Two Values Including Prospective Opinion

[ZZGAMAZZ]

I think OP may have got confused and client don't need a prospective value opinion. Just a gut feeling.

Bingo. As it occurs so often, the AF is supported by so many super-intelligent folks that it is a humbling experience, although I also often wonder whether "most" of the thousands of residential appraisers are familiar with these nuances that appear new every durn day????

 

[sputnam]

Yeah, it can be done and I agree with the appraiser and client working that out. It is not normal in the lending the world. For a private client, I can see it happening.

It is actually quite common in the lending world. Not so common for residential properties... but very common in appraisals of large commercial properties.

 

[sputnam]

Ids about "making a call when the construction will be complete", but the value opinion is either the current effective date or a specified future/prospective value date (asked for by the client - A future value date assignment is outside the norm for res lender work as far as I am aware.

Used to see it in Relocation appraisals.

It is unusual for residential work. It isn't prohibited. Not every residential loan is conforming. The Lender/Client is responsible for knowing what they want. The appraiser's job may include offering some guidance or maybe asking "Are you sure that is what you want?" Beyond that, the appraiser accepts or declines the assignment.

 

[J Grant]

" the Interagency Appraisal and Evaluation Guidelines recommend including both the current market value "as is" and the prospective market value upon completion or stabilization, if applicable, in real estate appraisals for regulated institutions. "

They recommend it, they do not require it, and I have never heard of any lender ordering a prospective value for a conventional loan, which is what the vast majority of Q and A here references in URAR appraisals.

 

[J Grant]

It is unusual for residential work. It isn't prohibited. Not every residential loan is conforming. The Lender/Client is responsible for knowing what they want. The appraiser's job may include offering some guidance or maybe asking "Are you sure that is what you want?" Beyond that, the appraiser accepts or declines the assignment.

But this is a residential conventional lending assignment. The OP is confused and has asked this kind of thing before. OF course, anyone should ask their client if they are not sure of the assignment condition

 

[J Grant]

Improvements in this assignment include a small, average condition SFR with a detached garage.
--As Repaired plans include renovating & enlarging the DU, and a garage-to-ADU conversion [eliminating current garage requirement]
--Urban density, mixed-use neighborhood in LA City Crenshaw District is interesting with very few ADU's although an estimated 20% of the residential listings describe the garage-to-ADU "Potential" that presumably [somehow] would affect the estimated, future, prospective value.

Well IMO that sure explains the need for a current value if my interpretation of your explanation above is relatively accurate:
Current Value AS IS is the basis of the Current Value AS REPAIRED that modified by the anticipated date of completion, as affected by projected market influences between now and then

Have you asked your client if they need a prospective value or a current inspection eff date for the as repaired value? You should not be asking Terrel; you should be asking your client.

Imo, this is two appraisals, whether it is in one report or two reports. This is not just an as-repaired value, they are changing the subject property characteristics with an ADU conversion .

 

[George Hatch]

They recommend it, they do not require it, and I have never heard of any lender ordering a prospective value for a conventional loan, which is what the vast majority of Q and A here references in URAR appraisals.

You never heard of it until now.

The reason why they're making this request is very nearly immaterial. If it isn't an external minimum that they're required to get then its an internal extra of their own that they want to get. Lenders are always free to ask for more so long as that more doesn't undermine the minimums.

What's the appraiser going to do? Tell then "no, you can't have that"?

The only difference between this "doesn't exist today" and any other is the future effective date. Situations like this will have the potential to become more common with heavy fixers and flips occurring during a declining price trend. It may become useful to a decision maker to consider what might happen to the remodeled/repair value that comes online 3 months from now during a declining market.

 

[Tom D]

Sometimes it's the loan officer who doesn't understand what is required, and they get it ordered wrongly.

 

[J Grant]

You never heard of it until now.

The reason why they're making this request is very nearly immaterial. If it isn't an external minimum that they're required to get then its an internal extra of their own that they want to get. Lenders are always free to ask for more so long as that more doesn't undermine the minimums.

What's the appraiser going to do? Tell then "no, you can't have that"?

The only difference between this "doesn't exist today" and any other is the future effective date.

Of course, I have heard of a prospective value. But in nearly 30 years doing lender and review work, no, I have not heard of a single conventional loan assignment asking for a prospective value, and that includes the 203k loans I have worked on.

The OP has not answered whether their client specified it or not - or if it is a URAR form or not.

 

[George Hatch]

How freaking narrow minded are you? Conventional doesn't always mean Fannie which should be obvious to someone whose clients are direct lenders. Like you, right? Credit unions and community banks are usually federally regulated. FRT/RRT requirements apply. Prolly half of every "prospective" I ever performed or reviewed involved SFR properties.

One report can contain multiple valuation scenarios so that's not the issue. (i.e., insurable value, liquidation value, etc)

The OP laid out a scenario. And they clarified what their question was. Engagement requires "as is" and "prospective". And they added a clarification at the end:

Note: Advice concerning the decision to accept the assignment and/or the need for a reasonable fee isn't needed because mine was a business decision to accept--unless advice is based upon USPAP, etc.

Besides that, you SHOULD open your mind to the possibility that such assignments may become more common in the future. I don't know if they will or won't and I'm not making any predictions. But there is a possibility. "Prospective" wasn't a thing with the feds during the last RE downturn. It came on during the boom when prices were increasing.

Heck, Fannie/Freddie might like to know but they may have problems asking for it due to how many appraisers already don't meet all of their other minimums. As a reviewer I have had to enforce this element of their engagement with a number of appraisers, every one of which initially resisted complying with it until I explained it to them. A couple of them refused outright (inadequate fee for the extra work) and the lender ended up cutting them off the approval panel. Good appraisers with lots of experience, but ultimately uncooperative with a couple of the explicit terms of their engagements. Another one they didn't want to do was actually develop their land value opinions instead of backing into them off the SC for the subject. Engagement letter said to do it but they wouldn't, even after I showed them there were land sales in the area that they could use.

You never know. If you actually are working for credit unions and community banks it's just a matter of time before their banking regulators catch up with them. You may be seeing this again. You might even have to figure out how to do it. Or not.