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"Drive-By" Appraisals

The Alabama Real Estate Appraisers Board takes the following position on the issue of Drive By Appraisals.

The determination of the extent of inspection to be performed is the responsibility of APPRAISER, not the CLIENT.  The appraiser has the obligation and the responsibility to determine the extent of inspection required.  Note:  The Conduct Section of the Ethics Provision states that “An appraiser is required to avoid any action that could be considered misleading or fraudulent.  In particular, it is unethical for an appraiser to use or communicate a misleading or fraudulent report, or to knowingly permit an employee or other person to communicate a misleading or fraudulent report.  USPAP, pg. 2 (1998 edition).

Uniform Standards of Professional Appraisal Practice (USPAP) Rule 2-3 requires the use of the following statement or one similar in content.  “I have (or have not) made a personal inspection of the property that is the subject of this report.  (If more than one person signs the report this certification must clearly specify which individuals did and which individuals did not make a personal inspection of the property).  Departure from this binding requirement is not permitted.”  USPAP, pg. 24 (1998 edition).

The fee for the assignment of a “drive-by inspection”, where only an exterior inspection is requested by the client, is often less than that for an interior/exterior inspection based appraisal.  The fee for an appraisal should never be the determining factor in the dept of preparation of an appraisal report.  The decision as to whether both an interior and exterior inspection or just an exterior inspection is necessary to properly complete an appraisal is the appraiser’s decision alone and cannot be dictated by the client.

An appraiser accepting a job from a client who only requests an exterior inspection of the subject property must document, in the appraisal file, that an interior inspection was unnecessary to properly complete the appraisal.  Should an exterior inspection, combined with other reliable data, failed to provide sufficient information to perform the appraisal, the appraiser has a duty to perform an interior inspection or to withdraw from the assignment.  It is the appraiser’s job alone to determine the amount of inspection necessary to properly complete an appraisal.

The Alabama Real Estate Appraisers Board will allow appraisals completed with exterior only or drive-by type subject property inspections, such as those reported on Fannie Mae Forms 2055 and 2065 and Freddie Mac Form 704, as long as they comply with USPAP requirements.  It is the responsibility of each individual appraiser to decide if the scope of the appraisal assignment can be performed without an interior inspection of the property and still meet the USPAP requirements.

Remember that the documentation and market data requirements, as well as the liability incurred in the preparation of these reports is not lessened with the use of these forms.  Complete documentation must be maintained in the appraiser’s file if not reported on the forms used.  For this reason, the Board strongly suggests that all appraisers include a written statement of their rationale for the omission of an interior inspection in each appraisal file where only an exterior or drive-by inspection was completed.  

Each appraiser should read and understand the Advisory Opinion AO-2 found on page 97 of the 1998 addition of USPAP.