Appraisal Waivers Almost 50% of Fannie/Freddie Loans

An explosion of appraisal waivers. Is that good or bad?

By Ryan Lundquist

Excerpts: Appraisal waivers have really exploded in recent years – especially during the pandemic. But how many are there exactly? Let’s look at actual numbers to walk away with some perspective. These stats are from January 2021 from AEI.

  • 47.4% of all Freddie Mac loans had a waiver
  • 44.5% of all Fannie Mae loans had a waiver
  • Waivers are far more common during refinances
  • Only 10-12% of purchases had an appraisal waiver in January
  • Non cash-out refinances have the most waivers (67-69%)
  • The higher your loan-to-value, the lower your chance of a waiver
  • Waivers have seen a dramatic increase during the pandemic

2) Seeing numbers: What real estate professionals experience with appraisal waivers with their clients can really vary. For instance, if you work with FHA borrowers putting very little down, you probably don’t see many waivers, but if you work with conventional buyers putting 30-40% down, you’re going to see more. This is why seeing actual stats is so important.

Read more of Ryan’s comments, see graphs, plus over 25 appraiser comments: click here 

To read the AEI report, click here

My comments: I wrote about this in the February issue of the monthly Appraisal Today. Also included is data on which states are doing the most, and least, alternative appraisals. I spent a lot of time trying to get any statistics from Fannie without success. I knew waivers were going way up, especially for purchases. AEI reports have the analysis

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NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, Trip fees, waivers, solar, AVMs, mortgage origination stats, etc.

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Age adjustments in appraisals

Age adjustments in appraisals

By Jamie Owen

Excerpts: Sometimes, two homes with wide age differences can have the same effective age. For instance, a thirty-year old home may have an effective age that is the same as a fifty-year old home, if the fifty-year old home has been renovated to a degree that is comparable to the younger home. If this is the case, while there is a relatively wide age gap, no age or condition adjustment may be supportable.

Once the home is lived in, it can never be considered “new” again. Subsequently, a new home typically has a higher market value than one that has already been lived in. The joyful homeowner makes these choices, the home is built, and they move in. Now starts the wear and tear. The degree of wear and tear depends much on the homeowner and how well they maintain their home. With new homes, typically homeowners go for a number of years without needing to do anything major to the property. However, at some point, they will need to.

To read more and see some fun animated gifs and a video, click here

My comment: Written for homeowners (an excellent marketing tool) but interesting comments for appraisers. I love Jamie’s blog posts!!

Humor for Appraisers

For Covid Updates, go to my Covid Science blog at covidscienceblog.com

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Real Estate Agents and Comparable Sales – Tips for Appraisers

Agents and Comparable Sales – Tips for Appraisers

Excerpts: When real estate agents provide relevant comparable sales to appraisers, it certainly benefits both parties. Agents can ensure that appraisers are reviewing comparables that match their properties and, hopefully, meet the seller’s desired price.

Additionally, while appraisers still must verify the information, it can save them time. Here are some dos and don’ts to follow as agents and appraisers work together on establishing comps for appraisal properties.

One of the tips: Don’t go outside the neighborhood

Other neighborhoods may be less or more desirable, and that can affect overall value. Comparable sales should come from only the direct neighborhood in which the house is located—even if that means choosing homes that are slightly smaller or bigger to use as a comparison. Agents should never use sales from a “better” neighborhood to boost the value of an appraisal property.

To read more tips, click here

My comments: All appraisers get comps from agents sometimes. Unfortunately, many are not useful. I always ask if an agent has any sales or listings for me. Agents are often experts in their particular area and know what is happening. Appraisers work in a much wider area usually. Whenever I speak with agents, I tell them how to select comps, especially pending sales, using some of the criteria above.

This does not apply to the sales provided by AMCs, of course, which require a response and often wasted time for the appraiser. Most are generated by computer algorithms or occasionally a review appraiser that knows nothing about the local market.

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Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

For Covid Updates, go to my Covid Science blog at covidscienceblog.com

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Common Appraiser Violations

Two of the common appraiser violations – Use of inappropriate sales and Use of unsupported site value

Excerpt: When it comes to common appraisal violations, certain minor violations are very common. In this article, I outline several examples of less serious breaches of development STANDARD 1 and reporting STANDARD 2—and a few other types of violations, too. I have compiled these based on many years of personal experience in appraisal regulation, as well as feedback I have received from other states’ enforcement agencies. Once you’re aware of these common mishaps, you should be able to avoid them more easily.

