Line, Net, and Gross adjustments

[Learner]

IMO i understand part of this -- maybe.

Net. You add up the adjustments with the pluses and minuses cancelling out. +$2,000 and -$3,000 is a net adjustment of $1,000. Guideline -- maximum of 10%??

Gross. You add up adjustments irrespective of pluses and minuses. +$2,000 and -$3,000 is a gross adjustment of $5,000 -- maximum of 25%??.

Please correct anything I have said wrong so far.

Then, what is line? Maximum line adjustment 10%???

And who is the source of any guidelines with respect to line, net, and gross adjustments? Fannie Mae???

Again, many thanks fir any assistance.

 

[Lee Lansford]

What is this "thingy" about "maximum" as to net, gross or line adjustments?

Pay NO attention to "maximum" other than to later include comment as to why it is that it is necessary to exceed a guideline.

I pay no attention to "guidelines" in the development of an appraisal. In the communication of the appraisal, I do attend to following my own advice above.

 

[Mike Kennedy]

Part B, Origination Through Closing
Subpart 4, Underwriting Property
Chapter 1, Appraisal Guidelines, Appraisal Report Assessment
July 26, 2011

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 Conditional Considerations
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.

Printed copies may not be the most current version.
For the most current version, go to the online version at
http://www.efanniemae.com/sf/guides/ssg/. 565

 

[Mike Kennedy]

IF the intended use of an appraisal report is a FHA loan

4150.2 Appendix D.
Quote:

Generally, adjustments should not exceed 10% for line items, 15% for net adjustments and 25% for gross adjustments. If any adjustments exceed stated guidelines an explanation must be provided including reasons for not using more similar comparable sales.​

 

[Mike Kennedy]

IF Fannie Mae Guidelines are applicable:

Part B, Origination Through Closing
Subpart 4, Underwriting Property
Chapter 1, Appraisal Guidelines, Appraisal Report Assessment
July 26, 2011

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 Conditional Considerations
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.
Printed copies may not be the most current version. For the most current version, go to the online version at
http://www.efanniemae.com/sf/guides/ssg/. 565

 

[Restrain]

UWs want an explanation of line adjustments exceeding 10%, net of 15%, gross of 25%, all based on the sale price. You are right on the methodology, and should be displayed at the bottom of the grid in your software. Thing is, the lower the sale price, the bigger percentage adjustment factor of even minor adjustments. The overall answer is to explain everything you do, with the comment on adjustment percentages in your summary statement.

 

[Learner]

So a line adjustment is any one individual adjustment???


My recent appraisals involved neither fannie mae nor FHA -- I'm guessing because of my large amount of equity. The last appraisal in particularly commented in adjustments in excess of what I now know are the FHA guidelines.

Is he just being cautious?

Does he know what type of financing it is?

Again, many thanks to all.

 

[Mike Kennedy]

What type of financing is it? Local Lender, Trust Bank, Credit Union, Hard Money Lender?

 

[Lee Lansford]

So a line adjustment is any one individual adjustment???


My recent appraisals involved neither fannie mae nor FHA -- I'm guessing because of my large amount of equity. The last appraisal in particularly commented in adjustments in excess of what I now know are the FHA guidelines.

Is he just being cautious?

Does he know what type of financing it is?

Again, many thanks to all.

Again, if you have appropriately completed your market research, selected the most reasonable data available for your analysis, analyzed the data, and then communicated the the appraisal in a professional manner...you need have no concern regarding the size of line adjustments and or the size of net/gross adjustments.

Don't allow what might be an underwriting "challenge" become your "problem".

On two occasions I've had appraisers inform me that they "tailor" adjustments so as not to exceed "guidelines"; what they told was the wrong answer.

 

[Learner]

It's a national bank, but with all offices locally.