Chapter 16 Assumptions Certification Limiting Conditions Fannie Mae Form 1004 Fannie Mae Form 2055 Fannie Mae Form 2070 FNMA Desktop Underwriter Form appraisal report Freddie Mac Form 70 Letter of transmittal ID: 624005
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REPORTING APPRAISAL OPINIONS
Chapter
16Slide2
AssumptionsCertificationLimiting ConditionsFannie Mae Form 1004Fannie Mae Form 2055Fannie Mae Form 2070FNMA Desktop UnderwriterForm appraisal reportFreddie Mac Form 70Letter of transmittal
Narrative appraisal reportProfessional appraisal standardsQualifications of the appraiser
Sales historySelf-Contained Appraisal ReportSummary Appraisal ReportUniform Appraisal Dataset(UAD)URAR2CHAPTER TERMS AND CONCEPTSSlide3
LEARNING OUTCOMESList the three conventional formats of written appraisal reports.
Describe the three written reporting options provided by USPAP.
Discuss the eleven required elements of a Self-Contained Appraisal Report.Outline the contents of a narrative appraisal report.3Slide4
APPRAISAL REPORTS: THE FORMAT CHOICESPractical ConsiderationsIntended Use and Intended User(s) of the Appraisal ReportMethod of Transmittal
Who Determines: Intended Use and User?Method of Transmittal?
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TYPES OF WRITTEN REPORTSThe Letter ReportRestricted use reportThe Form ReportURAR2055 & 2070
ReportUCIRThe Narrative Appraisal ReportMost Comprehensive
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The USPAP Reporting Standard“clearly and accurately set forth the appraisal in a manner that will not be misleading
.”“contain sufficient information to enable the intended users of the
appraisal to understand the report properly.…” Note that only the intended users need to be able to understand the report. Review the definition of intended user in Section 3.1.“clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment.” Source: USPAP, 2012-20136Slide7
FEDERALLY RELATED APPRAISALSConform to Generally Accepted Appraisal Standards as Evidenced by USPAP, Unless Principles of Safe and Sound Banking Require Compliance with Stricter Standards.
Be Written and Contain Sufficient Information and Analysis to Support the Institution’s Decision to Engage in the Transaction.
Analyze and Report Appropriate Deductions and Discounts for Proposed Construction or Renovation, Partially Leased Buildings, Non-Market Lease Terms, and Tract Developments with Unsold Units, Using Market-Based Data.Be Based Upon the Definition of Market Value as Set Forth in the Regulations.Be Performed by a State Licensed or Certified Appraiser.7Slide8
Uniform Appraisal Dataset (UAD)attempts to define the allowable content and format for roughly 62 of the 200 data fields in the URAR. These 62 fields must be in the correct format for the appraisal report
to successfully transfer through the Uniform Collateral Data Portal. Another 15 fields also will be transmitted to Freddie/Fannie,
but these do not have mandatory formatting requirements that might cause a report to be automatically rejected.8Slide9
ISSUES IN SELECTING THE REPORT FORMATThe Intended Use and Intended UsersMutual Understanding of the Differences Between the Reporting Options
Legal RequirementsWhether the Intended Use Warrants a Detailed or Concise Disclosure of the Steps and Information Considered in the Appraisal Process
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USPAP REPORTING STANDARDS“Clearly and Accurately Set Forth the Appraisal in a Manner that Will Not Be Misleading”“Contain Sufficient Information to Enable the Intended Users of the Appraisal to Understand the Report Property”
“Clearly and Accurately Disclose all Assumptions, Extraordinary Assumptions, Hypothetical Conditions, and Limiting Conditions Used in the Assignment”
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TYPES OF WRITTEN APPRAISAL REPORTSSelf-Contained Appraisal Report:A written appraisal report that presents the required information in comprehensive detail Summary Appraisal ReportA written appraisal report that summarizes information for a more concise presentation
Restricted Use Appraisal ReportA written appraisal report that states the required information with the least detail. It is the minimum reporting format allowed.
