Fannie Guidance on Use of Builder Sales

[J Grant]

That is why I posted this. Fannie is using any reason they can come up with to force lenders to buy back loans. Appraisals are the most undefendable of all the buy back issues. Most appraisers believe it's two from the subject's builder and at least one from outside the development to show market acceptance. If Fannie wanted this guideline to be crystal clear, they would state only one sale from the subject's builder is allowed on any appraisal. but they don't want it to be crystal clear. (quoted)

THERE IS NO FANNIE GUIDELINE THAT ONLY ONE SALE IS ALLOWED FROM THE BUILDER. ON A REPORT. THE FANNIE GUIDELINSE STATES THAT AT LEAST ONE SALE MUST NOT BE FROM THE BUILDER,AKA, AT LEAST ONE SALE OUTSIDE SUBDIVISION OR A RESALE IN THE SUBJDIVISION, OR FROM A DIFFERENT BUILDER IN SUBDIVISION.

NC Appraising posted well on the subject.

Fannie is not forcing buy backs becase an appraiser used more than one builder sale. Fannie is forcing buybacks when the appraiser relied soley on builder sales for value (even if appraisers used an oustside sale, ). A buyback or other problem with report is when appraiser relies on builder sales prices, and the builder sales prices are not MV.

I always use at least two outside sales, and preferably three, and did so before the Fannie Guideline. How else does an appraiser test if the builder sale prices are MV ? Pendings and listings resales in subject community or outside community, not just the list of pendings new homes the builder hands you.

Sometimes builder sales prices are equivalent to MV and some times they are not, but the report has to develop and opine MV from data and sources other than the sales contract price of subject and the list of sales/pendings the sales office hand the appraiser.

 

[Sunshine in VA]

That is why I posted this. Fannie is using any reason they can come up with to force lenders to buy back loans. Appraisals are the most undefendable of all the buy back issues. Most appraisers believe it's two from the subject's builder and at least one from outside the development to show market acceptance. If Fannie wanted this guideline to be crystal clear, they would state only one sale from the subject's builder is allowed on any appraisal. but they don't want it to be crystal clear. (quoted)

THERE IS NO FANNIE GUIDELINE THAT ONLY ONE SALE IS ALLOWED FROM THE BUILDER. ON A REPORT. THE FANNIE GUIDELINSE STATES THAT AT LEAST ONE SALE MUST NOT BE FROM THE BUILDER,AKA, AT LEAST ONE SALE OUTSIDE SUBDIVISION OR A RESALE IN THE SUBJDIVISION, OR FROM A DIFFERENT BUILDER IN SUBDIVISION.

NC Appraising posted well on the subject.

Fannie is not forcing buy backs becase an appraiser used more than one builder sale. Fannie is forcing buybacks when the appraiser relied soley on builder sales for value (even if appraisers used an oustside sale, ). A buyback or other problem with report is when appraiser relies on builder sales prices, and the builder sales prices are not MV.

I always use at least two outside sales, and preferably three, and did so before the Fannie Guideline. How else does an appraiser test if the builder sale prices are MV ? Pendings and listings resales in subject community or outside community, not just the list of pendings new homes the builder hands you.

Sometimes builder sales prices are equivalent to MV and some times they are not, but the report has to develop and opine MV from data and sources other than the sales contract price of subject and the list of sales/pendings the sales office hand the appraiser.

I posted the response to my request for clarification of guideline XI, 406.02: Selection of Comparable Sales (06/30/02) from my contact at Fannie, who stated word for word...

As to your first and second question, yes if there is only one builder within a development, then the appraiser should only be using one sale from within the development. That assumes that there were no resale's. A resale from within the area would always be considered a good indicator of value. Even if that property were built by the subject's builder, the builder would not be involved in the transaction.

As to the third question, if there are two builders, you could have one sale from the subject's builder and another sale from a competing builder within that same development.

...but I'll go back and tell him he's wrong...LOL

 

[J Grant]

Sunshine, where does it state what you wrote in an official Fannie guideline (ie, an appraiser CAN NOT use more than one builder sale). I have not seen it anywhere. Of course a resale is always a good indicator to value.

