Using a 1004d for a refi of a recent sale

[Tim Schneider]

There is some local debate going on about the use of a 1004d (update section) when a borrower wants to refi a home that they recently purchased.

Some banks and appraisers are saying that an update can not be done in this scenario because the type of assignment of the original appraisal was for a sale, not a refi. They say that this alone consitutes a USPAP violation, because the update has a different purpose.

The other side says that the intended use (market value determination) and intended user (client) are the same, and that USPAP does allow this report as long as the USPAP requirements are met (covered in AO-3). Also, they say Fannie designed the form for this scenario since it includes a box for sale price and date.

So what do you USPAP gurus think?

 

[Webbed Feet]

I always have a lot to say .

There is some local debate going on about the use of a 1004d (update section) when a borrower wants to refi a home that they recently purchased.

Some banks and appraisers are saying that an update can not be done in this scenario because the type of assignment of the original appraisal was for a sale, not a refi. They say that this alone consitutes a USPAP violation, because the update has a different purpose.

I say the above is incorrect. Check USPAP and all the AO's carefully. You will find that an "Update" is simply a "New Assignment." Since when does a new assignment have to have the same purpose as some old past assignment? There certainly are issues, but "purpose" is not one of them.

The other side says that the intended use (market value determination) and intended user (client) are the same, and that USPAP does allow this report as long as the USPAP requirements are met (covered in AO-3). Also, they say Fannie designed the form for this scenario since it includes a box for sale price and date.

So what do you USPAP gurus think?

Oh it includes a box!!!!!!! Well, there you go, that just makes it all nice and better doesn't it? .. LMAO!

Why is it so many in the trade just find it impossible to tear themselves away from "form think?" .. I challenge anyone to prove that "Fannie" actually had any cognitive brain cells involved during the design of the 1004d for anything at all as far as using the upper part goes. Also, I would lay some fairly good odds that 80% of the people on this "other side" of the debate will all be violating USPAP whenever any of them use the 1004d "Update" portion of that form for anything at all. What is really funny here is the entire debate is like the pot calling the kettle black.

The first group are incorrect, the second are in denial regarding how out of compliance with almost everything the "Update" section of the 1004d is. Wait till the second group gets a load of brain cells going after it dawns on them they have to redo the entire 1004MC they will all soon be doing.

What a dumb debate......

 

[Mr Rex]

Side 2 just wants to further screw the appraiser out of an appraisal fee. Every time I affix a signature to a report, that's an appraisal, with all its inherent liability, and its required fee. Live fee or die I say.

 

[Tim Schneider]

I really don't want this thread to be about whether or not it should be done from a business standpoint, but if it can be done from a USPAP standpoint.

 

[Mr Rex]

That form by itself is not USPAP complaint IMHO. You can create a USPAP compliant report from it or a piece of Charmin Extra if you desire. Filled out forms are not appraisals or appraisal reports.

 

[Webbed Feet]

I really don't want this thread to be about whether or not it should be done from a business standpoint, but if it can be done from a USPAP standpoint.

As USPAP has never dictated the format that any real estate appraisal should be reported on, or in, ... it should have occurred to both sides that this wasn't a USPAP debate in the first place. From a USPAP standpoint we can supplement any completely horrible form into compliance as long as there isn't a prohibition on the form against modification and / or we can do it without saying one thing in one place on a "form" and then something else completely different somewhere else in the report in an addendum.

The "issues" are "incorporation" while possibly misleading intended users regarding what items are being incorporated that remains credible and valid, versus what that is being incorporated that is no longer credible or valid and should not be considered "incorporated."

 

[The Warrior Monk]

There is some local debate going on about the use of a 1004d (update section) when a borrower wants to refi a home that they recently purchased.

The long and short of it is that there is no update. It's simply a new assignment, and if done properly, is USPAP compliant...forms aren't compliant, appraisers are.

Whether or not it is acceptable by the lender is a whole different story. There are issues with inspection dates and various other items that may or may not be acceptable to certain intended users.

 

[Tim Schneider]

So I spent the last hour or so working around the USPAP issues that the form lacks, and came up with this addendum. What do you think?

The following items append the Scope of Work as printed on the 1004d Form:

Items incorporated by reference:
The appraiser was asked to perform an Appraisal Update for a property located at 123 Main St, Anytown, WI, which the appraiser previously completed a report on, with the effective date of 11/1/08. This appraisal was completed with Hometown Bank as the intended user. Some information from the original report (file # 8Main123) is being incorporated by reference, as stated below:

Intended Use/User: See previous page
Legal Description: Main St Subdivision Lot 1
Property Identification: See above for legal description and address. A map and description of the neighborhood are included in the referenced report.
Property Interest Appraised: Fee Simple
Definition of Market Value: See referenced report
Effective Dates: Original Appraisal- 11/1/08, Appraisal Update- 2/17/09
Summary of Information Analyzed: See referenced report for a summary of appraisal methods employed in determining an opinion of value. The subject property has not been offered for sale since the effective date of the original report. With regards to the appraisal update, a search of closed sales was performed for the subject market area. There were no comparable sales that indicate the subject has declined in value since the original appraisal. See attached comparable sales grid for a summary of 3 recent sales.
Current Use: The subject property is currently used as a single family residence, which is also the highest and best use. Subjects zoning does not allow for multifamily or commercial use.
Extraordinary Assumptions: The appraiser makes the assumption that the interior condition has not changed since the effective date of the original report. An exterior "drive-by" inspection was performed on 2/17/09.

Certifications:
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this report are true and correct.
- The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions.
- I have no (or the specified) present or prospective interest in the property that is the subject of this report and no (or the specified) personal interest with respect to the parties involved.
- I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
- My engagement in this assignment was not contingent upon developing or reporting predetermined results.
- My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
- My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
- I have made a personal inspection of the property that is the subject of this report, as reported above.
- No one provided significant real property appraisal assistance to the person signing this certification.

 

[fifteen]

Excuse my ignorance, but 3 months seems like a long time for an update. Is there a time limit for when these can be ordered? Seems appropriate within a month, not 3 1/2.

 

[Tim Schneider]

Jeez, it's just a sample. Make the dates whatever you want. The dates are not the issue.