Not a Get Out of Jail Free Card

Pandemics Do Not Give Us a Get Out of Jail Free Card - Convoluted Times

It is not misleading to use a 1004 form for a desktop or a drive-by because, during these convoluted times…

In talking with Tim Andersen, a USPAP instructor and long-experienced appraiser, I was reminded that, even in the time of C-19, USPAP applies, and appraisals must still be credible. Reports must still not mislead. USPAP has never required the appraiser to inspect the property. That is a lender construct. So long as your scope of work is clear relative the level of inspection you provided, and why that was your scope of work, you should not have a problem.

Note that USPAP’s Certification Standards Rule, SR2-3 does not require you to disclose the extent of your interior inspection, since it does not require you to inspect the property at all. It merely requires you to disclose if you did not inspect the property. The GSE’s certifications are much more detailed, however. Thus, if you accept an assignment from a GSE, be prepared to carry-out the type of inspection it expects of you. If you are uncomfortable with that scope of work, then don’t accept the assignment.

It is not misleading to use a 1004 form for a desktop or a drive-by because, during these convoluted times, the GSEs and state boards know some of the rules have changed. Once the convoluted time have returned to non-convolution, the rules will likely change again.

If we continue to exercise proper due diligence, if our appraisals are still credible, if our report do not mislead the client or the intended user(s), then we are USPAP compliant.

For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: 527 Staying USPAP Compliant During The Pandemic

Dustin Harris
Latest posts by Dustin Harris (see all)
Image credit flickr - Mark Strozier
Dustin Harris

Dustin Harris

A multi-business owner and residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children. Dustin Harris on

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25 Responses

  1. Avatar Marion says:

    Ha But market value still requires an open and competitive market, not one where people are ordered to stay at home.

    Because when you stay at home, you are not competing in the market.

  2. Avatar Dave says:

    In my market, people are still paying over list price and there are bidding wars. Values are still going up and up!!! All appraiser’s can do is explain the facts. Just the facts. I will report market value, what crazy people are willing to overpay. I try and state my opinion, that buyers are acting crazy for the Covid crisis, but am told things are fine. Doesn’t matter what appraiser’s do or say. We will always be the people who are blamed for greedy Realtors, sellers and buyers actions.

  3. Avatar cjk says:

    I just had one with 18 showing and 8 offers in the first 24hs. The seller had to stop the showings because so many people were looking at the house. All of the offers were above the list price. The contract was at $310k, the LP was $290k. It is the appraisers responsibility to report what the market is doing. Not to be a Doom and Gloom prophet. I have talked to Appraisers and Realtors in my market, the only difference they see is how people go into the property. My work load has not changed, buyers are still looking for homes. Only time will tell what effect C-19 has had.

    • Avatar cjk says:

      The issue I have right now is with FNMA. They just restated that the appraisal should not have an extraordinary assumption for a desk top or exterior-only report. FHA and the Foundation say that the appraiser might need an extraordinary assumption. Colorado nailed an appraiser for not having one. FNMA is setting up the appraisers to be the fall guys again. So, to get around FNMA and protect myself I just change the verbiage in my report, they can stick it. I am not sure if the state “gods” will care what FNMA says when they go after the appraisers (regardless of what they say now), remember they want to destroy us with USPAP. So, document EVERYTHING and create a paper trail.

      • What was the issue/case in Colorado, cjk?

      • Just put the assumption somewhere after EA definitions and impact statement Don’t make it a big deal. “Appraiser assumes 3rd party data provided by owner or mls is accurate unless otherwise noted herein.”

        IF anyone insists it is not permitted then tell them to cancel the appraisal; keep the fee and provide a letter to you stating that they have accepted your withdrawal on the basis that a credible report cannot be made that is definitively not misleading without the cited assumption; AND that the appraisal will not be used in any way for any purpose. USPAP prevails.

  4. Dustin both your and Tim’s stated views are accurate as … far as they go.

    Keep in mind that in addition to USPAP itself we are all obligated to follow Federal; State and Client SPECIAL REQUIREMENTS. We may not make misleading statements even if we believed those to be true when made UNLESS we have limited them or conditioned them on specifically identified assumptions.

    We can quibble re FNMA or Freddie being clients. Clearly they ARE intended users. The less careless AMCs indicate FNMA compliance is required.

    While I strenuously object to certain interpretations about whether we can use assumptions (quibble if you will-or extraordinary assumptions), there is no question that a client can dictate the scope of inspection and extent of the inspection process that is acceptable to them. They can also dictate that a normally prohibited form be used in a manner inconsistent from its historic use.

