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Fees and getting C/R vary widely-per www.AppraisalPort.com polls

Fees and getting C/R vary widely – per www.AppraisalPort.com  polls

As you can see above, appraisers say that 60% or more of their  clients are paying C/R fees

As you can see above, only 9% of appraisers say C/R is under $350. Yet, I suspect that many are working for under $350 fees. Looking at the poll above,  60% or more of respondents say are working for C/R fees. Are most of them doing a lot of non-lender work, VA appraisals, AMCs who pay C/R, or direct lenders?

As you can see from the two polls, they show that 60% of residential appraisers say they are getting $400 or more per appraisal. If you’re not in the 60%, its time to change.

But, somehow the results seem strange to me. With AMCs at about 80% of the lender market and limited non-lender work available (as compared with commercial appraising) who are the 60% of the appraisers working for? If it is accurate, it means there are lots of clients paying C/R fees…

If you want to get higher AMC fees, you must:
1. Ask for higher fees and
2. Dump cheap AMCs
3. Only bid on jobs that won’t take much time and have few revision requests
Why don’t appraisers do this? Fear and Greed, just like all other businesses. Fear – afraid they will never get another appraisal job. Greed – want more money now. You have to overcome this to be successful in today’s very competitive AMC appraisal market. It is your choice to work for low fees and very demanding clients.

Next month’s paid Appraisal Today newsletter will have an article on how to overcome Fear and Greed and get higher fees.

Appraisal Today newsletter

Posted in: Appraisal fees, appraisers

Fannie warning letters – GLA adjustments and lots more coming

Fannie warning letters-GLA adjustments

Fannie has been sending out warning letters to appraisers about variations in Q and C ratings. Now they are sending out letters about using low GLA adjustments. According to people who attended, or heard about a recent speech that Bob Parsons of Fannie Mae gave an appraisal conference, $25 per sq.ft. Seems to be used by lots of appraisers for lots of properties that vary widely in size, etc. I wasn’t at the speech and don’t know what was actually said, but $25 per sq.ft. Was used in a large number of appraisals.

A quote from a recent email I received: “A friend of mine just got a letter from Fannie Mae stating that they have been monitoring his reports for 6 months. In that time they said he used $35 Psf for gla adjustments 14 times. This is a warning. Further action may be required if this continues.” I haven’t seen any of the letters myself but have been hearing about them for a few months. This The last two sentences have been pretty common in the warning letters sent about Q and C adjustments, which are a lot more shakey to support and are much more controversial.

Hmm… In my area, the San Francisco Bay Area, with a median home price of $601,000 in October, 2014, slightly down from June as many markets have slowed down. San Franciso’s median home price is around $1,000,000. I hope no one there is using $25 per sq.ft.!! Except maybe in neighborhoods with relatively low home prices or some lower priced condos condos. In my small city of 75,000 population the median price in October 2014 was $690,000. Our prices are around the median for the area. Very few homes or condos under $300,000.

Sq.ft. is one of the easiest adjustments to support, as compared with lots of other features. For many years, it has been one of the few almost always reliable adjustments when using regression analysis. You can sometimes even use matched pairs. I have no idea why appraisers don’t try to figure out an appropriate adjustment.

This is just a start. Read info on Fannie’s UCDP Fannie Mae Appraisal Messaging Change Notification” – link below, with a list of all of the appraisal data that Fannie is looking at below.

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Dave Towne on Collateral Underwriter
Thanks to appraiser Dave Towne (again) for his Most Interesting Comments:

Appraisers……..

Many know by now that the GSE’s…primarily FannieMae……..have instituted a new ‘appraisal scoring’ procedure based on an electronic read of your reports ……….. specifically on a SFR 1004 or the Condo 1073Those are the only forms currently being analyzed by the CU process.

On Nov. 18, 2014, FNMA released a document named “UCDP Fannie Mae Appraisal Messaging Change Notification” which you can find here:  https://www.fanniemae.com/content/release_notes/ucdp-change-notification-01262015.pdf

I encourage all appraisers to actually read this document … all 11 pages.

When you do read this document, you will learn that your reports are being compared to your peer’s reports, and to your other reports, and to some unidentified ‘model’ FNMA uses.

Some of the ‘checks’ being performed by the CU process include these:

The reported GLA is materially different than what has been reported by other appraisers.

