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Sales Concessions

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by Tazmaniac, Apr 14, 2010.

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  1. Tazmaniac

    Tazmaniac Sophomore Member

    0
    Oct 20, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Georgia
    I was just presented with a quotation from FNMA regarding the requirement of a comparable sales concession adjustment. It stated that a dollar for dollar adjustment is required regardless of whether the concessions are typical of the market. It specifically stated that it is the corrected sales price. Firstly, isn't this a USPAP violation, the sales price is the sales price. Nothing changes that, from what I was taught. Secondly, if the concession is typical of the market and the subject, which happens to be a purchase, has a similar concession, - wouldn't that be a violation of USPAP as well. You cannot adjust two like things.....The management company could not comprehend that fact. And then the issue of a refinance, you don't even adjust to the subject, you adjust to the market. In short, isn't FNMA requiring appraisers to violate USPAP regarding concession adjustment?

    Anyone out there with the link to the USPAP or GA State Board rules, please let me know. I need to give these guys some proof. Or, if I am wrong, please enlighten me. It seems these management companies are clueless.

    Taz
     
  2. BRCJR

    BRCJR Senior Member

    41
    Sep 20, 2005
    Professional Status:
    Licensed Appraiser
    State:
    Virginia
    Post the link or copy and paste the Chapter and Section of the Sellers Guide that states that, please.
     
  3. Tazmaniac

    Tazmaniac Sophomore Member

    0
    Oct 20, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Georgia
    Good morning. An adjustment for seller paid financing concessions on a provided comparable sale is necessary to equate the value of the sale to a cash equivalent amount as required by FNMA Part XI - 406.05, Section C, as follows:. "When a quantitative sales comparison analysis is used, the amount of the negative dollar adjustment for each comparable with sales or financing concessions should be equal to any increase in the purchase price of the comparable that the appraiser determines to be attributable to the concessions. The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area-large sales concessions can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate. Adjustments based on mechanical, dollar-for-dollar deductions that are equal to the cost of the concessions to the seller (as a strict cash equivalency approach would dictate) are not appropriate. We recognize that the effect of the sales concessions on sales prices can vary with the amount of the concessions and differences in various markets. The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions."
     
  4. BRCJR

    BRCJR Senior Member

    41
    Sep 20, 2005
    Professional Status:
    Licensed Appraiser
    State:
    Virginia
    The above is contrary to what was stated in your post quoting, which is below.....


    "It stated that a dollar for dollar adjustment is required regardless of whether the concessions are typical of the market".


    They cannot have it both ways.
     
  5. Mr Rex

    Mr Rex Elite Member

    285
    Jan 12, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina

    Taz, I don't think the sender or you actually understand what the FNMA quote is saying. The red part is what matters according to Fannie.
     
  6. Tazmaniac

    Tazmaniac Sophomore Member

    0
    Oct 20, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Georgia
    But what they sold for is the sales price...... not sp minus concessions. This is not confusing to me....I am not arguing an adjustment can be made if necessary, but if you read the above, it says to make an adjustment based solely on the idea that this is the CORRECTED sales price...which is a misrepresentation of the truth.
     
  7. Mr Rex

    Mr Rex Elite Member

    285
    Jan 12, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Where does it say that?
     
  8. Tazmaniac

    Tazmaniac Sophomore Member

    0
    Oct 20, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Georgia
    "The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions"

    Quotation from above.

    This is what I am talking about.....FNMA needs to rewrite this rule of theirs. Lenders and AMC are reading this and asking for an adjustement on all comps to negate their respective concessions.
     
  9. Michigan CG

    Michigan CG Moderator Staff Member Moderator

    566
    Nov 1, 2006
    Professional Status:
    Certified General Appraiser
    State:
    Michigan
    If the comparable home sold for $100,000 and the seller gave them $5,000 back at closing what is the effective sales price of that comparable property?
     
  10. Tazmaniac

    Tazmaniac Sophomore Member

    0
    Oct 20, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Georgia
    What is an Effective sales price..?... We use factual information here in GA. I use actual sales prices. The concessions are not an issue.....The loan doesn't magically become 5K less......Why dont you adjust for price of the appraisal, as well..........I will tell you why , variable costs and fixed costs.....none of which effect a sales price - which cannot be changed.
     
    Last edited: Apr 14, 2010
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