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Are Guidelines to Restrictive?

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by William K, Oct 12, 2009.

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  1. William K

    William K Senior Member

    0
    Sep 21, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Are Guideline by the GSE's and lenders in regards to appraisals too restrictive? and are they having an impact on values due to their restrictiveness?

    If a lender states the appraiser must use sales within 90 days or 6 months or 12 months and will not accept sales over these guidelines, then does this lead to a potentially misleading report?

    If there are 3 ABSOLUTELY COMPARABLE SALES but all exceed the lender/ GSE requirements in terms of distance or date of sale, does the appraiser do a disservice by using "the best comparables available for comparison which meet the lender/ client guidelines"? Especially if the use of these "within lender requirements" sales greatly differ from what the value opinion would be if the ABSOLUTELY COMPARABLE SALES were used?
     
  2. DaveH

    DaveH Junior Member

    0
    May 5, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Ohio
    You just have to explain, explain, explain. Kind of like qualitative vs quantitative adjustments and analysis, underwriting and GSE's can't understand those either.
     
  3. CANative

    CANative Elite Member

    168
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    The guidelines are for reporting purposes. Do the appraisal without regard to "guidelines." Then explain the variances.

    Appraise first (SR1), report second (SR2). Get it? 1 then 2. One, Two.
     
  4. Mike Kennedy

    Mike Kennedy Elite Member

    95
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    William are you referring to arbitrary AMC or MB instructions? GSE, FHA, & VA guidelines all accept variances from "standard" time, distance, gla, etc factors when necessary - with detailed analysis. Re "kill 2 birds with 1 stone" suggest more recent comps (in your case C4, 5, & 6 being the least similar and adjusted for their dissimiliarity) and the "3 Perfect" as C1, 2, 3. If least similar C4, 5, and/or 6 are RADICALLY dissimilar - suggest reporting them in Comments ONLY with discussion as to why it would be misleading to include them in SCA (close the door behind you methodology).

    To further support that procedure it is wise to copy and paste "comparable selection" guidelines highlighting ACCEPTABLE Variances when necessary applicable to each assignment IN THE REPORT Directly under the SCA GRID - not on an addendum - and do it in BOLDFACE.

    I agree that NOT utilizing 3 MOST credible comps to appease a Lender or AMCs unsupported and erroneous restriction on comp selection would indeed be intentionally misleading resulting in a clearly less than Credible appraisal.
     
  5. Randolph Kinney

    Randolph Kinney Elite Member
    Gold Supporting Member

    82
    Apr 7, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    The lender always has the option to reject the appraisal report no matter what the guidelines they use say.

    Inactive markets represent higher risk.
     
  6. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois

    If the appraiser arrives at a different opinion of value based upon what set of data the appraiser is analyzing, something is wrong.

    I suppose that I could report and analyze (as best I could) a set of sales (note that I did not state "comparable" sales) in response to a client request that such be included.

    HOWEVER, I am the one who weights the data...I can always decide (and so report, being certain to explain the reason that such data are included) that I do not rely upon any such data in arriving at the opinion of value.

    Frankly, if the client raises such a request from the level of a "guideline" to a "requirement", I could also elect to decline the assignment.
     
  7. William K

    William K Senior Member

    0
    Sep 21, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    I think your missing my question. I'm not working on a report. I understand the whole "Explain, explain, explain", I understand differences in Guidelines which are Guidelines and Guideline-Requirements which can not be broken.

    I ran across a scenario where I obtained a copy of an appraisal report which was completed in this case under FHA requirements. The 3 best comparables were over 12 months old (this is without question and was commented on by the appraiser), so the appraiser then used the Best comparables in accordance with applicable guidelines even though these sales were not as near comparable as the older sales and resulted in a significantly lower value range. The sales over 12 months old CAN NOT be relied upon due to guidelines even though they were the best indicators.

    So I began thinking can guidelines be so restrictive to affect a value conclusion?

    As an example an appraiser starts their search for comparables in a given market by proximity within 1 mile, same style, within 1 year. If they find sales within this criteria they further reduce till the most similar are being used.
    However, what if 1.1 miles away and 13 months old there were 3 comparable sales which were identical to the subject requiring not a single adjustment but they were not considered because of exceeding lender/ client requirements- guidelines.

    Are the lender/ client guidelines- requiremnts so restrictive that they could affect the value conclusion?
     
  8. stefan olafson

    stefan olafson Senior Member

    0
    Apr 2, 2003
    Professional Status:
    Certified General Appraiser
    State:
    North Dakota
    If the best comparables are all over 12 months old, I'd use them anyway and explain why. It's a disservice to our clients to use newer sales if they are not the best available. Any good quality client will understand why if we explain up front.
     
  9. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    If something is a "guideline", it is just that: a "guideline".

    Only a competent and ethical appraiser, working free of serious error, can develop and communicate a credible appraisal.
     
  10. Mike Kennedy

    Mike Kennedy Elite Member

    95
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    Only if an Appraiser permits them to be.:icon_idea:
     
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