The reported lot size is materially different than what has been reported by other appraisers.

The condition rating is significantly different than what has been reported by any other appraiser.

The quality rating is significantly different than what has been reported by any other appraiser.

Here are a few that can cause real concern among appraisers:

The GLA adjustment is larger than peer and model adjustments.

The GLA adjustment is smaller than peer and model adjustments.

The view adjustment is materially different from peer and model adjustments.

And I just love this one:

The appraiser-provided comparables are materially different than themodel-selected comparables.

It’s time for appraisers to get serious about meeting your peers in person, compare notes, and develop a regional adjustment chart for all variables … much like that yellow legal pad paper you were handed when you got in this business …. that paper with the ‘required’ adjustment amounts on it for almost all items.

Oh … and when you get that knuckle slapping letter from FNMA saying your adjustments or comparables don’t match the ‘model’ be sure to get the specifics and pass on ‘model info’ to your peers.

Yep, appraising real property and developing an opinio

My comment: Fannie, please send me all my adjustments. Then I won’t get questioned by my state regulator (hopefully), underwriters, reviewers, etc. I would really like to know what adjustment to be made for all the unusual features in the homes I typically appraise – most built before 1930 and many built before 1910 with all types of additions, remodeling, etc. Even tract homes have stuff like converted garages, original kitchen and baths, inlaw units in rear, views, etc. Of course, I have been using regression since the 1970s on homes and very few adjustments are very reliable. I wonder how Fannie is going to do it.

I remember commercial appraisers used to talk about getting cap rates from bottom of a stone monument ;> Maybe we are still looking for that darn piece of stone!!

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Dave Towne on Big Data, Hedonic Regression, etc.

Appraisers………

The new Collateral Underwriter electronic review process developed by FannieMae has many appraisers on edge. This will become the ‘ultimate authority’ or gold standard for reviewing appraisal reports as of January 26, 2015 …. at least as far as FNMA is concerned. Your reports will either ‘pass’ or ‘fail’, depending on many factors. Some of those factors are outside your immediate control.

“Big Data” is one giant pile of stuff that is being put into the CU pot, stirred together like a stew. Except there is no master chef involved that ‘we’ can interact with. Instead we have a bunch of secret sous chefs each contributing a chunk of meat, a bit of spice, some chopped carrots, and a few potatoes. None of them, or us, really knows the actual CU recipe, because part of what’s in the stew is a ‘model’ of something unknown. But some of that Big Data in the CU stew could be yours … or it might be data provided by your peer appraisers who work in your area – that your reports will be compared against. Not too tasty you say? Just add more pepper.

An aspect of this Big Data stew is Census Tract home price analysis, which is compared against your appraised property value. As an exercise, everyone reading this immediately write the neighborhood description using N, S, E & W directionals for the census tract in which your home residence is located. What? You don’t know the boundaries of your census tract? For shame! Some people using the CU stew might think you are deficient because you don’t know price trends in the exact census tract of the appraised property.

Then we have Hedonic Regression. It’s not a bad thing. But it’s becoming the buzz words of our appraisal adjustment process. It’s a ‘background component’ in the CU process, moving farther forward, faster than some might expect.

Bet you didn’t know that the adjustment grid is a form of Hedonic Regression! It’s a way a certain property’s components of value are itemized separately. By using Hedonic Regression, the individual value of the adjustable components can be calculated and plugged into the adjustment grid. In theory, this can lead to a more accurate property value.

The folks at Bradford Software were among the first to begin promoting use of regression techniques by appraisers. In other ways, the other appraisal software companies and some independent developers have been working on individual processes to make “Regression” more palatable and useful to appraisers. Bradford, and the independent developers, have either report software, or separate spreadsheets, that can help calculate property adjustable components, which in turn can lead to a more credible and supportable opinion of value for the appraised property.

The days of “I’ve been an appraiser for 27 years, so I know what this house is worth” are rapidly coming to an end. The Big Data CU stew is overtaking appraising like the snow avalanches that have closed State Highway 20 in north Washington State in the Cascade Mountain range, not far from where I sit in my cozy bathrobe and bunny slippers.

