When do clients typically request the Exterior‐Only Inspection Residential Appraisal Report (Form 2055)?

Clients typically request the Exterior‐Only Inspection Residential Appraisal Report (Form 2055) when there is a very low loan-to-value ratio. This situation indicates that the borrower has a significant amount of equity in the property, which reduces the lender’s risk. In these cases, a full interior inspection may not be deemed necessary, as the existing equity sufficiently protects the lender. The exterior-only inspection allows for a quicker assessment while providing enough assurance of the property's condition and market value.

In scenarios involving a low loan-to-value ratio, the perceived risk is lower because the borrower has more investment in the property. This is why lenders might accept an exterior-only appraisal as a sufficient measure to determine the property's value for the purposes of the loan.

Other choices do not align as closely with typical requests for Form 2055. For example, clients may not choose this report specifically for small property sizes, high loan-to-value ratios, or simply because the property is located in a rural area. Each of these scenarios may still necessitate a full inspection to adequately assess the property's value and mitigate lender risk.