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REQUIRED ELEMENTSState the Identity of the Client and any Intended Users by Name or Type
State the Intended Use of the Appraisal
Describe Information Sufficient to Identify the Real Estate Involved in the Appraisal, Including the Physical and Economic Property Characteristics Relevant to the AssignmentState the Real Property Interest AppraisedState the Type and Definition of Value and Cite the Source of the Definition.Do not cite USPAPState the Effective Date of the Appraisal and the Date of the Report.12Slide13
More REQUIRED ELEMENTSDescribe the Scope of Work Used to Develop the Appraisal
Describe the Information Analyzed, the Appraisal Methods and Techniques Employed, and the Reasoning that Supports the Analyze, Opinions, and Conclusions; exclusions of the Sales Comparison Approach, Cost Approach, or Income Approach Must Be Explained.
State the Use of the Real Estate Existing as of the Date of Value and the Use of the Real Estate reflected in the Appraisal and When an Opinion of Highest and Best Use was Developed by the Appraiser, Describe the Support and Rationale for that OpinionClearly and Conspicuously:state all extraordinary assumptions and hypothetical conditionsstate that their use might have affected the assignment resultsInclude a Signed Certification in accordance with USPAP Standards Rule 2-3.13Slide14
SUMMARY AND RESTRICTED USE APPRAISAL REPORTSA Summary Appraisal Report
Summarizes the factual data, analysis and conclusions developed in the appraisal processA Restricted Use ReportPresents the required minimum content and the conclusions reached
The appraiser must have sufficient data in their workfile to present the data in a summary formatRequires a prominent use restriction clause. Client has the right of access to your workfile.14Slide15
FORM REPORTS: A CLOSER LOOKURAR Form, also known asFreddie Mac Form 70
Fannie Mae Form 1004Only for Loan AppraisalsFNMA Loan Forms 2055 and 2070
Form 2055 for exterior inspection appraisalsForm 2070 inspection, NOT appraisalThe AI Report FormDesigned to be used for many appraisals15Slide16
OUTLINE OF THE NARRATIVE APPRAISAL REPORTIntroduction
Description
Analyses and ConclusionsAddenda16Slide17
INTRODUCTIONTitle PageLetter of Transmittal
Table of ContentsPhotograph of the Subject Property
Summary of Relevant Facts and ConclusionsStandard and Special Limiting Conditions and AssumptionsScope of Work of the Appraisal17Slide18
DESCRIPTIONIdentification of the PropertyDescription of Neighborhood and Community, and Marketing ConditionsDescription of Land, Zoning, Community Services, and Taxes
Description of the ImprovementsSales History of the Subject Property; this would including any leases
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ANALYSES AND CONCLUSIONSHighest and Best UseExplanation of and Support for the Exclusion of any of the Usual Approaches to Value
Estimate of Land or Site Value
Analysis of Data by the Value ApproachesThe Cost ApproachThe Sales Comparison ApproachThe Income ApproachReconciliation and Final Conclusion of ValueCertification, with the Signature of the Appraiser(s)19Slide20
ADDENDALocation and Plat MapsPlot Plan of the Subject Property
Legal DescriptionFloor Plan of the Improvements
Photographs of the Subject PropertySales Data Sheets, Sales Photographs, and Sale Location mapsAny Relevant Cost, Income, and Market-Study ExhibitsQualifications of all Appraisers Signing the Report20Slide21
Zoning Map21Slide22
ZONING MAP LEGEND22Slide23
COMPARABLE SALES CHART23Slide24
INFORMAL DATA SHEET24Slide25
PLOT PLAN25Slide26
SAMPLE QUALIFICATIONS26Slide27
SUMMARY27
The written appraisal report is a formal business
communicationfrom the appraiser to the client. Both the form and content of appraisal reports are defined by the Uniform Standards of Professional Appraisal Practice. In practice, appraisal reports tend to mix the features of thebasic formats for reports, containing some features of the letterreport, some of the form, and some of the narrative report. In federally related appraisals, regulations require that all reports be written, conform to the Uniform Standards of Professional Appraisal Practice, and meet other minimum content standards set by the financial institutions of the federal government.