Unfinished home, "Subject To" completion.

[sputnam]

The second suggestion works fine, but I'm not too sure about your first suggestion. Are you really suggesting a hypothetical to replace the hypothetical subject-to conclusion? Assuming no improvements is just as hypothetical as assuming completed improvements.

Yep, the hypothetical applies to the opinion of value....not to the report. In the report you have two opinions of value....one 'subject to' and one 'as is'. You can have different assumptions and hypothetical conditions for each value...as long as you are not misleading.

I agree that the better way to do it is to estimate the value of the property including the partially completed improvement however, as I said once and shouldn't have to say again....the other approach is acceptable to lenders and regulators.

As for "shouldn't need to be an 'as is' value", take it up with Congress. It is required for certain federally regulated lenders. And yes, it's stupid. But, it's one of those...you don't have to like it, you just have to do it...things.

 

[George Hatch]

I respectfully disagree with the idea that there are three conditions involved; "as is", "subject to" and "with Hypothetical Condition". The last two are synonymous with each other and that condition is mutually exclusive from the "as is" condition.

"As is" = WYSIWYG. No more and no less. I can think of a couple of examples of how it would be impossible to develop an "as is" for a partially completed construction, but just the physical condition isn't one of them.

For example, if the subject property rights being appraised hadn't yet been created then you wouldn't be able to market it individually. And that's independent of the physical condition (even if all improvements were completed).

SMT-10 was retired because the ASB retired the Supplemental Standards Rule, which was the mechanism whereby the material could be considered part of USPAP proper. It wasn't retired because the banking regs or the definition of "as is" changed during the interim. All those requirements for those assignments were applicable prior to the ASB issuing SMT-10 and remained in play after SMT-10 was retired. The only difference is that the current mechanism that triggers the requirements in those assignments is the SOWR and the related references in SR1.

As for using the past performance of our clients and the banking regulators as the primary barometer of the meaning and application of "as is", I would strenuously object to that, too. I distinctly remember sitting in a seminar being instructed by appraisers from 2 banking regulatory agencies some years ago where they covered this and other FIRREA and banking requirements and I can assure you they're not all illiterate.

We assert competency in what we do and one element of competency in an assignment is identifying the applicable assignment conditions for an assignment. Not being competent may be a violation of the COMPETENCY RULE, but not even trying to be competent may also be a violation of the Conduct section of the ETHICS RULE and/or the SCOPE OF WORK RULE.

There are times to give people the benefit of the doubt as far as how they perform their assignments, but IMO this concept of opting in to follow written the requirements pertaining to assignments performed for regulated lenders is not an example of that.

 

[George Hatch]

BTW, since we apparently have some controversy over the meaning of "as is" and "subject to" please allow me to point out that while neither of those terms is specifically defined in USPAP, there is a definition for "Hypothetical Condition" and we assert that the requirements of USPAP are based on the actions of the appraiser, not the nomenclature being used.

 

[andrew81]

... the requirements of USPAP are based on the actions of the appraiser, not the nomenclature being used.

Relationships and Application

 

[CANative]

What's annoying to me is that these FRT rules have been on the books in excess of 20 years, there was a 14-page Statement of Standards (SMT#10) on this material in USPAP for 9 years (2000-2009) and then when the SSR was retired the material was moved to an AO that's still in the book (AO-30).

This material is not some arcane secret that nobody expects you to be aware of.
IT'S BEEN SPECIFICALLY NOTED IN USPAP FOR A LONG TIME.

If you guys are doing these assignments you need to be competent.

Wasn't there some sort of joint letter from the regulated agencies that stated they are okay with GSE underwriting standards because "Fannie Mae sets the standards for appraisal?"