Appraisal Forms Designs & Purposes
These forms were “designed” to be used for those specific purposes…
Earlier this week, I discussed the following about some lenders requesting a type of property inspection to be completed on a form “Not Designed” for the specific property type:
Original observation discussed earlier this week:
Read the highlighted sentence.
Read the highlighted sentence again.
According to a regional bank in my area, via info from their AMC, “thousands” of Manufactured Home appraisals have been done on the 2055 form.
Do you do that, just because someone – who just wants to “make a sale” – tells you to do it?
If so, you are violating the SOW on the 2055 form. And NO, for mortgage lending purposes using the GSE forms, you can’t just “ignore” or “change” the pre-written SOW on the GSE form.
Be professional about your work. Tell the client you’ll be happy to do the Manufactured Home assignment on the form designed for that type of housing…the 1004C. Also tell them you WILL NOT do a Manufactured Home assignment on the 2055 Form.
The ONLY reason clients order Manufactured Home exterior’s is to save money.
Fine, tell the client that someone approved to do EVALUATIONS can do it for them. But you, as a professional appraiser, will only do a v on the 1004C and will do an interior inspection (as the form mandates) so that the client has a complete understanding of the quality and condition of that home.
I received a number of comments in response to the above pushing back, similar to this one by a peer:
“This report is not DESIGNED to report an appraisal of a manufactured home…” but it doesn’t say you CAN’T.”
Let’s go back in time to 1986. Prior to ‘86, the mortgage lending businesses were mostly ‘Savings and Loan Associations’ and most used a ‘form’ generically called the Green Hornet, which was actually designed by a US appraiser years before. The intent was to make the mortgage lending process easier by having a uniform form design across the country. But the problem was not all S&L’s and banks used the Green Hornet form, which made selling the loan to the GSE’s more difficult. (The GSE’s were established in the 1930’s and 1950’s.)
In 1986, the GSE’s took over the ‘form design’ and implemented the URAR full inspection for single family residential properties, later supplemented by additional forms for “drive by” inspections, multi-family, condos, manufactured homes, and several others. These forms were “designed” to be used for those specific purposes so that mortgage loan processing could be made more uniform and simpler.
Looking back in my forms library, manufactured home appraisals used to be done on the 1004 Form, with an additional “1004C Addendum” added. In 2005, when all the forms were revised, the present 1004C became the ‘only’ form to be used for manufactured homes.
These GSE designed forms for defined uses have become the defacto required forms across the entire mortgage lending spectrum, regardless of which entity is the loan originator or guarantor. Unfortunately, GSE forms DO NOT meet every single variation in mortgage lending or property evaluation/valuation, especially for odd-ball assignments.
As new appraisers have entered the business since the late 1980’s, many have only used these ‘designed’ forms. As a side note, erroneously they believe these forms comply with USPAP, which applies to appraisers, not forms. But that’s a story for a different day. Many “GSE form centric” lenders and appraisers don’t know other reporting options exist.
A problem everyone has in the situation where a ‘GSE form’ is used for an assignment that the form was not specifically designed to do, for example a “drive-by” assignment of a Manufactured Home on a 2055, is the appraiser better be darn sure how the client intends to use the ‘form report’ and where that report will ultimately wind up.
It’s best that the appraiser get a written response from the client, i.e., an engagement agreement. This response would tell the appraiser how the lender intends to use the report, meaning keep the loan tied to the report ‘in house’ or sell it off to some investor? Secondly, the client response should specifically state that the lender is aware the ‘form’ is not strictly designed for the assignment, but the client is authorizing the appraiser to use the desired form.
Getting these items IN WRITING from the client helps protect the appraiser in case anything happens with the property or loan in the future. Your E&O carrier would probably want a copy of that in case they have to defend you. Appraisers might want to write the engagement terms themselves, and present that agreement to the client for signature prior to commencing work on the assignment.
Bottom line with this issue: Have I backed off my original observation? Yes. Have I appreciated the feedback from peers? Yes. All have been respectful. Do I believe we appraisers should be professional in how we engage clients with oddball assignments? Absolutely. But appraisers also need to stand up for themselves and protect their work, and not just do reverse cartwheels trying to please every client request.
Carefully examine every assignment for weirdness and communicate concerns with the client up front. By all means, understand the design intent of the form you are being asked to use for oddball assignments. Get client approval in writing when deviations are desired.