My observation in this process is that appraisers, as a group, are not statisticians by training and are somewhat scared of that term – even though ‘we’ deal with lots of statistics and data. Thus, appraisers don’t have a clear understanding of what “Regression” is, or does. As a result, ‘we’ have been reluctant to embrace this ‘actually old’ technology in modern appraisal reports. And ‘we’ certainly are skittish about FNMA’s soon to be released (to lenders only) Collateral Underwriter which will analyze reports using “Regression.”

Another perspective on this topic is from this blog: http://www.housingwire.com/blogs/1-rewired/post/32165-does-fannie-mae-support-appraisers  This one is written by one of the regression spreadsheet developers, currently available to appraisers.

And for info on Hedonic Regression: http://en.wikipedia.org/wiki/Hedonic_regression

My comment: When I first started doing residential lender appraisals in 1986, we used census tract maps to find the code. Later, the codes were available on computers and we did not use maps. However, I found that they were very good for defining neighborhoods. I guess we all forgot about them since few, if any, appraisers look at the maps. I still have my old census tract books.

Appraisal Today newsletter

Posted in: adjustments, appraisers, Fannie, lender appraisals, Reviews, square footage

How much time should clients give appraisers to deliver a 1004 report on a typical (not unique) property?

www.Appraisalport.com  poll results



Take the current poll at www.appraisalport.com  on c/r fees –
What percentage of your clients offers what you would consider to be customary and reasonable fees for most assignments?

Appraisal Today newsletter

Posted in: AMCs, appraisers, lender appraisals

Fannie Mae – buy backs, adjustments, MLS fotos, etc

By Steve Costello, www.appraisalport.com

Steve reports on an educational session he attended at The Appraisal Institute (AI) annual conference in Austin, Texas, on Aug. 4-6, 2014. He also includes information from an Appraisal Institute seminar – Unraveling the Mystery of Fannie Mae Appraisal Guidelines

If you work for lenders, it is highly recommended that you read a summary of these recent changes for yourself in Announcement SEL-2014-03, dated . It can be found at
https://www.fanniemae.com/content/announcement/sel1403.pdf

Lenders are still concerned with buy-backs, where Fannie makes them buy back loans that Fannie purchased. Yes, they are happening today, sometimes due to appraisal “problems”.

Excerpts:

The ongoing scrutiny and updating of the Guidelines, combined with all these recent problems, are the reasons your lender and AMC clients now have to take great care screening your appraisal for any type of error. These days, it isn’t uncommon for a lender to be forced to buy back a loan that is still performing because an issue was discovered with the appraisal after the loan was sold on the secondary market. Many of the common UAD errors that cause problems may not have a direct effect on your final value, but these types of errors can still cause the lender to have to buy back a loan.
….
Another area of close attention by Fannie Mae that Underwood mentioned is the proper supporting of adjustments. Fannie Mae has determined this to be a problem area based on the volumes of appraisal data they examine. Just saying you made an adjustment is not good enough. You now need to show how and why you are making the adjustment. They found a lot of appraisers using “standard” amounts for adjustments. Many of these are old and outdated or no longer apply to a particular neighborhood. Fannie Mae is now looking for the appraiser to completely document how they arrived at their adjustments for any given property.

Note: Fannie Mae has said that they are especially looking to see some support for the adjustments made for gross living area and those items on the adjustment grid above gross living area, which include such attributes as the room counts, location, site and so on. How did you decide how much to adjust?

You may find some of Fannie Mae’s requirements surprising, but remember your lender may have different, more stringent requirements. Be sure to meet the requirements of your client even if they are above and beyond the Fannie Mae requirements.

A few Fannie guidelines you may not be aware of:
– Acceptable photographs include original images or those from MLS or the appraiser’s files. (If you can’t get to the comp, for instance in a gated community, you can use the MLS photos from the sale but make sure to document what you did).
– The appraiser must identify items that require immediate repair and deferred maintenance items which may or may not require immediate repair.
– Market condition adjustments must reflect the difference in the market conditions between the contract date of the comparable and the effective date of appraisal for the subject. (The adjustment may be either positive or negative).

 

Appraisal Today newsletter

Posted in: appraisers, Fannie, lender appraisals

Lender and AMC revision requests

Lender/AMC revision requests
By Steve Costello
Source: AppraisalPort monthly newsletter

My comment:  www.appraisalport.com  recently redid their web site and somehow their surveys got put on another page. Now, they are back. AppraisalPort has my Most Favorite Appraisal Surveys!! The current poll is about what measuring device appraisers use. Be sure to vote!! Their poll responses were typically very high, 4,000 to 6,000 responses.

