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Proposed Construction On A 2055?

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apt20

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Oct 10, 2012
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Certified Residential Appraiser
State
Illinois
Just received an order from a off and on Client. Local bank, no AMC. They have ordered an appraisal of proposed construction on a 2055. Any one ever done this? All of the proposed construction I have done is on a 1004. I've called to ask her a few questions but have not heard back as of yet. She has accepted any fee we wish to charge, along with fees for periodic and final inspections. Thoughts please? Thanks in advance.
 

hastalavista

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May 16, 2005
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Certified General Appraiser
State
California
In many ways, a 2055 (drive-by) for a proposed construction valuation makes perfect sense.

What is the difference between a 1004 vs. a 2055? Inspection of the improvements, right? In the proposed construction scenario, the improvements are proposed, so (presumably) you'll be working off plans & specifications. You will still drive-by the site and the comparables. The inspection of the improvement is a Scope of Work thing; you would develop your value the same as-if the inspection had been completed.

Seems to me your client has ordered exactly what they need. You (or someone else) will likely be engaged to complete a 1004D with an interior inspection to ensure the property was completed per plans/specs.

Good luck.
 

Michigan CG

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I am guessing FNMA computer won't accept any 1004D without having 1004 completed first.

Otherwise I agree with Denis.
 

apt20

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Illinois
I am guessing FNMA computer won't accept any 1004D without having 1004 completed first.

Otherwise I agree with Denis.

That's kinda where I was going with this. I agree with you and Dennis, there really isn't any difference in the forms when proposed construction, however, my issue is when its complete. That's why I am waiting on a call back to confirm a few things.
 

apt20

Junior Member
Joined
Oct 10, 2012
Professional Status
Certified Residential Appraiser
State
Illinois
In many ways, a 2055 (drive-by) for a proposed construction valuation makes perfect sense.

What is the difference between a 1004 vs. a 2055? Inspection of the improvements, right? In the proposed construction scenario, the improvements are proposed, so (presumably) you'll be working off plans & specifications. You will still drive-by the site and the comparables. The inspection of the improvement is a Scope of Work thing; you would develop your value the same as-if the inspection had been completed.

Seems to me your client has ordered exactly what they need. You (or someone else) will likely be engaged to complete a 1004D with an interior inspection to ensure the property was completed per plans/specs.

Good luck.

Thanks. I agree for the most part, and definitely have plans and specs to work off of. My question is the same as MichCG. Will FNMA accept a 1004D with no 1004?
 

hastalavista

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Certified General Appraiser
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California
Thanks. I agree for the most part, and definitely have plans and specs to work off of. My question is the same as MichCG. Will FNMA accept a 1004D with no 1004?

1. I don't see why not in this case; this isn't subject to a repair; it is subject to completion. However, please share when you find out.
2. I wouldn't presume this is going to Fannie Mae. This may be a construction loan. And, if it is, I recommend you verify with the client that they will accept a as-complete value using a hypothetical condition of the completion date being the date of inspection. Otherwise, they may want a prospective value (as-when completed). That can still be done on a 2055 (IMO) but you will also need to include an as-is value of the site.

The GSEs (Fannie/Freddie) will loan on a to-be-constructed home. They are not making the "construction loan" (funding the construction); they are committing to making a conventional loan on the property once the house is complete. When they do this, they ask for a value as-if the improvements are complete. In order to do this, we complete the appraisal using a hypothetical condition that the improvements are complete as-of the date of our inspection.
Fannie may will not make a construction loan on a consumer's single family residence.

Federally regulated institutions (banks) also make loans and some of them are non-Fannie/Freddie. They make construction loans. A construction loan is exactly what it sounds like; they are funding the construction of the improvements. Usually, the construction loan is closed out once the home is completed/sold.
The basis of that land (the collateral) is the value of the land. Such loans fall under FIRREA and the Interagency Guidelines. These types of loans always require an (a) as-is value and usually require an (b) prospective value. In this case, the value of the site (or, if it has improvements that are going to be demolished, site + improvements) are the significant valuation items as this is what the lender is holding as collateral. I review a lot of these types of reports for a bank. Many times, the appraisers (who are very comfortable and knowledgeable about the Fannie rules) fail to support their as-is value (and many times do not complete the H&BU analysis properly).

You are communicating with your client to find out exactly what they need and to share your concern regarding acceptability of such a report to Fannie/Freddie. Kudos to you for getting clarification.
But, if this is not a Fannie loan, and the client needs an as-is value for a construction loan, you'll now have some background to digest that request as well (and if you already know this stuff, I apologize!).

Good luck!
 

apt20

Junior Member
Joined
Oct 10, 2012
Professional Status
Certified Residential Appraiser
State
Illinois
Thanks Dennis! It is a construction loan and they are willing to accept an as completed value as of the date of inspection. Typical of what I do for all proposed construction I do here for local banks. Most of what we do doesn't go to Fannie/Freddie, so I am familiar with what you posted. There are items in the request that lead me to believe they are going to Fannie/Freddie (which I left out of my original post, should have included it) which is why I am waiting for clarification. Again thanks for your time and input. You always seem to be johhny on the spot with helpful advice.
 

RSW

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Feb 18, 2002
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Certified Residential Appraiser
State
Tennessee
Sounds like the construction loan is not going through Fannie Mae and is staying in house. So, it really doesn't matter. Fannie Mae retired the 2055 form several years ago. That does not stop lenders from still using it.
 

BRCJR

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Virginia
Fannie Mae ( or Freddie Mac) does not make loans, do they? They buy loans, don't they?
 
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