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Unusual Property as Exterior Only

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Steve Owen

Thread Starter
Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
I hope I'm not the fool who will give them what they want from Walt Kirk's response to Jawand125's thread below, but here goes:

I have been asked to appraise an unusual property by a good client. To give you a general idea, the property is a horse ranch, with a high value home, within the city limits. The client’s secondary lender requested a 2055 exterior. However, the property is unusual enough that a 2055 is possibly not appropriate, as I believe the form may not have room for some of the adjustments I would have to make (I haven’t looked for comps yet, so I’m not positive about this, but I’m pretty sure there aren’t any recent sales of homes with horse stables, 10 acres, and the pipe-style fencing that goes with such operations inside the city limits of Joplin).

I was provided with a copy of a complete appraisal on a 1004, including interior photographs of the home, completed by another appraiser in December of 2001. The client says that the borrower rescinded a loan with another broker within the three day recission period because of extra fees, etc. Knowing that broker, I can believe it. My client tried to use the old appraisal, with recertification, but was rejected because it is too old. I told him that my recommendation is for him to get the original appraiser to do an update, but he doesn’t want to do that because he says the original appraiser is too slow (it took him three weeks just to get the recertification.) He says he intends to “eat” the appraisal fee, which probably means he doesn’t have a deal for this loan if there are additional hassles for the borrower.

There is now time pressure to close this loan within a few days; I would like to help a good client by doing a rush on this, but have some misgivings about the exterior only 2055 even though I have lots more information than you usually get with these kinds of orders. There has been no indication of value pressure and this is not a client who has been guilty of this in the past. However, I do have a slight degree of skepticism about the other appraiser’s value (without having done a review, of course, it would not be possible to dispute it - the work appears to be adequate in most respects.)

I considered doing the appraisal on a 1004, without an interior inspection and commenting and altering the form, with an indication that I relied on the other appraiser and photos provided for knowledge of the interior. But, that seems a little dicey to me. (For those who may be a little rusty on this stuff, #8 in the 1004 certification says, in part “I have personally inspected interior and exterior areas of the subject property....” So, what I would do, if I did the appraisal this way, would be to alter the form by X-ing out this part of the certification and adding a comment concerning the exterior only inspection and reliance on the other appraiser’s inspection and interior condition, etc. My worry is that this might be considered misleading, no matter how I alter the form, since most secondary market people assume that a 1004 is going to include an interior inspection.

Another option would be just to use the 2055 and add together adjustments for quality and site improvements on the two blank lines at the bottom of that form’s grid. These adjustments would be considerable (the previous appraiser made a $20,000 adjustment just for stables and barn, and took that adjustment on every comp used). If I went this route, I would probably have to add my adjustment for stables and barn to the fence and other site improvements, as it is likely I might need the other blank line for quality or other interior features. Additionally, like the other appraiser, I would not be likely to find market data to support my adjustment for the stables and barn and would be at the additional disadvantage of not having a cost approach to give an indication new for these items (of course, without market data to back up the depreciation, that would be of only be of small value anyway).

If it sounds like I’m rambling, well I am. I’ve been thinking about this all weekend, and my thoughts are running several different directions. But, it seems as though I really have three options:

1) Do it on a 2055 as requested; in this case there is probably enough data for a credible indication of value, even though I would normally not do this kind of complicated property this way.

2) Use a 1004, but with exterior inspection and lots of changes to the form.

3) Refuse the assignment unless I can do a complete scope of work, including interior inspection of the property. Doing this would damage a really good client, and one that has not been guilty of value pressure in the past.

I had thought about doing a limited appraisal with a narrative summary report, but don’t think I really have enough time to do a quality job of that. (I knew you would suggest that, Terrel.)

What would you do? Warning, I may print this thread as evidence of what my “peers” would do in this situation.
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Steve,

You can't modify the Cert on the 1004 as FNMA/FHLMC will not allow it nor will they buy the loan if you do. So the URAR is out

You probably do have enough info to complete the report. On the 2055 cite as your sources: Tax Records, Owner and The Previous Appraisal by zzz. Nothing states that you can't use the info in the previous appraisal to help complete yours. Call the owner and basically verify what is presented in previous appraisal. If based on that info you can develop a credible value in your opinion, go for it, on the 2055. If you have to lump adjustments on one line due to the lack of adjustment lines on the 2055, ecplain it somewhere else and be thankful you don't have to complete a Cost Approach on the 2055, and be responsible for it.