Aside from this response to you, where does it say this in any Fannie published guideline?

No offense, but who is your "contact" at Fannie, and are you sure they were quoting from the Fannie guide, or was this response was their opinion? Because unless somone posts a link to an official published Fannie advisory or guideline, I would not want to rely on a contact" response to question as the same as an official publsihed requirement. I still have not seen this anywhere else, re, that Fannie has al regulation against an appraiser using more than one sale from the same builder.

.

 

[NC Appraising]

HERE IS THE NEWER FNMA:

When appraising new construction, the appraiser may need to rely solely on the builder of
the property he or she is appraising to provide comparable sales data in accordance with the
requirements stated in Properties in New or Recently Converted Subdivisions, Condos, or
PUDs, below, as this data may not yet be available through typical data sources, such as public
records or multiple listing services. In this scenario, it is acceptable for the appraiser to verify the
transaction of the comparable sale by viewing a copy of the HUD-1 Settlement Statement from
the builder’s file.
By using the HUD-1 to verify a recent sale of new construction not yet available through other
data sources, an appraiser may be better able to comply with the requirement that he or she must
provide at least one comparable sale from the subject’s subdivision or project. The appraiser
must also select one comparable sale from outside the subject subdivision or project and one
comparable sale from either inside or outside the subject subdivision or project, provided it is
a good indicator of value for the subject property. Both of these sales must be verifiable from
reliable data sources, other than the builder. The appraiser may also provide additional recent
comparable builder sales from competing projects that are not presently available through
traditional data sources as long as the appraiser verified the sale through the applicable HUD-1.
Additionally, the appraisal must include discussion and analysis of sales concessions and​

upgrades for the subject property relative to concessions and upgrades for each builder sale.

Properties in New or Recently Converted Subdivisions, Condos, or PUDs
The subject property must be compared to other properties in its general market area as well as to
properties within the subject subdivision or project.
The appraiser must 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, provided it is a good indicator of
value for the subject property.​

Note:

Sales or resales from within the subject subdivision or project are preferable to

sales from outside the subdivision or project provided the developer or builder of the

subject property is not involved in the transactions.​

 

[NC Appraising]

Sources of Comparable Market Data
Data and/or verification source(s) for each comparable sale must be reported on the appraisal
report form. Single or multiple sources for data and verifications are acceptable provided the
appraiser adequately verifies the comparable sales. Examples of data sources include, but are
not limited to, a multiple listing service, deed records, tax records, realtors, builders, appraisers,
appraiser’s files, and the Internet. The appraiser must state the specific data source and refrain
from using broad categories, such as “public records.” Data source(s) must be reliable sources
for the area where the subject property is located.
Information used to verify the data is obtained from a “verification source.” Verification
sources include, but are not limited to, the buyer, seller, listing agent, selling agent, and closing
documents in certain situations. Regardless of the source(s) used, there must be sufficient data to
understand the conditions of sale, existence of financing concessions, physical characteristics of
the subject property, and whether it was an arms-length transaction.
When comparable sales data is provided by parties that have a financial interest in either the sale
or financing of the subject property, the appraiser must verify the data with a party that does not​

have a financial interest in the subject transaction.

 

[Mr Rex]

All appraisers that have been given falsified HUD-1s by on site agents please raise your hand.

 

[residentialguy]

...but I'll go back and tell him he's wrong...LOL

You can laugh all you want, but JG and NC are correct. There is no FNMA requirement that you should only use one sale. NC showed proof of what he said. Did the person that talked to you show you proof?

It's important when talking to FNMA or HUD to ask them to point out where that is stated in the requirements. Often you find that it is just their opinion and not a requirement.

 

[J Grant]

thanks Res Guy, sometimes we do agree!

 

[NC Appraising]

I think sun may have mis-understood or the FNMA rep could have been a newb.



Or they may have gotton the "the appraiser may have to reley on the builder for comparable sales DATA".

This does not mean that the appraiser can use all builder sales from the same project. Thus, all of the MUST are marked in red.

 

[J Grant]

Excellent clarification, NC!