Another “good one” by Dave Towne, Washington appraiser and commentator
Something’s been gnawing at my craw ever since January when FNMA’s wonderful CU was unleased to the world. And before that, which still continues, is the AQM process they still use to judge the work of appraisers.
No one else has written about this, or even mentioned it, so I will: It has to do with the word “Comp” which is used liberally by FNMA.
What exactly is a “Comp?”
In FNMA’s world, it’s any property that they obtain, either by their vast AVM process which examines millions of property transactions, or properties that have been extracted from appraisal reports submitted by appraisers……..yes, your work. In their fuzzy logic, it’s a “Comp” considered for your report if they say it is. It is not!
A true “Comp” is a property viewed and/or analyzed by a real living, breathing, mirror fogging appraiser who compares that sold property against the subject property in terms of multiple features, characteristics and amenities. It is not determined by an AVM or algorithm within the vast bowels of FNMA. Until the property has such analysis done by an appraiser, it is merely a SALE……it is not a “Comp.”
This FNMA lie really became evident to me on 4/20/15 when FNMA released a news release about how CU has been integrated into their on-line Desktop Underwriter software mortgage lenders use, which you can read here: http://www.fanniemae.com/portal/about-us/media/corporate-news/2015/6239.html?p=Media&s=News+Releases&from=RSS
Within that news release is this quotation from a VP at a mortgage lender: “The collateral information that CU provides is invaluable and simply staggering,” said Breck Tyler, Executive Vice President, Trustmark Mortgage Services. “CU has aided in providing important comparable data that was previously unavailable or very difficult to get. CU messages in DU will help streamline appraisal review and make the underwriting of an appraisal a much more informed process.”
Then, FNMA released info directed to Correspondent Lenders who intend to use the CU process in UCDP, but don’t intend to sell the loan to FNMA: https://www.fanniemae.com/content/fact_sheet/collateral-underwriter-non-seller-implementation-guide.pdf
That has this statement: “Fannie Mae does not instruct or suggest to lenders that they ask appraisers to address all or any of the up to 20 comparables that are provided by CU for most appraisals.”
I want to repeat what I said above…in case you missed the point: A PROPERTY IS NOT A “COMP” UNLESS YOU DETERMINE IT IS AND INCLUDE IT IN AN APPRAISAL REPORT. Otherwise it’s just a ‘sale.’
If you’re an appraiser who liberally uses the word “Comp” in place of a ‘property sale’ I would ask that you be more careful. If you receive info from a lender, AMC or anyone else who asks you to look at the “Comp” they have provided, correct them and use the words “sale property” until you have determined that it truly is a “Comp.”
I’m also asking members of appraisal organizations and associations to communicate your concern about this lie perpetrated by FNMA directly with them, and ask FNMA to change the word “Comp” used in their CU Reports, news releases, instructional materials, etc. to ‘Property Sales’ so that there is no misunderstanding about the significance of this issue.
If organizations and associations won’t do that on behalf of appraisers, then we might as well kiss the profession of residential real property appraising goodbye. Because if a list of ‘sales’ are considered “Comps” then an actual human appraiser won’t be needed to provide supportable property analysis and market value reports.
My comment: I have been aware of the difference between a sale and a “comp” for a very long time. I try not to mix them up. It is very important when communicating with lenders and real estate agents, who should already know the difference. I am glad that Dave Towne points out this very big difference.
I have not found it to be an issue with non-lender clients, where I use “comparable sales” which is a much clearer term to use, since few are familiar with the term “comp”.