1. Use of inappropriate sales

One of the big problems is the use of inappropriate sales in a sales comparison approach….

2. Use of unsupported site value

Another common violation is the use of unsupported site value in the cost approach. That’s something that a lot of boards have cited as a prevalent deficiency or shortcoming in appraisal reports.

To read more click here

My comment: useful information. Nothing new, but good reminders. Don’t get the “violation letter” from your state board!!

Appraisal Process Challenges(Opens in a new browser tab)

Appraising Weird Stuff is Challenging!(Opens in a new browser tab)

What to Do When Your Appraisal Is Under Review(Opens in a new browser tab)

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Appraising Weird Stuff is Challenging!

How to Handle the Weird Stuff: Appraisal Methods from an Experienced Florida Appraiser

Excerpt: Going further away or back in time

One method is to go further back in time for comparable sales.. Another method is to use sales that are more distant to find data to utilize. Both of these techniques have long been available to appraisers. When using these appraisal methods, most often a comparison is made between properties with similar characteristics to the question at hand to extract a ratio/percentage which is then brought current or to the locale and applied. This could work for the above illustration with only four houses on leased land and no similar nearby sales. Most appraisers are familiar with and have utilized these techniques… Appraising Weird Stuff is Challenging!

Well written and worth reading. To read more, click here

My comments: Lots of good tips. All of us are asked to appraise the “weird ones”. Of course, sometimes we don’t know a house is weird until we drive up and see it!! A very good discussion of methods. I have used all of them except the depreciated cost, which is a good method. Plus, lots of tips on doing them for lenders. Of course, sometimes I just say “no” as it will take too long.

I have learned that they often are money losers due to the increased time. This is what can happen with lender UAD appraisals for AMCs due to the excessive amount of questions and trying to fit the appraisal on the form. I sometimes accept the weird ones for non-lender work with no time pressures. They can be very interesting and challenging.

Appraisal Process Challenges(Opens in a new browser tab)

Common Appraiser Violations(Opens in a new browser tab)

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Fannie Update on Covid alternative appraisals

Fannie Update on Covid alternative appraisals. Excerpt: Through mid-May, about 15% of Uniform Collateral Data Portal® (UCDP®) appraisals completed after our announcement used the flexibilities, either desktop or exterior-only. As you know, circumstances vary widely across the country, and the uptake of the flexibilities reflects this. The highest percentages of appraisals using the flexibilities are around 40% in some northeastern states, while the lowest percentages are around 10% in some of the less impacted states…

We found that appraisers have used the flexibilities correctly about 90% of the time. Appraisers have done a great job identifying external obsolescence for desktops and exterior-only appraisals, as well as leveraging their local knowledge, maps, aerial photos, and other data sources. We’ve been pleasantly surprised to find that, although not required, about 35% of nontraditional reports include a sketch pulled from prior reports, assessors records, or other sources. Also, the supporting comments in the nontraditional reports have been even better on average than those in traditional reports.

Worth reading. 5 pages and well written. Also includes comments on “one mile rule” and flood zones. To read more, click here

My comments: There are very few of these done in the Bay Area. 10% sounds about right. However, now we are now in a major virus surge in some states – opened too soon and people in some areas did not do social distancing, hand washing and wear face coverings. Use of the alternative reports may increase in some states, and decrease in the northeast.

These appraisals are not easy to learn how to do, and are very different than doing full 1004 with interior inspections. In the June issue of the paid Appraisal Today I have lots of information on them, including useful references. See the ad below.

Covid-19 and Appraisers FREE Newsletter(Opens in a new browser tab)

Click the link below for a church converted to a home, Value Difference Between Streets, Avenues & Boulevards…?, Millions of American Homes at Greater Flood Risk Than Government Estimates, New Study Says, random thoughts of an appraiser, mortgage origination stats. 

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Reconsideration of Appraised Value

Reconsiderations of Value and What to Do About Them

By Danielle Lopez

Excerpt: It is Tuesday morning and I have my day planned and timed between reports that are due and morning inspections. I’m just about out the door when I receive an email notification for an appraisal I submitted last week. The notes indicate “Reconsideration of Value.” You know the drill, I’m sure.

