Team's Blog

A little AMC humor for the best appraisers in the region: Team’s Panel. You guys and gals rock and I’m lucky to be working with you – and just delivering your reports. ;-)

http://www.xtranormal.com/watch/7075651/

Thank you all for everything you do.

-Laurie

This is worth reading, guys and gals, because you may need to alter your practices slightly, particularly in regard to the 1004MC and reporting of active listings. Here’s a link to the updates so you don’t have to read all 1,234 pages of The Guide. ;-) https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1009.pdf

BTW – For those of you (like me) who have stomped your foot in response to a poorly performed review and shouted, “Why does the review appraiser always get to be right?!” here’s the answer from the selling guide: When a review appraisal…is obtained, the lender must use the opinion of market value as stated in the review…because the lender has, at that point [in] time, rejected the original appraisal. (Page 545 of the June 30, 2010 Selling Guide.) https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel063010.pdf

The incessant requests for additional comparables by lenders attempting to avoid ordering reviews makes sense now, doesn’t it? If you read the entire section titled Guidance on Addressing Appraisal Deficiencies starting on page 544, you'll see lenders have few choices. Let’s give them a break and try to comply with their requests to the best of our abilities - especially given the sources of many review appraisals these days. (Soapbox deleted.)

-Laurie (who is obiously a little riled up about this topic ;-)

(PS: I've been toying with the idea of creating a review panel to provide quality reviews to local lenders. Please let me know if you'd be interested in participating.)

Just had an interesting conversation with a member of the real estate community and I was told there is a movement among some Realtors to remove lockboxes from houses so appraisers can’t gain access themselves - thereby having to set an appointment to meet the agent. Of course I thought this was a terrible idea due to inevitable delays, but the reasoning was alarmingly sound.

We all know about the problems we’re having with some AMCs assigning requests to appraisers who are geographically incompetent. And some appraisers are accepting assignments for which they are geographically incompetent (though I know none of you are.) So it makes sense to me agents would take matters of geographic competency into their own hands by removing lock boxes. At least then they have the opportunity to talk to the appraiser and perhaps discuss what they know about the subject, the local market and the transaction itself. You know, exercising due diligence on behalf of their client. ;-)

It surprises me there is still confusion about this but since there seems to be, I’ll go ahead and mention it. The HVCC only prohibits communications with loan production staff. Not with Realtors, homeowners, buyers or sellers. For that matter, it doesn’t prohibit communication with the lender – only with the lender’s loan production staff. But to the point of agents, there are 63 Frequently Asked Questions in the March 2010 HVCC FAQs and I think only this one has a one-word answer. https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf

Q10. Does the Code specifically prohibit communication with an appraiser by a real estate agent?

A: No.

Hahaha - I think that’s pretty clear! Something else to consider is an appraiser can’t violate the HVCC any more than a lender can violate USPAP. See what I mean?

Speaking of USPAP, there may be some question as to whether accepting Realtor input or data constitutes a USPAP violation. I’m here to tell you it doesn’t (and yes, as always, I've consulted with people of authority. ;-)

Standard Rule 1-4(a) states, "In developing a real property appraisal, an appraiser must collect, verify, and analyze all information necessary for credible assignments results. When a sales comparison approach is necessary for credible results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion" (bold added by Laurie.)

This is the response (from people of authority) to my inquiry regarding SR 1-4a as it pertains to this issue: “Receiving and considering sales information from a Realtor is not a problem as long as you complete your own independent research to determine whether any of the Realtor-provided sales represent the most relevant comparable sales that are available in the subject's market segment. Relying on the Realtor-provided sales and comparable sales without your own independent comp research would be a problem.”

In light of the USPAP rule cited above (being mindful not to reveal any confidential information) you are strongly encouraged to have a discussion with a party to the transaction to collect and verify data lest you be accused of not analyzing all relevant data (helpful advice from people of authority. ;-) It is your job to determine what is relevant and to develop and report the results of your appraisal in conformity with USPAP.

So since there’s no HVCC violation in talking to Realtors and there’s no USPAP violation in considering data they may provide (and the fact you’ve been strongly encouraged to do so) why not have that conversation? Especially if it keeps lock boxes on houses. Our experience at Team is it also reduces the number of appraisal appeals we’re asked to respond to. Now that alone makes it worth it!

-Laurie

If you asked any appraiser I’ve trained over the years what the best piece of appraisal advice I ever gave her/him was, I’d be willing to bet each of them would say, “Answer the question before they ask.”

Over the course of the past year I’ve found my “In-Home” appraisers (as Michelle calls them) get far fewer underwriter requests for “additional comps” and I know why. Just as they discuss the comparable sales they have included in their analyses, they address sales/transfers of ownership which they have not included. In other words, they answer the underwriter’s question before it’s asked. It takes a little longer on the front end but it sure saves time and frustration on the back end when an underwriter asks for two more comps! (Sold within the past 90 days, within one mile, with minimal adjustments. ;-)

David Feldman, SRA, Vice-President for Government Affairs of CoreLogic Valuation Services, (and an attorney, incidentally) says the same thing in a recent Appraisal Buzz interview far more eloquently than I ever have and I encourage you to read the article if you haven’t already. Here’s the link: http://www.appraisalbuzz.com/newsletter/2010/newsletter_06_07_10.html

We’ve found it’s not too hard to anticipate which sales/transfers of ownership will come to an underwriter’s attention by running a quick radius search following the typical parameters, namely sales within one mile that have sold/transferred within the past 3-4 months. Obviously I wouldn’t expect anyone to address 13 excluded sales/transfers, but choosing a handful of the obvious ones and explaining why they weren’t included in the analysis has proven very helpful – and makes for a pretty darned strong appraisal report.

