Requirement for Commercial Foreclosure Appraisal

[Nebs50]

A client needs and appraisal on two commercial parcels. The parcels are adjoining, but have completely separate uses. The parcels do not infringe upon each other and could be sold off independently. One parcel is a small restaurant and the other is a small grocery store. Both parcels are owned by the same person and are in foreclosure. The lender needs the appraisal for foreclosure purposes.

1. The lender has requested this be one appraisal for both parcels. Is that possible?
2. The lender would like a restricted appraisal done. What are the appraisal requirements for a property in foreclosure? Are they different from a refinance or a purchase?

 

[Paul Isolda]

Any number of properties can be appraised and communicated in 1 report. It sounds like the valuations would have to be separate. 2 separate appriasals with 2 values in 1 report.

I would absolutely not do a restricted report because it can be relied upon by the client themselves only. Any number of other parties may wind up relying on the report, most notably a judge, and by definition a restricted report would not be suitable.

 

[Nebs50]

I agree 100%.

Thanks

 

[Michigan CG]

Welcome to the forum Nebs.

Your question was posted in a section that is for the general public to ask questions. I have moved your post to the commercial/industrial section of the forum where you will get more responses.

As to your question, two appraisals in one report would be ok, although I would not want to do it that way.

As to a restricted report I would not do that. Do not let your client dictate your scope of work, the scope of work to produce a credible report is the decision of the appraiser.

 

[Vernon Martin]

A lot of lenders are drowning in loan defaults and they order restricted use reports to reduce their appraisal costs. Remember that appraisers are competing with BPOs in this arena. I think it's ok to do the restricted use format, but advise the client that if the appraisal were to be used beyond the restricted use, such as in court, that you would need to expand the format for an additional fee. A reasonable lender would agree to that.

 

[JT1974]

I would pass on the assignment. It would be one thing if the two properties were similar and basically used the same comps, but writing an appraisal of two different property types in one report is just trying to squeeze 10 lbs of potatoes in a 5 lb. bag. Technically, it can be done, but it isn't pretty.

I'm guessing the lender is thinking he/she can get a 2-for-1 deal out of you by requesting a combined restricted use report. I wouldn't play that game.

As far as requirements go, that's covered in the scope of work. In addition to my "normal" market analysis, I tend to include a lot more data and discussion relative to current listings and competitive properties when I'm doing foreclosure work. Basically, the lender wants to know what they are going to be up against when it comes time to sell.

 

[Terrel L. Shields]

A lot of lenders are drowning in loan defaults and they order restricted use reports to reduce their appraisal costs.

This is absolutely why i hate "restricted" "self-contained" and "summary". The work is the same and the difference in the report writing for me might be 30 minutes, an hour at most. The term "restricted" to the average lender connotates a short APPRAISAL...limited if you will....and they have the idea that the length of the report is directly proportional to the amount of work and liability.
I'd simply call the lender and tell them that a summary report would be more appropriate and would cost the same.
As far as i am concerned the screwball who invented the term "restricted" as it relates to an appraisal should be strung up by his/her thumbs over a bumble bee nest.

Also, if the bank itself is under bank board or FDIC scrutiny, they are very likely going to order a new appraisal if they find a report in file that they are suspecious of....these appraisals are used to value their inventory and that in turn is used to calculate the LTV ratios, etc. They need to be accurate and not a guess.

 

[Abester]

The work is the same and the difference in the report writing for me might be 30 minutes, an hour at most.

Right on, brotha!

 

[Mountain Man]

You can write both properties in one report, but it's still 2 appraisals. You'll have 2 H&BU analysis, 2 sets of sale comps, 2 sets of rent comps, etc. The only time saved would be in writing one neighborhood description... not much of a savings there. In cases like that, I quote a normal fee for 2 reports minus a wee bit for the convenience of being able to copy/paste some of the canned stuff. I generally do not win those bids, because someone out there is willing to do it the wrong way for cheaper. I just shrug them off, no biggie, I don't want clients like that.

 

[PropertyEconomics]

I do not think that restricted appraisal report means restricted appraisal fee. Thats just me. Your work file needs to meet the requirements for a summary report with regard to data and analysis ... to me you save a little bit of time on writing but none on analysis.
Charge what you see fit but that is my opinon.