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Full article below:

First, I am glad to report that the poll is back up and running on the AppraisalPort homepage. It was down for a few weeks during the transition to the new version, but you can now find it by either scrolling down a bit or by just clicking on the button that says “Weekly Poll” on the right side of the screen.

This month, I want to discuss a couple of recent polls related to lender/AMC revision requests. First we asked: “Compared to a year ago, my lender/AMC revision requests have…?” Out of the 5019 responses, nearly 40 percent went with the answer “Stayed about the same.” Unfortunately the second most popular answer of “Increased significantly,” which took 21 percent of the vote and was followed closely by “Increased somewhat” with 19 percent. These were followed by the responses of “Decreased somewhat” pulling 13 percent of the vote and finally, “Decreased significantly” with a 7 percent share. There are two ways we can look at this data: Taking a negative view, 40 percent of the appraisers are experiencing some kind of increase in revision requests. That is a big number, but looking on the positive side that means that the other 60 percent have either stayed at the same level or have experienced a decrease in revision requests.

In the second poll we asked: “On average, how much time do you spend making and delivering requested revisions on any given appraisal?” We had a total of 4870 responses to this poll. Nearly half (48%) of those chose the response of “10-30 minutes.” This would seem about right for most minor to moderate revisions. Many must be making pretty minor revisions because the second most popular response with 24 percent of the vote was “Under 10 minutes”. Another 18 percent are having to take a bit more time and went with the choice of “31-60 minutes.” A smaller group of 7 percent is having to invest some real time to make the revisions and picked the response of “Over an hour.” The final 3 percent selected the answer of “I don’t make revisions.” I’m not sure if that means they are doing an amazing job on every report and never get a request or if they just refuse to do any revisions!

My comment: these results are somewhat similar to the recent Valuation Review survey results. I keep hearing lots of complaints about revision request hassles. It is good that it seems to be stablizing. Interesting results. I hardly ever have revision requests from my estate clients, except when I have a typo on the address or client name ;> I really hate getting reviewed!! Well… maybe it would be okay if it is an experienced local appraiser who knows all about my market!! I have always wondered why lender appraisals have been regularly reviewed. I don’t know of any other profession where someone else reviews so many reports that are done. I really think this is why appraisers are so negative about other appraisers’ work. I can’t remember if I took the poll… I often don’t because I don’t do any lender work and it sorta skews the results…

What do you think? Post your comments below!!

Appraisal Today newsletter

Posted in: adjustments, AMCs, Appraisal fees, appraisal management company, appraisers, lender appraisals, Reviews

Standardizing adjustments?

Channeling Deep Blue Versus Garry Kasparov in Home Valuations – It’s time to standardize how real estate appraisers make their adjustments

Source: Corelogic blog

Excerpts:
It might be time to reengineer the process appraisers use to make adjustments to comparable homes. The current approach does not appear to be defensible.

To investigate this issue, we obtained a set of relocation appraisals from an appraisal management company and conducted our own analysis. (As background, for relocation deals, two or more appraisals are ordered at the same time; and the two appraisers often choose an identical comparable property).

For the experiment, we:
1) Obtained a set of relocation appraisals—two appraisals on each property prepared at roughly the same date for which the appraisers choose an identical comparable.
2) Looked at the adjustments made to that comparable and noted discrepancies in the amount of the adjustments, and even the direction (positive or negative).

It’s time that we re-engineer the process so that appraisers can focus on the things that may benefit from the human element, such as defining the neighborhood and selecting comparables. But for the pieces of the puzzle that need to be standardized, like adjustments to comparables, we should be harnessing the power of our machines. Too much is at stake to maintain the status quo. Appraisers would benefit by being allowed to focus on things they do well; loan applicants would benefit from a less-costly, streamlined process; and lenders would benefit from valuations that were standardized and more reliable.

Read the full article and see how they analyzed the data, with graphs etc. at:
http://www.corelogic.com/blog/authors/michael-g.-bradley/2014/10/channeling-deep-blue-versus-garry-kasparov-in-home-valuations.aspx?WT.mc_id=crlg_131016_0OGMz#.VFERojTF8zr

My comments: of course, it would be very helpful if appraisers had access to all the Big Data being compiled by Fannie and Others. Fannie will be looking at appraiser adjustments but don’t offer any help from their Big Data to appraisers making the adjustments.