    FNMA and Freddie CA dictate that “something beyond an assumption that the exterior condition is reflective of the interior condition ” is required. They removed cert 10 for the Covid 19 special-use exceptions.

    The requirement and interpretation of ‘have adequate information about the property to produce credible results’ takes past practices and scope expectations out of common sense and CHANGES the traditional scope of work which was based on user expectations and acceptance of limited scope work. (its a DRIVEBY! Under old cert 10 we could NOT know interior condition except by assumption. Either assumption that exterior is representative OR old mls and 3rd party representations are credible (note the latter would conflict with cert 10 when in effect).

    FNMA and Freddie are trying to pretend that they need to find mls or owner representations has always existed. We ALL know that is not true with the possible exception of Danny Wiley.

    In an unlisted property refinance, or REO “no contact allowed” pre COVID Exception, appraisal reliance on separately unverified owner information would not be allowed under Cert 10.

    Since it is unlisted, where else would interior condition information be derived from, other than an owner? Further who in their right mind aside from damned fools would use such information without stated assumptions that it is true or accurate?

    Lets for the sake of discussion assume the appraiser is, in fact, a damned fool and (now) takes an owners word that the basement interior was fully finished and converted to the living area; and the overall interior condition is ‘good’ or very good (“Perfect” in the owners words-as new). C2 or maybe just C3 is concluded. (The unknown reality is C5)

    On foreclosure a divorcing spouse says the other one lied to get the loan, and the interior was always (at best) only fair to average condition and the reason for the divorce is spouse “got tired of living in a cesspit.”

    The appraiser is guilty of developing and delivering a misleading report under current USPAP definitions of misleading. IF he or she did not use a disclosed EA or stated assumption that the conclusions were predicated on the owner having told th etruth, they are going to get hung.

    It is NOT the use of the form that is misleading. It is the failure to recognize that its use is also a statement of fact concerning unknowable conditions rather than a conditional assumption that those conditions or features exist as reported.

    The ultimate responsibility is placed on the appraiser to be clairvoyant. Even getting information ‘reasonably believed to be true’ and exercising exceptional due diligence is not protection. If the city; owner, mls, agent or anyone else made an error that you report as a fact (C1, C2, C3, C4 are all a statement of fact) and you have NOT limited your culpability by an identified and stated assumption, then YOU have produced a misleading report.

    In my state that’s a big deal based upon recently demonstrated ‘fact-finding’ trends from BREA. Expect a heavy fine or loss of license. In a few states where common sense is applied before prosecutorial ardor, you may not be fined or found in violation of having produced a misleading report.

  5. Avatar Johnny Q says:

    Why use a 1004 when there are exterior and desktop formats?

  6. Avatar Dave says:

    That’s what I said too! Why put “exterior” in the map section when we can just do on the exterior UAD which is self evident. Covers our rears better. Guess that would be too logical!

    • The ‘why’ is because they said to. FNMA can computer read and ‘score’ a 1004. They cannot do that with 2055. The directions fnma gave us re covid can be done and produce credible reports. What cannot be done is to state definitively that conditions you have not observed are ‘factual’ so that is where an assumption becomes necessary.

  7. Avatar Julio E. Sune Jr. says:

    “So long as your scope of work is clear relative the level of inspection you provided, and why that was your scope of work, you should not have a problem.”

    Sorry, it is not that simple….at certain times, the lender is NOT a friend but a FOE.

    SOURCE: Claim Alerts

    Added effort today may save you from a claim later

    An appraiser in Tennessee was retained by a lender to do an appraisal, including an interior inspection, of a single-family home for the purpose of a purchase loan. About a year later the appraiser was called back by the lender to do a drive by appraisal of the same property in connection with a refinance loan. Within months of this drive by appraisal, the area where the home was located suffered flood damage after a period of heavy rainfall. A short time thereafter, the borrower defaulted on the loan and the lender foreclosed.

    The appraiser was once again asked to do a drive by appraisal for the foreclosure. He was expected to comment, specifically, as to whether or not the property showed “any evidence of exposure to recent flooding that affected the area”. The appraiser was very uncomfortable with this request and explained to the lender that he might not be in a position to make such an assessment, especially when conducting only a drive by inspection. The lender asked simply that the appraiser “do his best”.

    The lender was a good and long time client of the appraiser, so he did not want to turn down the assignment. However, he did not want to take on liability exposure. The appraiser always included extra language in drive by appraisals that reiterated that his inspection was limited to a simple curbside viewing of the property. In this case, the appraiser also added language explaining the property was located in an area that had been recently affected by flooding and there did not appear to be any visible, external evidence of any floodwaters affecting the subject property, such as visible water stains. The appraiser also took several photos of the property, although he simply included the usual front and rear photos when he submitted the report to the client.