BTW – in case anyone is wondering where underwriters get their sales data, many times it’s from a CoreLogic report. How about that?

-Laurie

Hahaha! Yes, Guys and Gals. With the exception of its continued use for new construction and manufactured housing, the HUD-92051Compliance Inspection Report was retired on January 1^st, 2010, and has been replaced by the Fannie Mae Form 1004D.

There is still a little confusion regarding terminology commonly used by underwriters and AMCs. When they request a “442” they don’t mean the old pre-2005 Satisfactory Completion Certificate. They mean the 1004D which, interestingly, Freddie Mac still calls a 442. (I’m not kidding – look in the lower left corner of the page.)

For more information you can read the Mortgagee Letter yourself by clicking here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-51ml.pdf

By the way, for those of you who don’t use terminology such as, “Once all repairs/inspections have been completed, the subject will meet minimum property standards as indicated in HUD Handbooks 4150.2 and 4905.1” in your reports, you’ll want to include that verbiage on your 1004D when you submit it to avoid the inevitable addendum request.

Ten-Four on the 1004D all!

-Laurie

Originally posted September 2009

I know, I know, we’re all tired of this topic but I bring solutions!

I read an awful lot of appraisal reports these days and this is the one area I can see even the most knowledgeable and talented appraisers in the Pacific Northwest (Team’s panel ;-) getting her/himself into trouble with our licensure boards or (possibly worse) major lenders, Fannie or FHA.

Those of us in Oregon have an advantage (at least that’s how I see it) because OAR 161-025-006 states: (5) All licensees must disclose in all appraisal reports whether the comparable sales analyzed in the appraisal report were or were not confirmed by a party to the transaction or an agent or representative of a party to the transaction. No problem here - simply stating you did or did not confirm sales data does, in fact, comply with the above mentioned rule.

HOWEVER, all appraisers have a little GSE/FHA business to attend to, as well.

This is from Fannie Mae’s XI, 406.05: Underwriter’s Review of Adjustment Grid (11/01/05): Generally, sales or financing data for comparable sales—such as the mortgage amount, loan type, interest rate, term, and any fees or concessions the seller paid—is available. The appraiser should obtain this information from an individual who was a party to the comparable transaction (the broker, buyer, or seller) or from a data source that the appraiser considers to be reliable. We recognize that there may be some situations in which sales or financing information is not available because of legal restrictions or other disclosure-related problems. In such cases, the appraiser must explain why the information is not available—however, we will not accept an explanation that indicates that the appraiser did not make an effort to verify the information. In all other cases, the appraiser must provide the sales and financing concession information that was available (and verified) for the comparable sales. If the appraisal report form does not provide enough space to discuss this information, the appraiser should make an adjustment (or a relative relationship assessment) for the concessions on the form and include an explanation in an addendum to the appraisal report. [Bold added by Laurie]

FHA doesn’t sugar-coat anything (as usual.) We’d better verify and analyze the impact of seller concessions as evidenced by Mortgagee Letter 2005-02 – no excuses. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/05-2ml.doc. (Seriously, please read this.)

Being an Oregon appraiser, I’d love to let myself off the hook for verifying concessions with the argument I get from some folks in the real estate community that they can’t disclose seller concessions. Problem is it just ain’t so according to the Department of Justice when they said this: Although real estate licensees…are not precluded…from disclosing sales concession information..., [this part sucks] no law requires them to disclose it. http://oregonaclb.org/aclb_prod/images/stories/pdf/concessionsopinion.pdf

I know it sounds like a no-win situation, especially when you just know there’s a seller concession on a comp you have to use, but no one is willing to verify it. Don’t hang up your appraiser hat just yet - I have a solution!

Fannie says: the appraiser should make an adjustment (or a relative relationship assessment) for the concessions on the form and include an explanation in an addendum to the appraisal report. In other words, make the adjustment you “know” exists for sales concessions and explain your logic. It might be wise to give less weight to an unverified sale but I don’t think the lack of data verification would be a valid reason to exclude a comparable sale from your analysis (as I sometimes see.)

Some sample verbiage might be:

Comparable #2 was originally listed for $595,000 and an offer of $560,000 was accepted after only 13 days on the market. Attempts were made to contact a party to the transaction, however, emails and phone calls were not returned. Due to the short marketing time, because the accepted offer was well below the list price, and because the loan amount of $415,000 would indicate no need for seller-paid assistance, in the appraiser’s judgment, there were likely no seller paid concessions and no adjustment was made. Secondary weight was placed on this comparable due to its difference in style and design and due to the lack of verification of sales data.

Or maybe this:

Comparable #2 was listed for $295,000 and sold for $310,000 after 123 days on the market. The appraiser did not verify sales data with a party to the transaction, however, the buyers obtained an FHA loan where seller concessions are common and because this comparable sold well above the list price after a relatively long marketing time, it is likely the $15,000 over the original list price is attributable to a seller paid concession. A dollar-for-dollar adjustment is judged appropriate to account for the impact of the seller concession on the sales price of this comparable. Secondary weight was placed on this comparable due to the lack of data verification.

You might try this one on for size:

Comparable #2 was listed for $295,000 and an offer for $295,000 was accepted after 38 days on the market. Attempts were made in the form a phone call and an email but the appraiser was unable to confirm sales data with a party to the transaction. This sale, however, was an all-cash transaction making seller concessions unlikely, so no adjustment was judged necessary. Blah, blah, blah.

We have a high success rate in verifying sales data with Realtors at Team so the argument that they will not disclose the information is not valid (in my humble opinion.) Your market may be different and that’s OK – just make sure you analyze and explain it in your reports.

BTW – As you all know, sales concessions are not the only data we appraisers should be verifying with a party to the transaction. ;-)

-Laurie