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FNMA Time Adjustment Change

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by David Dietz, Jan 19, 2009.

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  1. David Dietz

    David Dietz Member

    0
    Oct 30, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    The Announcement 8-30 changed from which date the time adjustment is to be made. The old guideline read as follows.

    “Time” adjustments must be representative of the market and should be supported by the comparable sales whenever possible. The adjustments must reflect the time that elapsed between the contract date (or the date of the “meeting of the minds”) for the comparable sale and the effective date of the appraisal for the subject property.

    The revised states,

    Selling Guide, Part XI, Section 406.05D: Date of sale/time adjustment
    The following is being added to Section 406.05D of the Selling Guide:
    If in the analysis and completion of the sales comparison approach the appraiser determines that time adjustments are required, the adjustments may be either positive or negative. The adjustments, however, must reflect the difference in market conditions between the date of sale of the comparable and the effective date of appraisal for the subject property.

    Although I do not do much Fannie Mae work any more I believe this is a big mistake. I can tell you in my market a one or two month period from date of contract to sale date can make as much as a 10-20 thousand dollar difference in value. What is your take on this change.
     
  2. leelansford

    leelansford Elite Member

    28
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Though I wish that the words were clearer, I don't understand this as indicating anything has changed.

    What is clear is that the market dictates what adjustments are appropriate. And, market conditions as of the date of the contract ("meeting of the minds") is what rules...not date of closing. If the appraiser understands this, the appraiser understands that the appraiser should continue doing things the way that he (she) has.
     
  3. JC California

    JC California Sophomore Member

    0
    Oct 31, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    contract date = date of sale
    date of sale = contract date
     
  4. Riick

    Riick Elite Member

    26
    Aug 14, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Delaware
    Everyone will understand this as: Date of Sale = Closing or Settlement Date.
    Net effect.... Smaller time adjustments, thus higher net adjusted values.
    Whoopie... market values go up --- ever so slightly.

    As they say in Topeka:
    "Figures don't lie, but liars figure"

    But..... Far be it for me to impugn Fannie Mae, there is no intent to mislead.

    This is just an error
    that will be cleared up
    sometime
    in the next 5-10 years.

    Surely, in time for
    the next Boom.
    .
     
    Last edited: Jan 19, 2009
  5. JSmith43

    JSmith43 Elite Member

    18
    May 5, 2003
    Professional Status:
    Certified General Appraiser
    State:
    California
    The text needs rewording. I repeat that I am available on a contract basis to review and offer alternate wording for mortgagee letters, etc:icon_mrgreen:

    I don't think anything has changed, but that wording will lead someone somewhere astray.

    Lee put it well by illustrating that mortgagee letters can't dictate economic theory or appraisal theory. I don't think the authors intended to be less precise than the former wording, which was really, more specific.

    It has to be hard to step back from the communication and take a fresh look, especially, when the changes are so minor. This might have been a typo or a "thinko reverseo" (also known as a "lysdexic" moment) and not intentional. Perhaps, they were having trouble with the fact that the contract date may not be consistent since contracts are often living, morphing all the way to closing, especially when short sales are involved.

    The REO/short sale phenomenon and the comedic trip some of these transactions take to closing, may have crushed the concept of "meeting of the minds." :icon_mrgreen:
     
  6. Kevin A. Spellman

    Kevin A. Spellman Senior Member

    0
    Aug 30, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Massachusetts
    I recently interviewed an agent. The sales price was $412,000 and the appraiser could only support $405,000 for the lender. The contract and the meeting of the minds was $412,000. The off market date was 04/21/2008 and the closing occurred on 05/28/2008 @ $405,000. The time lapse was 37 days. It is sometimes the change between the contract date and the closing date that can cause issues and not the market conditions.

    I just used a sale that went under contract for $2,200,000 in 2006 and sold in 2008 for $2,500,000. The time lapse was for litigation. The seller did not want to sell. For the litigation beating to stop the buyer who was also an attorney up the price to $2,500,000 and then it closed.

    I always go after the facts first and then look at the performance of the comparable within the market conditions. I do want to be mechanical in the assignment of market change adjustment in either direction.
     
  7. hglenbetts

    hglenbetts Senior Member

    2
    Dec 3, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Michigan
    I've had issues with using the contract date because more and more, prices are renegotiated after the initial pending date because of inspection problems, appraisal value or just a change in terms.

    The final meeting of the minds on the price the property closed at may have taken place 24 hrs prior to the closing, not necessarily 30-45 days back.

    Also, many time the listed "Pending" date in the MLS is erroneous, and a call to the agents/Brokers rarely get things clarified. The closing date, at least is verifiable through the public record.
     
  8. David Dietz

    David Dietz Member

    0
    Oct 30, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Whether it was a mistake or you want to argue what is the sale date I know firms have already instructed appraisers to not adjust from the contract date based on the Fannie Mae letter and I would think the huddled masses are doing the same. Most appraisers do not keep themselves informed.
    Most appraisers I speak with did not even know about the Fannie Mae announcements and they have been appraising for years longer than I have.
     
  9. SmilingDog

    SmilingDog Member

    0
    Apr 22, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    I asked about this a few years ago. I ran it past an attorney. In California, the Recording date IS the Date of Sale. The contract date is not relevant. For example, what if you had agreed in 2000 to rent a house with an option to buy at 2000's prices. You effectively have a contract date but it's irrelevant, as the market has changed since (either up or down). Therefore contract dates should not establish final price. Remember even in a 30 or 60 day escrow many things can still be negotiated in or out of contract (escrow fees, title fees, etc). So the Sale Date is the effective date in order to make time adjustments, etc.
     
  10. David Dietz

    David Dietz Member

    0
    Oct 30, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    The part I highlighted reflects why you would have to consider the contract date of a prospective comparable not ignore it. It would make the contract date very relevant. I believe you may be looking at this the wrong way. If the example you used closed yesterday and you wanted to use it but was under contact in 2000 at 2000 prices the market may have changed up, down or both and if you were to use this as a comparable the time between the meeting of the minds (contract date) and the sale date would need to be considered to the date of appraisal.
     
    Last edited: Jan 19, 2009
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