Are Floor Plans in Your Future?
Appraisers, I’ve recently been studying a ‘word change’ in various GSE documents. This change happened initially in March 2020 in the COVID era revised ‘flexibility’ Assumption and Limiting Conditions and Scope of Work attached to residential reports, and was further incorporated into TWO new appraisal forms issued in July 2020, which you might not even realize they exist!
The word change was subtle, but has major implications for appraisers. The change is ‘sketch’ to “Floor Plan.” But when I inquired about this change, I have been told the process to produce and include a “Floor Plan” was not enforced during the COVID era.
For context, watch the video with Danny Wiley of Freddie Mac below, and listen carefully to what he says:
In the Selling/Servicer Guides of FNMA and Freddie Mac, both GSE’s identify a ‘sketch’ to be a diagram of the subject as measured by the appraiser which shows exterior walls, and includes the dimensions. That’s it. They don’t even say that room labels are needed, but most appraisers include those.
Including a ‘sketch’ in reports as an exhibit is an additional Assignment Condition, beyond what USPAP requires in Standard 2, per the Assumption and Limiting Conditions on the residential forms. Both GSE’s require a more detailed diagram including interior wall locations when interior design abnormalities are discovered, and reported – which they call a “Floor Plan”.
In practical application, “Floor Plan” is synonymous with a highly detailed diagram produced by an architect or building designer. My assumption is that diagram is the same exterior ‘sketch’, with the addition of interior partition wall locations and room labels, but without exterior or interior wall thickness shown.
“Floor Plan” is the ‘required’ diagram on the new 1004 (Desktop) and 1004 (Hybrid) report forms.
I’ve talked with representatives from both GSE’s recently. Their line of thinking, at the present time, is a “Floor Plan” should be provided as an exhibit in the appraisal report even though the report signing appraiser was not physically present at the subject property when data was gathered. Their line of thinking is also slanted to having third parties provide the subject property data, believing appraisers are more valuable as ‘analysists’ instead of as observers and detailers of the property characteristics.
Thus the evolution to the new 1004 (Desktop) and 1004 (Hybrid) report forms, with different Scope of Work and Assumption and Limiting Condition statements in each version. (These forms are in your software forms package now.)
The THEORY of these forms, by the way, is that appraisals will take much less time to get back to the lender than the current Full Appraisal, meaning one with an interior/exterior observation/inspection done by the signing appraiser. A second, underlying, belief is that kind of limited report may cost less than a Full Appraisal.
So let’s circle back to the implication of a “Floor Plan” required exhibit that is supposed to be included in the Desktop and Hybrid report. How will that be done?
If you are not aware, both Apple and Android based smartphones can have apps installed which can capture property photos and wall dimensions/locations. There are about 4 current versions of these ‘apps’, developed by separate companies. They all claim to be super accurate, even to the point of implying the “Floor Plan” produced by these apps are better than what appraisers can do themselves.
To put this into perspective, for a Hybrid report, the app is used by someone totally unknown to the appraiser. The resulting inspection/measuring details are uploaded to a particular place (in the cloud, or another country), which are then made available to the appraiser, along with the “Floor Plan.”
For a Desktop report, the expectation is the appraiser would ask the borrower or perhaps a real estate agent to download the app to their phone, then walk around the property, inside and out, while the appraiser directs that person, via the app audio, to do certain things to measure and photo the property. The resulting inspection and “Floor Plan” details are then sent to the appraiser.
Is a “Floor Plan” in your future? I’ll let you decide!