The 1004D for Disaster Inspections – Advice
When Disaster Happens…
The phrase “disasters happen” is, unfortunately, all too common. Fires, floods, vehicle accidents, wind storms, hurricanes, tornadoes are all factors that can affect real property.
When a local disaster happens, and is officially declared, lenders often ask appraisers to observe the current condition of their mortgaged properties. The assignment date may be days, weeks or months after the declared disaster.
The hiccups, hang-ups and head scratching occurs when the lender or AMC asks for a ‘Disaster Inspection Condition Report’ to be done on the wonderful 1004D form. Something it is not designed to do. And this is all too common.
Unfortunately, there is no ‘one common property condition inspection form’ that lender clients can use, like there are for residential, condo, and multi-family properties. Because their systems only recognize common GSE forms, they, and we are stuck with the 1004D – at least as the ‘starting’ form. This is something the GSE’s should correct!
Before you begin screeching at me, yes, the GSE 2070 or 2075 form is a possibility. But those require inputting local market data statistics and trends, which the lender client may not need or want. All the client really cares about is whether their property is still standing, with doors, windows, walls, and roof, with no observed damage to the structure or property, at a low fee. These forms are not normally ordered for a ‘Disaster Inspection Condition Report’ anyway.
The 1004D is designed to provide a notice to the lender if the property HAS GONE DOWN IN VALUE, which technically is an appraisal assignment. Or if the property HAS BEEN COMPLETED per original plans & specs, or subject-to repairs or recommended inspections.
If the property is sitting there ‘today’ all pristine, unaffected by any events surrounding the declared disaster, and you have no record of a prior appraisal, you cannot check either box in the 1004D update section, without conducting at minimum two desktop appraisals. One as of the day before the disaster date, and the other as of the current date, which is not normally the Scope of Work for a low fee ‘Disaster Inspection Condition Report.’ I don’t recommend checking either Update box, regardless of the property condition. If you do, you are committing yourself to a USPAP appraisal.
And you can’t use the Certification of Completion either!
The solution to this requested nonsensical form for this disaster inspection is to use verbiage like I have on the 1004D. And then add a Property Condition Report form to the 1004D, along with photos, such as you see in the PDF below. This is an actual report I recently did. The added Property Condition Report form with photos gives the lender enough info to satisfy their evaluation of their property at a current date.
Be real careful if you suspect any potential damage that cannot be readily observed from the street. You may need to add an Extraordinary Assumption statement in the report.
Each of the various appraisal report software vendors should have a similar form as the one in my report. So check yours and pick one that works.
Observing exterior conditions and reporting what you see in a simple format is not an appraisal assignment because no value statement is made. But I suggest you maintain a workfile for the ‘Disaster Inspection Condition Report’ assignment, per USPAP’s Record Keeping Rule.