Appraisal Today newsletter

Posted in: adjustments, appraisal, appraisers, lender appraisals, Reviews

Fannie's new Collateral Underwriter to check appraisals Using Fannie's Big Data.

Fannie’s new Collateral Underwriter to check appraisals Using Fannie’s Big Data. 

Another great email from Dave Towne in Washington!!

10-14 FNMA Collateral Underwriter Flyer showing info about the FNMA Collateral Underwriter process they will make available to lenders (NOT APPRAISERS) in January 2015. You should review it. It has to do with their Enhancement of Risk Controls.

This is what we know as Appraisal Quality Monitoring (AQM) …. which was announced almost 2 years ago. FNMA has already been using the ‘scope’ on your reports, but will soon allow the lenders to have access to the software so that they can do pre-submittal exams prior to uploading the loan file, and your appraisal, to FNMA.

Virtually everything is digital now in our real estate appraisal world. That makes it incredibly easy for ‘big data’ to be analyzed very quickly and efficiently. Hiding relevant property info under a rock, your clipboard [tablet?], or just ignoring it, is no longer possible. Discrepancies will be found fast, and you will be asked for explanations or corrections.

Note the examples from the flyer:
– Chain of property ownership
– Inconsistency in reported property data from your info compared to your peers (subject & comps)
– Checking adjustments made (or not made) – primarily the math
– Testing for comps in terms of location, characteristics, sales prices, etc.

FNMA’s news release about their Collateral Underwriter:
Introducing Collateral Underwriter
Collateral Underwriter™ (CU™) is a proprietary appraisal risk assessment application developed by Fannie Mae to support proactive management of appraisal quality. CU will:
– Provide additional transparency and certainty by giving lenders access to the same appraisal analytics used in Fannie Mae’s quality control process.
– Perform an automated risk assessment of appraisals submitted to the Uniform
– Collateral Data Portal® (UCDP®) and return a CU risk score, flags, and messages to the submitting lender.
– Be available at no charge so lenders can take full advantage of the application for quality control and risk management purposes.

The CU risk scores, flags, and messages will be available to all UCDP users in real-time beginning on Jan. 26, 2015 through UCDP. Find more information on the CU web page at https://www.fanniemae.com/singlefamily/collateral-underwriter?cmpid=sln102114 .

Dave Towne, AGA, MAA Owner / Educator
360-708-1196
towneappraisals@clearwire.net
www.towneappraisals.com
Mount Vernon, WA

My comments: The PDF only has three pages of the document. The other pages were not available. Real estate is location, location, location. What about the 4th approach to value: Curbside Approach. That is where you sit on the curb across the street from the subject and ask yourself: “Does this value make any sense?”

There are many appraisal review programs in use and being developed. I knew that Fannie would be using their Big Data to automate underwriting reviews of appraisals as well as monitoring appraisers.

Does this mean appraisers focus even more on making sure their appraisals pass these automated reviews rather than focusing on what counts – the value? Is this another path along the way to not focusing on what appraisers provide – reliable and accurate values? Plus, disclosure of any problems with the property?

Appraisal Today newsletter

Posted in: appraisers, Fannie, future, lender appraisals, Reviews

Where Did All the Good Appraisers Go?

Where Did All the Good Appraisers Go?

By Hamp Thomas, Institute of Housing Technologies

Excerpt:

As appraisal fees go downward, quality is going in the same direction. The best appraisers, who have invested years and years in building their careers don’t want to work for a company that they have to check in with every 12 hours, and get treated like a school kid in the principal’s office. An untrained and unlicensed person on the other end of the phone is making their schedule and deciding who gets paid what. And guess what – it’s going to get worse… The best appraisers are finding other types of appraisal work (that values their craft), and the appraisers that work on mortgage loans are often the newer licensees or trainees. If all this Reform we’re talking about is still hoping for higher quality appraisals for use in mortgage lending, we’re in deep trouble. The best appraisers are leaving mortgage appraising as fast as they can.

