borrower has excellent credit and they think the ltv will be low. That's not my problem; my problem is to produce a credible opinion of value that is compliant with USPAP.

I thought about this issue and went back to my time logs on 2055's done in the past. There is some time saving when there is sufficient information to do it with exterior inspection only, especially if they don't require comp photos; but, for me, there is very little time savings if I have to measure and draw and include comp photos, maps, etc.

Therefore, I re-initiated the conversation with this client. Because most of the limited appraisals he orders require interior inspection, I told him there was no cost savings to me in terms of time to do these reports. He said, in that case, everytime they order a 2055 interior, I'll change it to 1004.

The advantage to me is economy of scale. Since I don't do a large nubmer of residential properties, four or five a week at most, it is easier for me if I always use the same form and don't have to ask questions like, whether they want a sketch, comp photos, etc. I still do some 2055's, and even a few 2070's and 2075's, but overall, my business runs smoother when I stick to 1004's.
 
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