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Fannie's Requirements For Comp Selection

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by Pat Butler, Jan 6, 2006.

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  1. Pat Butler

    Pat Butler Senior Member

    12
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    I'm doing a new construction appraisal and just noticed something.

    There's a huge contradiction in Fannie's comp selection requirements. Their selling guide says to choose at least one comp outside the subject's subdivision if it is a new development. However, the certification pages have the appraiser indicate that he or she chose the most similar comparables insofar as location, and functionally as similar (among other attributes). So which is it?
     
  2. Rudy Canoza

    Rudy Canoza Senior Member

    0
    Sep 27, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    For new tracts I have always gone to a competing tract for a comp.

    That's the Fannie Mae Incest Guideline, I think...
     
  3. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Pat, Fannie does not want to see three sales of new construction, all within the same subdivision and constructed by the same builder, as the only comps. They want the appraiser's opinion of value supported with other data from within the neighborhood or market area.

    Whenever one of my appraisals contains sales comparisons (or current offerings and/or pending sales) that are substantially different from the Subject in one or more respects, I do what I believe you also do: "Explain, explain, explain!"

    Lee
     
  4. Carnivore

    Carnivore Elite Member

    9
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Pat,

    In the absence of the Fannie Mae selling guide how would you develope the appraisal?


    Would you be confident that it would be consistent with a common definition of value?
     
  5. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    Like the others said above - follow the guidelines and then explain it time and again. If you selected all 3 (or more) sales from the builders' files of new home construction and sales, do you think that would be indicative of representing market value as defined? It almost goes hand-in-hand with the announcement that fannie sent out about the assemblage of land/home packages HERE.
     
  6. Pat Butler

    Pat Butler Senior Member

    12
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    I guess my question was somewhat rhetorical. My point was that Fannie has conflicting requirements. I understand what they are trying to do with a new subdivsion- they want to make sure that the initial sales in the subdivision are selling close to market value based upon competing subdivisions. Yet, after that new subdivision starts to get built out then it pretty much is its own market and all the comps can come from there. The obvious point of contention is determing where that threshold is that determines when the subject's subdivision is mature enough to be its own market.

    That all makes sense, yet the certification page does not allow for choosing comps outside the subdivision when it talks about using the most similar, proximite, or whatever. They need to add some certification language that allows for the exception of a new subdivision where they are telling the appraiser to go OUTSIDE of the subject's subdivision and to use comps that are NOT the most proximite. They can't have it both ways.

    My point wasn't that I disagree with their requirements for new construction but that the certification page is in conflict with their requirements.
     
  7. Tim Hicks (Texas)

    Tim Hicks (Texas) Elite Member
    Gold Supporting Member

    72
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Wrong, Mr. Key.

    Fannie Mae (and Freddie Mac) both state that at least one sale must be outside the control of the developer, builder or property seller. Resales may be used to meet that requirement.

    From Freddie Mac:

    From Fannie Mae:

     
  8. Pat Butler

    Pat Butler Senior Member

    12
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    I make the determination based upon whether there are resales ocurring in the subject's subdivision. The one I'm doing right now is in a subdivision that's about one year old. There are already resales from private homeowners and the competition from those sales keeps the builder's prices in line with the general market. In that case, I don't feel the need to go outside the subject's subdivision.

    But when you do go outside the subject's subdivision then how do you comply with the cert page statement saying you found the most similar and proximate comps?
     
  9. CANative

    CANative Elite Member

    450
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    You may be stressing too much over a literal translation of the certification. If you follow good appraisal practice who is going to fault you?
     
  10. George Hatch

    George Hatch Elite Member

    351
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    Fannie has some other "limitations", too. Their guidelines prefer a narrow window of time for the comps, a relatively narrow range of adjustments, cash equivalency, etc. It can be argued that the collective impact of these guidelines does serve to add to the assumptions used in the definition of Market Value. A true market value for a property may not exactly fit the Fannie Mae interpretation of Market Value. More than one appraiser on this forum has commented that we might be more accurate in our reports if we were reporting the values to reflect the definition of "Mortgage Value" rather than "Market Value" as is currently required.
     
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