    Sometime later, the appraiser was notified of a claim by the lender. Within days of the appraiser’s last inspection of the property, a major portion of the roof and ceiling had collapsed into the house. An engineer hired by the lender reported that he believed a contributing cause of the roof collapse was damage to structural supports caused by recent flooding. The lender wanted to know why the appraiser had failed to report the structural problems and indicated an intent to hold the appraiser accountable for the cost to repair.

    We assisted the appraiser in dealing with this very sensitive claim. The appraiser was angry about the lender trying to place blame on him, yet he wanted very much to maintain his client relationship. He drafted a letter explaining his initial hesitancy to complete the assignment. He highlighted all of the language he had added to his report about only inspecting visible areas. He included copies of the photos he had taken which did not depict anything wrong with the structure or with the roof. After sending in this response, the appraiser heard nothing further from the lender until he got an assignment to perform another new appraisal. The lender never officially abandoned the claim, but nothing further was mentioned and no lawsuit was ever filed. The appraiser continued to receive assignments and we closed the claim file

    • A perfect example of why we MUST decline orders where insufficient information is available OR where assignment conditions do not permit us to include our use of assumptions.

      “Should be ok” is never an acceptable metric. TAF redefined “misleading” to cover intentional AND unintentional oversights or omissions (errors in reporting) ie: Condition. The TN appraiser seems like he or she did a thorough job within the scope of the assignment ordered. Subsequently, the expectations of the client were increased.

      He was lucky. Had the client wished, they could have submitted a formal complaint to the state (most do) and I suspect a different outcome may (or at least could) have resulted.

      Thank you for posting this.

  8. Avatar D Wiley says:

    There would be far less confusion on this topic if more appraisers actually read (I mean really read) the full content of the forms/reports that they are signing.

    One poster wrote:

    “FNMA and Freddie are trying to pretend that they need to find mls or owner representations has always existed. We ALL know that is not true with the possible exception of Danny Wiley.”

    I don’t know of anyone asserting it has always been true. But, since 2005 the 2055 has addressed the requirement to have data on the subject property. The language on the 2055 says ( and this is a direct quote from the form that anyone can verify for themselves by just looking at the form):

    “The appraiser must be able to obtain adequate information about the physical characteristics (including, but not limited to, condition, room count, gross living area, etc.) of the subject property from the exterior-only inspection and reliable public
    and/or private sources to perform this appraisal. The appraiser should use the same type of data sources that he or she uses for comparable sales such as, but not limited to, multiple listing services, tax and assessment records, prior inspections,
    appraisal files, information provided by the property owner, etc.”

    That is NOT new language. What is unclear about that statement?

    The form also says:
    “Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted”

    This is also language that has existed since 2005. Can’t add assumption. Seems pretty clear.

    As for the use of third party data for COVID reports, can someone please explain why the EA some are suggesting is necessary, given what is stated in Cert 3 and Cert 5?

    For those who may not have read it, Cert 3 on COVID certs says:

    “The appraiser has relied on data provided by third-parties in this appraisal report. Such data may include, but is not limited to, flood maps, multiple listing real estate services, tax assessment records, public land records, satellite imagery, virtual street views, property data services, surveys, engineering reports, and property data aggregations. After examination of the data and data sources, the appraiser has used only the data he or she considers reliable. The appraiser assumes there are no material omissions and makes no guarantees, express or implied, regarding the accuracy of this data.”

    Cert 5 also covers the appraiser for adverse conditions not disclosed.

    So, the EA some are suggesting is (1) not an EA at all, because it is an ordinary assumption included in all COVID assignments, and (2) unnecessary, as it is already stated on the form.

    • Baggins Baggins says:

      Face the facts guys, you guys are arguing in a bottle, behind closed doors.

      ‘covid assignments’… Convoluted language with a misnomer on the side. Genius. As usual, government ran systems create more problems than they solve.

      I assume the above certifications are true and reliable. But I can not tell you the certifications are true and reliable for certain, since top level persons in the appraisal industry can’t figure it out or come to a consensus on the matter either.

      Furthermore, my powers of observation were diminished due to compulsory mask wearing orders in the county where this property was located. For fear of going to jail or thousands of dollars of fines, I kept the mask on although I was light headed, short of oxygen, could not see or function at optimal capacity, my glasses were fogging up. I will be available to revisit my analysis and conclusions at a later date when imposed restrictions to quality appraisal development process are no longer hindered by people whom suddenly decided to be hypochondriacs.

