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| 1004P appraisal form, report, 1004 p, mary cummins, real estate, appraisal, appraiser, los angeles, california, licensed, certified, cheap, affordable, |
UPDATE: 01/24/2021 1004P appraisals can now be used for more than just no cash out same bank refinances. Fannie Mae and others have agreed to accept bifurcated hybrid appraisals in some situations.
01/02/2020 The original article was about the 1004P appraisal and the lender, investor, appraiser. I didn't talk about how it affects the homeowner trying to refinance. Obviously it can't be used for purchases as they are riskier.
Here's a good reason why a home owner should make sure they don't get a cheaper 1004P desktop appraisal. They can only be used for same bank refinance with no money out. If you want to take money out, use a different bank, get a second instead of refinancing the first, home is older, not in perfect condition, hasn't been sold on the MLS recently, large loan, hight LTV ratio, not the best credit, market is decreasing...you will need a regular 1004 appraisal. Lender charges borrower the same price for either one. Lender pockets more when they use a 1004P. Purpose of 1004P is so lender makes more money. It doesn't help the home owner who could end up having to pay for two appraisals. It also takes longer to have two appraisals.
ORIGINAL: The 1004P hybrid appraisal report is a Fannie Mae real estate appraisal form and appraisal process.
A licensed real estate agent or appraiser does the physical inspection of the subject property. Turns out that's not always the case today, 02/12/2022. The AMC may send someone whom was only trained by a short prerecorded video online to do the inspection. They may not be a real estate expert, agent, appraiser or even someone who is at least licensed, bonded, insured or has passed a background check. You don't really want someone who hasn't passed a background check in your house, see
article about home inspector and Elmo doll here.
They measure/diagram the property, note materials/condition and take the photos of the subject to form their report. A licensed real estate appraiser takes that data, selects the appropriate comps and types up the finished appraisal. The appraisal clearly states that John Doe license # 12345 did the inspection, measured, took the photos and appraiser John Doe 2 license # 678910 completed the appraisal report.
When I first heard about the 1004P hybrid appraisal report I was skeptical for a few reasons. One, is a real estate agent qualified to inspect property for lending purposes? How would a real estate agent be able to recognize building and safety violations, be able to note condition of the home or even all of the materials? How well will they measure the home? Would it be legal gross living area or ANSI standardized measurements? Would their photos be good enough for the appraiser to see materials and condition? Two, how would one know if the inspection and photos are of the subject property? Three, can a proper appraisal be made using MLS comparable photos? That’s why I decided to research the 1004P.
Below is the actual 1004P appraisal form and the USPAP Compliance Addendum. As you can see the 1004P Appraiser’s Certification form states page five item 12 “I obtained the information, estimates, and opinions furnished by other parties and expressed in this appraisal report from reliable sources that I believe to be true and correct.” The USPAP Compliance Addendum clearly states who inspected the property, i.e. name, license number, E&O Insurance and who did not, i.e. the appraiser. The MLS photos used clearly have a stamp that says “CRMLS,” “TheMLS.”
https://drive.google.com/file/d/12Cpcr4YUWTc88ehXFfIHxRe9mvGxVCng/view?usp=sharing
I decided that I should do a sample 1004P report. I’m not posting that report as I have a horrible cyber stalker who loves to forge documents. I had to add a hidden seal to all my docs for that reason.
This is what I’ve learned from doing an actual 1004P report.
The inspection report, sketch, measurements and photos give the appraiser enough information to satisfactorily complete the appraisal report as long as there aren't hard to see major issues with the home. I’ve found the inspectors take way more pics than necessary. They take a few pics per room instead of just one. They take up close pics of the materials. The photos are large and detailed so you can zoom in if there are any doubts. Of course the appraiser is assuming the photos are true and correct representations of the actual home.
The measurements don’t always equal the tax roll due to unpermitted additions or mistakes e.g. adding area of stairs. Same happens when I inspect. I only include the legal permitted gross living area, bed/bath in my report anyway.