Ben
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
I agree with Ben that it can be done and would hate this one as much as you do. This will necessitate many, many disclaimers.

I am very sorry that you feel the need to give in on this one due to wanting to make sure you keep what has been a good client. Reality is, a unique property like a SFR / small horse farm should never be anything but a full appraisal.

Lots and lots of assumptions and disclaimers. For me, a property this complicated really does belong on either the URAR with lots of explanations or a narrative. The lender dictating the form and especially just a drive-by is going too far into dictating appraisal practice with no real knowledge of what it takes. It also shows that your client really couldn't care less about you.

I had something similar about 2 years ago where I had already completed an appraisal on it about a year before. (Horse facility in the city) 1 year later, the owners/sellers had already moved to their new place and left their 18 yr old son there. The necessary repairs and deterioration of this place in that 1 year was amazing and I would not have known it from the outside.

Just another example of lenders trying to dictate to and get rid of the appraiser that might kill the deal.

Make sure you charge a BIG fee for this. It will be more difficult to do and possibly more time consuming as a drive-by 2055 than a fully inspected URAR plus the liability is much higher.

I think I rambled here but I'm not going back to edit or change it.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Why does the lender want a 2055? If they will be attempting to sell the loan to Fannie Mae, Fannie Mae probably will not buy the loan if it is on a 2055 because it does not meet the 2055 Desktop Originator / Desktop Underwriter criteria. If not selling to Fannie Mae or anyone else, they could ask you to write the report on a single sheet of paper if that was how they wanted to receive the results---you would just have a very, very thick work file and disclaimers that only that specific client could understand the Restricted Use Report because of their own knowledge (page 147 2002 USPAP). Whether you do a Limited Appraisal (apply the departure rule--maybe by omitting the cost and income approaches) or Complete Appraisal (do everything within your workfile) would be the Scope of Work that you and client would have to discuss. If their only reason is thinking that the 2055 would be cheaper, then you make a business decision on what your fee will be (could be even higher than if they ordered a 1004).

So you and the client have to come to an agreement of if they want a Complete or Limited Appraisal reported to them in a format that is either a Restricted Use Report or a Summary Appraisal Report or a Self Contained Appraisal Report. So it all boils down to--how is the client going to use the report???

Oh, by the way, I hope the former appraiser didn't do a "recertification" unless he/she didn't change the effective date of opinion of value or consider any factors that occured after the date of the original report. If he/she looked at current data, then they did an "update to an appraisal" instead.
 

Steve Owen

Thread Starter
Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Thanks for your help, everyone. Having good information, including interior photos, from the recent, previous appraisal was the only thing that made this assignment possible. Having that was almost as good as doing an interior myself. The limitations of the 2055 form were somewhat difficult to deal with, but it could have been worse. I would have liked to have had a "Quality of Construction" adjustment, but, otherwise, it wasn't as bad as I had feared it would be. That was partly because I managed to get better comps than the appraiser who did the 1004 last year. (Unlike him, I had a pair to help determine adjusment for the stables and barn and also had a pair to help determine the adjustment for the fence.)

By the way, Jo Ann, he did do a recert, or at least tried to. He used a "Recertification of Value Report" and used all the same comps he had before (most just over a year old now), but, when I got to looking at it more closely, he changed the date to a current date of value. (What would we call that? A Recert-Update?) Obviously, he was in over his head and tried to do an update, without new data, on the wrong form. That is probably why the UW wouldn't accept it and wanted a new appraisal. My guess is that they only required a 2055 exterior because they had the information from the previous appraisal. BTW, this guy did his "Recert" for my client after having done the original appraisal for a different client. Here is a case where an appraiser tried to do a good job, and actually seems to have done a fairly good job of the original report, but got caught up by his lack of knowledge concerning some of the more mundane USPAP rules and wound up making a rather serious error. Funny how it seems like competency is the most difficult standard for us to self-enforce.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
He doesn't have a "recert" because the effective date of the opinion of value was changed. And he doesn't have an "update" because he didn't provide any current maret data. So in my opinion he had a "nothing"!
 

Steve Owen

Thread Starter
Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Amen to that Jo Ann. But, the LO, and probably everyone else who looked at it in the mortgage industry, thought it was a recert. No doubt it was not a proper recert because of the date on it, but at some point, if it walks like a duck, and quacks like a duck, it must at least be some sort of duck.
 
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