      Hypochondria: A hypochondriac is someone who lives with the fear that they have a serious, but undiagnosed medical condition, even though diagnostic tests show there is nothing wrong with them. Hypochondriacs experience extreme anxiety from the bodily responses most people take for granted.

      • Baggins Baggins says:

        That one is called; “The Covid Defense.”

        The government want’s a covid appraisal. That’s fine.

        Enter the covid defense.

        I don’t make the rules, I just play the game.

        The ‘new normal’. Be careful what you wish for.

    • Avatar Marion says:

      Read the regulations?

      Awe come on. It’s been 10 years and they haven’t “read” the Dodd Frank

      How about read the definition of “market value” and see that it does not include “panic buying”

      And “panic buying” is not “typical motivation” in an open and competitive market that would result in a “fair” sale.

      One pre-printed definition to read on the forms they are certifying too, and you want them to read regulations?

      And with “closed boarders” the markets, especially on the coasts, are not “open” unless you can show that foreigners never buy homes in those areas.

      Thanks for the laughs Dan. Maybe you should stop doing that.

    • Danny I don’t refer indirectly or ambiguously when I’m talking about a specific appraiser as I am in your case.

      Make no mistake, I am saying that YOU, Danny Wiley, have been mischaracterizing FNMA requirements and limitations. For years. You can send me another veiled private email inference about how it’s such a serious issue given your current position, but I won’t keep that private like I did the last one. I offered to work collaboratively to resolve this. Remember I asked where you wanted to go with this in my response? I’ll take your post above as a public response.

      IF you think you have some kind of recourse to having your inaccurate claims disputed and refuted in public, then be my guest. DO let me know if you are still speaking on behalf of Freddie Mac; FNMA and all the GSEs as was originally apparent and suggested in your posts. I want to know just how deep the pockets are for any cross-complaint.

      Refer to your own fourth (excluding “one poster wrote” line) full para; last line “… information provided by the property owner, etc.” from your own post above.
      You don’t see a conflict with certification #10 in the above?

      Here is certification #10 Danny.
      “10. I verified, from a disinterested source, all information in this report that was provided by parties who have a financial interest in the sale or financing of the subject property.”

      Please tell readers how exactly on a listed property that ‘condition’ reported in mls could be from a disinterested source? (since 2005). How would verification with an owner “since 2005” comport with certification #10? How would information from an unlisted property’s owner fit within certification #10?

      Danny are you too intellectually dishonest to deal with the entire dispute, rather than trying to selectively parse one-liners to suit the sophist argument of the moment?

      Remember you have also said no extraordinary assumptions allowed? Though you reimagined that definition as somehow being separate from ‘ordinary’ assumptions that are not found in USPAP at all. I pointed out where the same certs and limiting conditions YOU cite also permit the appraiser to expand the scope of work which in turn includes extraordinary assumptions, and you went back to the spurious ‘That’s the way its always been argument’.

      There is no way an appraiser can safely & factually report the interior condition of a property he or she has not personally observed EXCEPT through the use of an assumption, or hypothetical condition. Anything else is misleading or irresponsible.

      Whether that assumption is based on an mls being accurate and representative on the effective date of value; or that an ASSUMPTION is made that an interviewed owner accurately reported conditions; OR that an ASSUMPTION is made that interior photos provided are of the subject and in fact representative of overall conditions, AND that no significant defects have been omitted; OR a reasonable belief that a well-maintained exterior is ASSUMED indicative of a similarly maintained interior.

      Public records; permits, tax records, and the like do not provide credible indications of interior conditions as of a specific subsequent date.

      The confusion results from poorly cobbled together forms and certs by FNMA & FreddieMac and then petty bureaucrats trying to rationalize torturing the English language to make it appear no mistake was made; or that long out of date forms are still relevant.

      Danny, I say again reliance on third-party data given the new definition of “misleading” in USPAP is not possible without an assumption. An assumption specific to the appraisal.

      So again, please do tell us how since 2005 you think appraisers have always been required on an EXTERIOR property appraisal to report condition without using any assumptions? Dont keep telling us to verify the same we do with comparables. We verify comparables by mls; INTERVIEWs with interested parties and direct observations to the extent feasible. Two of these three ways are forbidden according to cert 10 “since 2005”.

      Until FNMA or Freddie both acknowledge they will permit reasonable, clearly identified assumptions under Covid or non covid conditions, any exterior inspection based report or desktop (2055 or 2055-Covid & 1004-Covid) must be refused by appraisers…or risk being misleading under the new USPAP definition of the term.