The materials in the written inspection report aren’t always correct but it doesn’t matter. An agent wrote “wood siding” when it’s actually “shingle siding” which I can clearly see in the pic. I report what I see in the pic. The underwriter can see the material in the pic anyway in case the agent or appraiser made a mistake.
The inspection report and photos give enough information to see if they are of the subject or not. So far all 1004P have been ordered for homes which sold recently on the MLS. You have MLS photos, data, public tax data, permit data to compare to the inspection photos and report to verify. This is true for all cases unless the current owner did a full remodel. Then I check with permits. If I were to do a drive-by appraisal or exterior only appraisal, I don’t get to inspect the interior or receive any interior photos. The 1004P gives a lot more data than regular exterior only inspections though not as much as a full inspection appraisal.
MLS comparable photos can be sufficient if they match Google street view photos. So far I haven’t come across MLS pics that don’t match Google street view doing 1004P. I have seen other MLS photos where they photoshop dirt into grass, cut out high tension power lines or just use an architect rendering program photo. If I were to see that, I would use Google street view photo instead and note it in the report. In a regular report we are only taking street view pics of the comps anyway as of the date of our appraisal and not the date of the sale of the comp. We don’t know if interior photos are real or not as it is.
After my analysis I believe that 1004P appraisals are good enough to use for lending purposes in certain situations. Those situations would be easy appraisals of newer average tract homes and condos that have sold more recently on the MLS. They would also be inspected by a licensed real estate appraiser, agent, broker who is insured and had a full background check. I don’t think they should be used for more difficult assignments where there would be more lender risk. Those assignments would be large custom homes, homes in C4 condition or worse, homes with any unusual conditions, some view homes, luxury quality homes or very old homes i.e. 80 years plus. I believe those homes and properties should be appraised by a licensed real estate appraiser who has personally physically inspected the property.
One thing appraisers should consider is that they are fully liable for the report no matter what. It doesn't matter who did the inspection and took the photos. It doesn't matter that the report states someone else inspected the property. By signing the report you are stating you had sufficient information to complete a credible appraisal. Per USPAP "If the appraiser does not have sufficient information to complete a credible appraisal, they must refuse the assignment." You can't rely on the inspector, their measurements or photos. You will be legally liable if they made a mistake or committed fraud.
If you don't feel the inspector or the MLS comps have provided accurate enough information, you must do your own research. You may have to look at all permits for the subject and comps, property history, all previous MLS listings ... to try to verify something. The inspector may have missed obvious signs of major problems with the property. Maybe you can't see the issues in the photos but you would have seen it during an inspection because of your years of training and experience. Those issues could be major uneven floors, one room at a higher level than adjoining room, holes in rear yard, damp smelling basement, burned smelling attic... I could see people perpetrating fraud via one of these appraisals just like they do with drivebys, regular desktops, AVMs and waivers.
Here's a 2019 article by the Illinois Department of Financial and Professional Regulation (IDFPR) titled "Illinois Board Issues Warning on Hybrid Appraisals" about liability and abiding by USPAP. They feel hybrid appraisals could be a violation of USPAP because an unlicensed person is providing "significant appraisal assistance." Illinois believes it's a violation of USPAP if the inspector provides the measurements, room count, condition, quality ... to the appraiser.
The Appraisal Foundation (TAF) stated that a hybrid appraisal in and of itself is not a violation of USPAP. They stated it's okay for another party to provide the inspection information if it is only known facts but the Appraiser is liable for that data. If the inspector provides condition, quality "opinions," they need to be a licensed appraiser. If the Appraiser doesn't feel the data provided is credible, the Appraiser must obtain the data in another acceptable manner or withdraw from the assignment.
Every state has their own license requirements beyond the federal regulations. It will be up to the states to determine if hybrid appraisals are a violation of state regulations as they control and enforce licenses.
Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the
Mary Cummins of
Animal Advocates is a
wildlife rehabilitator licensed by the
California Department of Fish and Game and the
USDA.
Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.
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