Contract, New Construction

[J Grant]

Fannike never mandated these limitations. They were always guidelines and still are only guidelines. UW or reviewers will ask about it, though, especially in dense areas with plenty of nearby sales. Just explain why you used comps over 6 months old or located over a mile away.

 

[Dublin ohio]

Fannike never mandated these limitations. They were always guidelines and still are only guidelines. UW or reviewers will ask about it, though, especially in dense areas with plenty of nearby sales. Just explain why you used comps over 6 months old or located over a mile away.

Those guidelines were eliminated some time ago. No longer mentioned in the selling guide

Analysis of Adjustments​

Fannie Mae does not have specific limitations or guidelines associated with net or gross adjustments.

 

[J Grant]

Those guidelines were eliminated some time ago. No longer mentioned in the selling guide

Analysis of Adjustments​

Fannie Mae does not have specific limitations or guidelines associated with net or gross adjustments.

Fannie no longer has them but nearly every reviewer or UW still asks about any comp, not adhering to them. and ex[ects and explanation when they don't-

 

[William Rightsell]

Reviewing the Purchase Agreement for a new construction tract SFR, I noticed two interesting items and wonder whether peers are familiar with them:

1) The appraiser cannot make adjustments for Lot Premiums [seems to me to affect the appraiser's Scope of Work]

2) The buyer is not responsible for his offer or the EMD/downpayment if the appraisal Opinion of Value does not support the contract price. [I don't know if all new construction contracts include this type of stipulation.]

---------------------

I'm trying to figure out adjustments for differences between the subject incentives and comp incentives for closing costs. If the subject receives $10,000 and a comp receives $15,000, would the adjustment be (+) $5,000 because the comp incentive is $5,000 more, reducing the price by $5,000 less that the subject? I also was told by an appraiser that FNMAE only permits downward comp incentive-based adjustments in the SCA.

Then the Doc Stamp protocol also s intriguing. The formula to determine selling price of a new construction SFR, per various Title offices is:

Doc Stamp divided by 1.1 multiplied by 1000 = Sales Price

But...who determined that formula, and why does it pertain to all sales? Why doesn't title just provide the appraiser with the selling prices rather than the formula? And WHY does every Sales Office provide appraisers with the phone numbers of Title and/or Escrow--when the first call the appraiser has to make is to obtain the email addresses--rather than to provide the appraiser with the email address to make the process more efficient?

They can put wahtever they want into a contract. That is not binding on you. You didnt sign it. Just do the appraisal and make your adjustments as if you never read the clause. Thats what your client is paying you to do.

 

[William Rightsell]

Reviewing the Purchase Agreement for a new construction tract SFR, I noticed two interesting items and wonder whether peers are familiar with them:

1) The appraiser cannot make adjustments for Lot Premiums [seems to me to affect the appraiser's Scope of Work]

2) The buyer is not responsible for his offer or the EMD/downpayment if the appraisal Opinion of Value does not support the contract price. [I don't know if all new construction contracts include this type of stipulation.]

---------------------

I'm trying to figure out adjustments for differences between the subject incentives and comp incentives for closing costs. If the subject receives $10,000 and a comp receives $15,000, would the adjustment be (+) $5,000 because the comp incentive is $5,000 more, reducing the price by $5,000 less that the subject? I also was told by an appraiser that FNMAE only permits downward comp incentive-based adjustments in the SCA.

Then the Doc Stamp protocol also s intriguing. The formula to determine selling price of a new construction SFR, per various Title offices is:

Doc Stamp divided by 1.1 multiplied by 1000 = Sales Price

But...who determined that formula, and why does it pertain to all sales? Why doesn't title just provide the appraiser with the selling prices rather than the formula? And WHY does every Sales Office provide appraisers with the phone numbers of Title and/or Escrow--when the first call the appraiser has to make is to obtain the email addresses--rather than to provide the appraiser with the email address to make the process more efficient?

A for the amount of "incentives", which I will assume are actual concessions of some sort, the adjustment is dollar for dollar. Others will argue but reality says if I kick back 10K I got 10K less, so the price I got just went down by 10K. What would you do if that 15K "incentive" was a new car? Adjust dollar for dollar for the comps based on the concessions for each sale. The "incentives" in the contract are meaningless. Just appraise it based on the comps. Adjusted for sales concessions. Easy.

 

[William Rightsell]

Agreed. What if you can't find better comps since right now sales volume is very low ? Especially GSE have strictly restriction for the comps, like 1/2, 1 or max 2 miles radius, GLA within 20~25% +/-, sold day in last 3 or 6 months, etc.

Those are what they "want". If they arent available then you give them what you have and explain a little bit. Not a big deal. YOU are the appraiser. Not the GSE.

 

[J Grant]

A for the amount of "incentives", which I will assume are actual concessions of some sort, the adjustment is dollar for dollar. