Review of 1004D "Update"

[Fred]

Barry,

it was stated the 1004D for Updating required the use of a EA, was not in compliance with Standard 2-3, it's scope was inadequate, and anyone using it sure had better follow A03.

That’s a peculiar statement. First, don’t we all know that every “form” is "inadequate?" Second, how can someone conclude that there is non-compliance with 2-3 without having the actual cert page in hand to see what it says? Whatever is missing from the report, I’ll bet it isn’t itemized in AO-3, but rather in 2-2.

What do you think the client’s intended use of the review is? Are they asking you to agree with the value, or just explain the problems?

 

[Webbed Feet]

Additional information

Barry,
That’s a peculiar statement. First, don’t we all know that every “form” is "inadequate?" Second, how can someone conclude that there is non-compliance with 2-3 without having the actual cert page in hand to see what it says? Whatever is missing from the report, I’ll bet it isn’t itemized in AO-3, but rather in 2-2.

What do you think the client’s intended use of the review is? Are they asking you to agree with the value, or just explain the problems?

Mr Santora,

Thank you for participating. The AMC has specified the Fannie 2000 form dated 03/2005. So it's SOW should be considered what is desired for our topic here. So I take it both a statement regarding the accuracy of the value opinion and explaining problems is wanted. I do not yet know the true SOW wanted by the AMC, but they are requiring a million plus of E&O to select a review appraiser, so I think we know where this is going.

I believe the information from the class on the new forms meant that the preprinted "Appraiser's Certification" on the 1004D alone, with no supplement to it, is a USPAP violation because it does not meet the minimum standard for an appraiser's certification set in Standard 2-3. I tend to agree with this. The message was if one signs a new appraisal, one has to sign a new set of USPAP compliant certifications. Ya can't say you "incorporated" the signed certifications, from a prior appraisal with a different effective date, that were signed six months ago for what was a different appraisal.

I believe the hilarious part here is this AMC, and it's wholesale lender client, are not thinking about that they have sent out what is a 1004D update appraisal for review. NOT the incorporated appraisal that is attached as an exhibit to the update. But I bet they think they will get back a review stating an opinion regarding the original value opinion in that attached prior appraisal rather than one addressing the statement of "has market value declined since the effective date of the original appraisal" ... which is a completely different assignment and response. .. Maybe the wholesale lender does get it though... Might be one astute underwriter in agreement there is no analysis of current market data reported with this "Update" appraisal opinion.

 

[hastalavista]

Barry-

1. I would consider it a review of one assignment.

2. As to "drive-by" or not, the certification signed by the appraiser states that, at a minimum, there was a drive-by inspection of the subject.

The pre-printed form also states
"I have summarized my analysis and conclusions in this appraisal update and retained all supporting data in my workfile."

This is where the update has failed (IMO).

SR 2-2(b) (the bold is USPAP's)

(viii)
summarize the information analyzed, the appraisal methods and techniques employed, and the reasoning that supports the analyses, opinions, and conclusions; exclusion of the sales comparison approach, cost approach, or income approach must be explained;
Comment: A Summary Appraisal Report must include sufficient information to indicate that the appraiser complied with the requirements of STANDARD 1. The amount of detail required will vary with the significance of the information to the appraisal.

The appraiser must provide sufficient information to enable the client and intended users to understand the rationale for the opinions and conclusions, including reconciliation of the data and approaches, in accordance with Standards Rule 1-6.

When reporting an opinion of market value, a summary of the results of analyzing the subject sales, options, and listings in accordance with Standards Rule 1-5 is required. If such information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required. If such information is irrelevant, a statement acknowledging the existence of the information and citing its lack of relevance is required.


I read this requirement to provide at least a summary of the analysis. That doesn't mean that a sales grid needs to be provided (again, IMO).
A comment like:
I researched the market since the effective date of the original appraisal and have concluded it has been "stable" based on XXXXX.
I then researched the most recent comparables; specifically, I analyzed the following sales:
Sale 1
Sale 2
Sale 3
Using adjustments as described in the original report and which are accurate reflections of current market reaction, I have concluded that there has been no decline in market value as of the effective date of this update.

IMO, all other requirements of a summary report are included by virtue of incorporation and what is on the update form. The specific analysis need not be included in the summary, but referenced and kept in the workfile.


Now, the question is do you want to complete the review? That's the interesting question. I, like Otis, may accept the assignment and review it (but I wouldn't do it on form 2000!).

(Edit: Steven- I didn't read your post prior to mine.)

 

[Marcia Langley]

So, Barry,

How did this come out?

 

[Webbed Feet]

So, Barry,

How did this come out?

Ms. Langley,

I am thinking the AMC was shotgunning for quotes on review pricing and turn time. I poised a question to them asking if they were needing a review of the original appraisal that was incorporated by attachment or needing a review of the "Update" appraisal? I pointed out to them on the phone that what they sent me was really a new appraisal on the 1004D form.. I also pointed out to them that since the original appraisal was "Subject To" based on plans and specs that this 1004D was NOT a 442 completion certificate. (it was not checked, that section was not completed.) .. just in case they had not noticed that.....I asked if they had the completion certificate...

They never called back and never actually attempted to engage me. I wasn't going to quote them a review fee until they clarified if they were asking for a review of the 1004D second appraisal or not... As doing so on the new 2000 form as requested sounded REALLY interesting! I had not thought about that one as yet.

 

[Marcia Langley]

Thanks, Barry,

I was hoping you would get to be the test driver on this, LOL.

Like you said, it's bound to happen.

 

[Fred]

Barry
The idea that – every form is inadequate – ought to cover it.

I believe the information from the class on the new forms meant that the preprinted "Appraiser's Certification" on the 1004D alone, with no supplement to it, is a USPAP violation because it does not meet the minimum standard for an appraiser's certification set in Standard 2-3.

Even if I thought a cert was worthy of criticism - and that would be unlikely – it wouldn’t have anything to do with what someone who decided to give a class decided to say. At some point, documents have to speak for themselves: forms and USPAP.

On this specific moot point, Std 2-3 does not purport to set forth a “minimum” cert. It says the cert used should be “similar” to the example given. IMHO and often NSHO – oh, what the heck, I am downright irreverent, only a nincompoop would use the word “violation” in writing, just because he or she did not think the cert used in a review was de "minimal” enough to match 2-3 or 3-whatever.

I am also leery of the “EA” issue for two reasons. All “A”s seem to have become EA’s, since USPAP changed the name from UA and gave them a separate niche. But more importantly, it’s seems like a “ordinary” scope issue. The scope of review either calls for verifying the accuracy of the original research to some degree or does not call for verifying any of the original research – but I don’t see where either is “extraordinary.”

 

[Jim Onderisin]

That 1004D is nothing less than a resurrection of the lending industry's precious "recertification" from the dead. Fannie Mae responded when the industry said, "we want our fast and cheap recertification back."

 

[warren asher]

A comment like:
I researched the market since the effective date of the original appraisal and have concluded it has been "stable" based on XXXXX.
I then researched the most recent comparables; specifically, I analyzed the following sales:
Sale 1
Sale 2
Sale 3
Using adjustments as described in the original report and which are accurate reflections of current market reaction, I have concluded that there has been no decline in market value as of the effective date of this update.

Does the addition of these comments make the 1004D is usable for to do an update?

thanks

 

[hastalavista]

A comment like:
I researched the market since the effective date of the original appraisal and have concluded it has been "stable" based on XXXXX.
I then researched the most recent comparables; specifically, I analyzed the following sales:
Sale 1
Sale 2
Sale 3
Using adjustments as described in the original report and which are accurate reflections of current market reaction, I have concluded that there has been no decline in market value as of the effective date of this update.




Does the addition of these comments make the 1004D is usable for to do an update?

thanks

For the specific topic, it would in my book.
Again, the 1004D states:

"I have summarized my analysis and conclusions in this appraisal update and retained all supporting data in my workfile."

But then doesn't provide a pre-printed form/box/grid for any "summary" (and, doesn't need to; you can write it as I did in a few sentences).
In the form, your conclusion is summarized (about as short as can be: Has the market declined? Yes or No!). But the analysis isn't.
To adequately summarize the analysis, I think at a minimum, one would have to give the sales considered and comment on the kind of analysis performed. If one is looking at specific sales, and is completing a similar/same analysis as one did in the original report, a summary can be simply what properties were analyzed and state you used the same type of analysis process & adjustments used in the original report.

It is key to make the comment that your "new" analysis (the update) using the "old" (original report's) process is still "reflective" today of the market (still supported in the current market).

The more I think of it, I'm not even sure one needs to list the sales (althouth I think it is the best practice). One could simply say:
I reviewed the most recent sales, and analyzed the best comparables using the same analysis process as described in the original report (which is remains appropriate for this market environment), and conclude no decline in the subject's current value. I have retained that analysis in my workfile.