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  #1  
Old 01-06-2006, 10:01 PM
Pat Butler Pat Butler is offline
 
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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?
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  #2  
Old 01-06-2006, 11:36 PM
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Rudy Canoza Rudy Canoza is offline
 
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For new tracts I have always gone to a competing tract for a comp.

That's the Fannie Mae Incest Guideline, I think...
  #3  
Old 01-07-2006, 09:06 AM
leelansford leelansford is offline
 
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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
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  #4  
Old 01-07-2006, 09:14 AM
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Carnivore Carnivore is online now
 
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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  
Old 01-07-2006, 11:18 AM
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Otis Key Otis Key is offline
 
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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  
Old 01-07-2006, 02:24 PM
Pat Butler Pat Butler is offline
 
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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  
Old 01-07-2006, 04:07 PM
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Tim Hicks (Texas) Tim Hicks (Texas) is offline
 
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Quote:
Originally posted by Otis Key@Jan 7 2006, 11:18 AM
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.
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:

Quote:
Comparables taken from the competing neighborhood are better indicators of current market trends in the subject neighborhood than the existing comparables available in the subject neighborhood

For properties located in established subdivisions or for units in established Condominium or PUD projects or ground lease communities (those that have resale activity), the appraisal report may use three comparable sales from within that subject project or subdivision. However, if the subject property is in a controlled market (such as a new subdivision or project, a newly converted project or an area where the property seller owns a substantial number of units), at least one comparable sale must be outside the influence of the developer, builder or property seller. Resales from within the subject project or subdivision may be used to meet this requirement. When comparable sales from outside the subject project or subdivision are used, they must also be outside the influence of the subject property's developer, builder or property seller.
From Fannie Mae:

Quote:
For properties in new subdivisions or for units in new (or recently converted) condominium or PUD projects, the appraiser must compare the subject property to other properties in its general market area as well as to properties within the subject subdivision or project. This comparison should help demonstrate market acceptance of new developments and the properties within them. Generally, the appraiser should select one comparable sale from the subject subdivision or project and one comparable sale from outside the subject subdivision or project. The third comparable sale can be from inside or outside of the subject subdivision or project, as long as the appraiser considers it to be a good indicator of value for the subject property. In selecting the comparables, the appraiser should keep in mind that sales or resales from within the subject subdivision or project are preferable to sales from outside the subdivision or project as long as the developer or builder of the subject property is not involved in the transactions.
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  #8  
Old 01-07-2006, 04:26 PM
Pat Butler Pat Butler is offline
 
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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  
Old 01-07-2006, 04:29 PM
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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?
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  #10  
Old 01-07-2006, 07:02 PM
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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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