Appraisers get together and discuss how “bass ackwards” all this “reform” is, and why something that is so logical has been stretched far enough that the government is biting; hook, line, and sinker… If you want a higher quality product, you have to pay more. Look around. Do the best doctors get paid more? How about the best mechanics? The best architects? The best teachers and speakers? The best attorneys? People seek out the best and they are in such great demand, they command higher fees. This is nothing new, it’s just the way the system is supposed to work. So why do we think that appraisals should be different? The lenders, and government officials, and AMC’s think appraisers can be paid less, be required to do more work in each report, and then the quality of appraisals will go up? Come on, this is not rocket science. In most cases, when you add a middleman to any process the price goes up and the quality goes down. Ask Walmart…

http://www.housemeasures.com/ArticlePages/Where-Did-All-the-Good-Appraisers-Go–.html

My comment: AMCs, and the lenders that hire them, see all appraisers as the same. Why not go for the lowest fee? Yes, there are direct lenders who care, and big lenders who have “special lists” of experienced and well trained appraisers, typically for high end homes or people who are top bank customers. Those appraisers are paid much more than the appraisers who compete on fee.
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Posted in: AMCs, Appraisal fees, appraisers, forecast, future, lender appraisals

Lone wolf appraisers fighting everyone, including other appraisers

Jonathon Miller’s original recent article on Bloomberg and follow up article replying to very negative appraiser “trolls”. Most of the appraisers did not read the

Guess What’s Holding Back Housing? – Original article
Jonathon Miller’s Original posting was on Bloomberg and got lots of appraiser comments, many of them very negative and defensive

Excerpts:
During the U.S. housing boom, real-estate appraisers acted like deal-enablers rather than valuation experts. Indeed, inflated appraisals were a key ingredient in the erosion of mortgage-lending standards that led to the housing bust. Now we are seeing the opposite — low appraisals — with unwelcome consequences for the housing market.

A recent working paper by the Federal Reserve Bank of Philadelphia looked at the impact of the HVCC rules on the outcome of appraisals and mortgages, touted as the first empirical analysis undertaken since the agreement was enacted.

The study looked at the frequency of low appraisals, in which the appraised value was less than the contract price. A low appraisal doesn’t necessarily equate to low quality but it could be a concern. The highest percentage of low appraisals occurred around May 2009. This was not only the peak of the housing-market collapse, but also when the agreement first went into effect, easing the pressure on appraisers by mortgage brokers and banks to “hit the number.”

http://www.bloombergview.com/articles/2014-09-25/guess-what-s-holding-back-housing

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Lone Wolves: Appraisers Fighting Everyone, Including Appraisers
Follow up posting after lots of appraiser ranting

Excerpts:
There are many great people, incredible talents and solid organizations within the appraisal profession. But in my opinion only 20% of the industry are truly competent professionals and the remainder are merely varying degrees of form fillers.

I have been an appraiser for 28 years and it is apparent that the industry is dying a death of a thousand knives. One of the key reasons for this slow death is the lack of national leadership and the extreme fragmentation since most appraisal shops are comprised of a single or just a handful of professionals. I’d also like to offer that the majority of our profession seem very willing to make unsupported negative inferences on reviews of a colleague’s work such as appraisal field reviews or troll columns like mine.

To read the full article and the appraisers’ comments:
http://www.millersamuel.com/lone-wolves-appraisers-fighting-everyone-including-appraisers/

My comments:
I have been following Jonathon Miller for many years. He is very savvy and is widely quoted in the media – local and national. Plus, he has a Most Excellent blog.

I agree with Miller regarding the lack of competent appraisers. It is not the appraisers’ fault. The problem is the lack of adequate training and poor education after appraisal licensing. Fee appraisers were expected to train new appraisers. But, it takes a lot of time. Also, poorly trained recently licensed appraisers were allowed to train new appraisers. The recent change to AMCs and UAD have made residential lender appraisers focus on “filling out the form” to fit guidelines and criteria that do not have much to do with getting a credible and accurate value. In fact, the restrictions can result in being hassled if you try to use comps and analysis that are appropriate for the appraisal. Many appraisers just give up and give them what they want.

I don’t know of any other trade, job, or career where participants constantly “bad mouth” each other. The only reason I can see is that their appraisals are reviewed. Appraisers are used to being criticized and look for “problems” in other appraisers’ work.

