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Discussion: Are FNMA "Guidelines" for net and gross % outdated?

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by xyzpdq0121, Jun 29, 2009.

Do you tweak your adjustments to keep them within guidelines?

  1. Yes, I pay attention to net and gross , even if that means changing my adjustments.

    0 vote(s)
    0.0%
  2. Yes, If the adjustments are close enough I will change them to keep them in line.

    4.1%
  3. No, I will not change an adjustment to conform to net and gross guidelines.

    95.9%
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  1. xyzpdq0121

    xyzpdq0121 Sophomore Member

    0
    May 15, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Georgia
    I thought I would post a questions for FRIENDLY debate and discussion... Are the FNMA guidelines for one line, net and gross adjustments out of date or a hindrance? Should they be expanded or removed all together?

    With the declining values within the marketing areas and with the limited number of sales in some cases, the appraiser has no choice but to exceed these guidelines to produce a credible report. Example, you have a home on a small lake... Your comparables have sold for $119K (on lake), $100K (not on lake), $115K (on the lake) and $105K (not on the lake). You derive that, all things else being equal, the influence of the lake adds $10K-$20K to the value of the home. Well if you use $15K lake adjustment, you exceed the one line adjustment in one swoop. If you use $20K adjustment, you exceed the net adjustment in one swoop. If you add any adjustment to the adjustments you might have already made to GLA or condition, you exceed the gross. All of which are valid adjustments and derived from the marketing area, but FNMA (and AMC/Green UWs) state that you are in the wrong. So they harass the appraiser and question the report.

    Now, I have had appraisers suggest to me, "you should tweak your adjustments so they are under the one line, net and gross. You will not have the problem that way!" Tweak an adjustment?!? Are you kidding me. When I make a lake adjustment, I look at properties not on the lake vs properties on the lake and, even if the houses are not comparable to mine, I figure out the % of contribution of that lake influence to the value of the property. Then I look at historical data and see if that % has changed or remained the same. Then I look at active/pendings to see if I can find the same correlation. Then I look at expireds to see if the same % may exist. Then I look at the sales prices of homes where the % was derived from and see if there is a variance in the % contributed. Then I take all that data and gather the median and average % contribution to the property. THAT is the adjustment that is utilized within the report. I do not give a crap if it exceeds the one line, net or gross %. That is what the marketing area is telling me that adjustment should be, so that is what I am going to use. There is no "tweaking" that number to fit MY goals of not getting a condition... it is what it is!!!

    So the question remains, does the one line, net and gross guideline need to be revised for current time. Are properties that exceed these guidelines STILL comparable?!? Do the net and gross restrictions serve any purpose?!? Do you honestly tweak your adjustments to avoid a condition?
     
  2. Mike Kennedy

    Mike Kennedy Elite Member

    78
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    When market-indicated, characteristic based on location &/or property type, and supported, Variances from "standard" guidelines are necessary, they fall within the same acceptable Fannie Guidelines, and reliably relfect market perception. Guidelines are guidelines, the Market is what, and where, the Market is. Let the Market speak. Fannie agrees.
     
  3. CANative

    CANative Elite Member

    155
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    IMO, the guidelines are there not to control the appraisal but as a benchmark for variances between properties. Fannie loans require "typical" properties and the benchmark for them to determine what is typical or not lies in their recommended percentage adjustment guidelines. If a property is not typical (as evidenced by comps that require excessive adjustments) then they want to know why.
     
  4. jlabauve

    jlabauve Member

    0
    Feb 24, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Louisiana
    These "guidelines" are not appraisal guidelines....they are underwriting guidelines. They are in place to help the underwriters determine if the subject property is fairly typcial of the area. Theoretically, if the subject is typical of the area, there will be recent sales of similar properties which can be adjusted and still stay within these guidelines.

    If only more appraisers and underwriters understood this concept!

    Obviously, in a perfect world, the best comps would stay within these guidelines when adjusted. But we all know that there are properties where comparables are scarce, and you have to use the comparables that are available.

    It is incorrect to tweak an adjustment just to stay within these artificial UNDERWRITING guidelines.
     
  5. Dale Hill

    Dale Hill Sophomore Member

    0
    Jan 12, 2006
    Professional Status:
    Appraisal Management Company
    State:
    Pennsylvania
    There is no fanniemae 10% line item adjustment guideline.
     
  6. BRCJR

    BRCJR Senior Member

    10
    Sep 20, 2005
    Professional Status:
    Licensed Appraiser
    State:
    Virginia
    Surely someone is gonna come along and vote 1 or 2!
     
  7. Blueprint

    Blueprint Senior Member

    2
    Aug 25, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Oregon
    That would require someone who is non-ethical to be ethical. :fiddle:
     
  8. Mike Kennedy

    Mike Kennedy Elite Member

    78
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    [​IMG] B4-1.4-17, Appraisal Report Review: Adjustments to Comparable Sales (04/01/2009)
    Introduction
    This topic contains information on adjustments to comparable sales.
    Net and Gross Percentage Adjustments
    The following guidelines for net and gross percentage adjustments may be used as a general indicator of whether a property should be used as a comparable sale.
    The amount of the gross adjustment is determined by adding the absolute value of all individual adjustments without regard to positive or negative adjustments.
    The amount of the net adjustment is determined by adding all of the individual adjustments with consideration given to the positive or negative values.
    Guideline[​IMG]Conditional Considerations[​IMG]The dollar amount of the net adjustments for each comparable sale should not exceed 15% of the sales price of the comparable. When the adjustments exceed 15%, then the appraiser must comment on the reasons for not using a more similar comparable. The dollar amount of the gross adjustments for each comparable sale should not exceed 25% of the sales price of the comparable. When the adjustments exceed 25%, then the appraiser must comment on the reasons for not using a more similar comparable. Individual adjustments that are higher than normal should be explained by the appraiser and carefully reviewed by the lender.If comparables have higher-than-normal adjustments, then the adjustments must be justified in the appraisal report.

    [​IMG]
    Fannie Mae's
    Single-Family Seller/Servicer Guides have moved.


    Please click here to access the new site.
     
  9. Kevin Mc

    Kevin Mc Elite Member

    0
    Jun 7, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    When guidelines are carved in stone I will follow them religiously, otherwise they are just guidelines, nothing more.
     
  10. Mike Kennedy

    Mike Kennedy Elite Member

    78
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    "Guideline [​IMG]Conditional Considerations" - agrees with your Statement.
     
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