Since I just completed this appraisal it was fresh in my mind. I recall the steps, time and attention to detail to locate the appropriate sales. I review my appraisal, and the unadjusted range of sales is $740,000 to $761,000, with adjusted prices of $740,000 to $756,000. I utilized three closed sales and two active listings/pending sales to support my opinion of value. The sales comparison approach is tight, bracketed and the report has an additional forty-eight pages of supporting documentation and explanation for the reader.

I open the notes from the AMC that say: “Please review the attached sales and indicate why they were not utilized in the appraisal.”…

To read more about this, click here

What Is An Appraiser?(Opens in a new browser tab) Humor

What to Do When Your Appraisal Is Under Review(Opens in a new browser tab)

51 Ways to Cut Appraisal Costs and Increase Cash Flow(Opens in a new browser tab)

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Swiss guesthouse built into side of mountain Appraisers and Houses

This 170-year-old Swiss guesthouse built into the side of a mountain is best accessed by a cable car.

Excerpt: The guesthouse and restaurant is quite literally built into a cliff, and its back wall is made up of the rock itself.

Its precarious perch makes it difficult to get to, and it’s only accessible after a steep hike along a mountain path or via cable car (the piano in the living room was brought in by helicopter). It’s been around for 170 years, and was originally a home for farmers; the guestbook goes back to 1940.

To check out the interesting fotos and brief description click here

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Defiant vs. Compliant Appraisers?

Excerpt: Believe or don’t believe. Is there a parallel between appraisals and how people respond to pandemic warnings? Defiant vs. Compliant Appraisers?

Appraisal reviewers decide whether an appraisal is “worthy of belief” (“credible”) or not. Similarly, people decide whether to believe in the need for public health orders.

Steven Dinkin (president of the National Conflict Resolution Center) recently had some observations on the public’s response to the pandemic, dividing people into two groups: defiant or compliant. What is interesting is that each group has a belief that their thinking is the right thinking. Their opinion is the right opinion.

Let’s look first at the “defiants.” Some of these are defiant out of economic necessity – money. The need to eat can trump health risk. (Especially if the health risk is to other nameless strangers. “They have to take care of themselves.”) Guess what – food on the table comes first…

To read more, click here

My comment: I see a lot of appraiser comments online on both sides of controversial issues, including sometimes “sharp words”. Fortunately, almost all online appraisal places I go are moderated. Very negative or “flaming” posts are deleted. Sometimes appraisers are removed from the group after a few warnings.

The June issue of the monthly Paid Appraisal Today will have an article on this topic: “How to connect with appraisers online. What’s the best way for you?” I last wrote about this in January 2018. There have been a lot of changes since then!!

George Dell had a much longer article in the May issue of the Paid Appraisal Today.

Strange Appraisal Terms(Opens in a new browser tab)Humor

What to Do When Your Appraisal Is Under Review(Opens in a new browser tab)

Which Appraisal Clients are used the most?(Opens in a new browser tab)

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Value, Accuracy, and Misleading for Appraisers

On Value, Accuracy, and Misleading…and How They are Different From What You Might Think!

By Tim Andersen, MAI

Excerpt: Let’s start this musing by addressing the issues of value, accuracy, and misleading. You might have looked at them differently in the past. Then we’ll tie these in the idea of the value conclusion in an appraisal being right or correct.

State appraisal boards level charges against appraisers. It is very common for appraisers to defend themselves against these charges by insisting their value is “right”. Or, they assert they have properly supported their value conclusion, or something similar. In reality, this argument is utterly irrelevant and carries no weight with the appraisal board.

IRRELEVANT!?

When it comes to value, accuracy, and misleading, the appraiser’s value opinion alone is irrelevant and weightless. This is because TAF has given state appraisal boards specific instructions. Those instructions are that the appraiser’s value conclusion is not to be a part of the board’s investigation. Nor is it to be a part of its deliberations. Therefore, it is not to be part of the appraiser’s defense since it is not part of the charges against the appraiser.

To read more, click here

My comment: Tim is a regular contributor to the paid Appraisal Today. He is The USPAP Expert and helps appraisers stay out of trouble with their state boards!! Tim also has an interesting podcast – link is on the top of the page.

What to Do When Your Appraisal Is Under Review(Opens in a new browser tab)

Appraisal Humor

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