Appraisal Today newsletter

Posted in: Appraisal fees, appraisers, forecast, future

New Fannie Appraisal FAQs including 1004MC

New Fannie FAQs – Appraisal and Property Related Frequently Asked Questions (FAQs) including 1004MC guidelines Published September 23, 2014

Fortunately, the document indicates which Q&As are new, as it is often hard to figure out what is new and what has already been sent out in other documents.

If you do lender work, read this document!!

Topics include:
– Comps with accessory units
– C&R ratings
– Comments on adjustments
– Sales over 12 months old and distance from subject – Ok to use
– Legal, non-conforming and proof of rebuilding – not required
And many more relevant and useful Q&As, including guidelines that have been around for a while, such as Net adjustments, etc.  Looks like Fannie has figured out many of the topics relevant to appraisers!!

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For many appraisers, the 1004MC comments will be very helpful:

Q16. What type of properties are to be analyzed for the data reported in the One-Unit Housing Trends portion of the Neighborhood section of the appraisal report form?

The data regarding trends to be reported in the One-Unit Housing Trends section must be reflective of those properties deemed to be competitive to the property being appraised. Additional commentary should be provided on the other segment(s) of the neighborhood when segmentation is present to aid in understanding the overall neighborhood dynamics.

Q17. Are the trends that are reported on the Market Conditions Addendum to the Appraisal Report (Form 1004MC) the same trends that are to be reported in the One-Unit Housing Trends section of the appraisal report (Form 1004)?

Yes. The conclusions regarding trends that are obtained from the Form 1004MC must be the same trends reported in the Neighborhood trends section of the Form 1004. The information reported on both forms must be consistent to provide the lender with a clear and accurate understanding of the market trends and conditions present in the subject neighborhood, based on properties that are considered competitive with the subject being appraised.

Read the additional 1004MC Q&As.

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Thanks to appraiser Dave Towne for some great comments on 1004MC:

Ever since the blasted MC Form was mandated in 2011, I’ve been saying the way appraisers have been ‘classically’ trained and used the Neighborhood check boxes on the primary forms did not mesh with the MC Form requirement.  (And in fact, I quit doing the ‘classic’ method then, and have been doing what Q16 & Q17 below say.)

I happen to believe one reason why the MC Form was instituted was that this ‘classic’ reporting methodology of reporting overall dissimilar neighborhood property trends (heterogeneous properties) did not (and does not) make sense when the assignment is to appraise a single property using comparable (or competitive) properties.

Dissimilar properties seldom have the same trend components that the comparable (competitive) properties have.  As such, they don’t need to be reported…..except as the last sentence of Q16 says …. ”Additional commentary should be provided on the other segment(s) of the neighborhood when segmentation is present to aid in understanding the overall neighborhood dynamics.”

An issue with the ‘classic’ methodology is the “predominate” value of an overall neighborhood with dissimilar properties can be much different than when only comparable (competitive) properties are used in the trend analysis.  So, when appraisers use the proper properties as outlined above, there should be no significant problems with that data point, because the “predominate” value will more than likely fall within the price range of the comparable (competitive) properties.

My comment: Finally some guidance on issues that have been driving appraisers crazy with lots of differing appraisal opinions. Now, we can use answers directly from Fannie!!

Hopefully, AMCs and lenders will use these Fannie guidelines instead of making up their own. Particulary, the guidelines that have been around for a long time that are repeated in these FAQs. You can refer them to this document.

Link to FAQs
https://www.fanniemae.com/content/faq/appraisal-property-report-faqs.pdf

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Appraisalport poll comments and results on 1004MC (from their Sept. 2 blog posting at www.appraisalportblog.com

“This month, I want to take a closer look at two recent polls – one related directly to the use of AppraisalPort and the other concerning a controversial form. Starting with the form, we asked: What do you think about the 1004MC form? This was a popular poll with a total of 5982 responses. The form doesn’t appear to be well thought of; with 66 percent of respondents selecting the answer “It really doesn’t work well and should be retired.”  Another 21 percent answered that “It is OK but in need of some updating or modifications.” It seems that the 1004MC form is going to have some trouble getting a date to the prom because only the remaining 13 percent of voters said “It still gives the client a good idea about current market conditions.”

“I did receive some additional feedback on this poll. Some appraisers just don’t like to use the 1004MC because it’s just something else that has to be done; takes more time out of the day; and may not provide accurate results – especially in rural areas. Others think it really is the first step to a more modern style of computer-assisted appraising.“

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