      • Avatar D Wiley says:

        You answered the primary question you pose in your own post above. For a GSE 2055, if the appraiser does not have enough data (e.g.. does not have condition data). then the appraiser should not do the assignment…just as you said above and just as stated in the FAQs that the GSEs have provided.

    • “The appraiser has relied on data provided by third-parties in this appraisal report. Such data may include, but is not limited to, flood maps, multiple listing real estate services, tax assessment records, public land records, satellite imagery, virtual street views, property data services, surveys, engineering reports, and property data aggregations. After examination of the data and data sources, the appraiser has used only the data he or she considers reliable. The appraiser assumes there are no material omissions and makes no guarantees, express or implied, regarding the accuracy of this data.”

      NOT ONE of the above-identified assumptions specifies ASSUMED condition conclusions based upon an owner’s verbal or written or photo evidence, OR agents. So yes, Danny an EA IS necessary. ALL assumptions are required to be identified.

  9. Avatar Bill Johnson says:

    Meanwhile, the appraiser coach is saying.

    “What I’m saying here is we might need to put boots in the living room on occasion. But really, most of the time that may not really be necessary.”

    There are those that seek the problems, find the problems, disclose the problems, interpret the problems all in the name of having high moral standards, while others avoid the truth to churn out AMC volume.

    Seek the truth.

  10. Alright folks enough bashing other appraisers!

    The purpose of this blog is to communicate with others, share ideas, come up with solutions… not to attack other appraisers.

    We welcome critical posts and opposing points of view and value robust and civil discourse. You may openly disagree, but state your case in an atmosphere of mutual respect, in which everyone has a right to a particular view about the topic of conversation. Please keep remarks about the topic at hand, and PLEASE avoid personal attacks. If the poster gets you upset, it’s the Internet and you can walk away from it.

    Personal attacks harm the collegial atmosphere we encourage on this blog.

    • Avatar Bill Johnson says:

      I agree. Posting what someone says word for word (the truth) is always best practice. In addition, where applicable, providing a link to that truth is just as important. Apologies accepted.

      Go make up a value, and seek the truth.

  11. Avatar Marion says:

    The GSEs do not write appraisal regulations, they are not Regulators. They are “competitors” in the secondary market.
    HA HA.

    The GSEs write “policy” for the loans they will buy in the secondary market.

    One of the “policies” the GSEs wrote; is the Appraiser Independence REQUIREMENTS which includes that no interested party can interfere with the development and reporting of an appraisal.

    The GSEs, are interested parties, they collect all the data from appraisal reports and resell it, in competition with appraisers. They do not “control” appraisals. They can accept or reject the loan, or, have the lender order an appraisal that meets their “Guidelines”.

    This still is the USA not some other place.

    The COVID reports could have been reported on the 1004P fully coded for upload to the system. Pre-written to accept interior and other “condition data” from sources, other than the appraiser. And yet,
    they are not ordered that way.

    And FAQs are NOT USPAP. Says so on page 1 of USPAP.

    Appraisers need to stop, and see a bigger picture. See the whole picture. Or just read the financial news. Look at the corps chomping at the bit waiting on the foreclosures to happen so they can take up all those SFRs, at discount prices, to be used a rental properties.

    Consider that many of those foreclosures had appraisal waivers, were hybrid appraisals, that now are suddenly not acceptable, or had the infamous, Restricted Use Reports, that never should have made it to the GSEs,

    All the while that the GSEs appraisal “policies” where that only the forms listed in the Selling Guide were acceptable.

    Forbearance ends, next month? But it will end, and many jobs won’t come back. And many appraisers, well, let’s just say, they should have seen the bigger picture.

  12. Avatar Julio E. Sune Jr. says:


    Preponderance of the evidence

    The greater weight of the evidence required in a civil (non-criminal) lawsuit for the trier of fact (jury or judge without a jury) to decide in favor of one side or the other. This preponderance is based on the more convincing evidence and its probable truth or accuracy, and not on the amount of evidence. Thus, one clearly knowledgeable witness may provide a preponderance of evidence over a dozen witnesses with hazy testimony, or a signed agreement with definite terms may outweigh opinions or speculation about what the parties intended. Preponderance of the evidence is required in a civil case and is contrasted with “beyond a reasonable doubt,” which is the more severe test of evidence required to convict in a criminal trial. No matter what the definition stated in various legal opinions, the meaning is somewhat subjective.


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Not a Get Out of Jail Free Card

by Dustin Harris time to read: 1 min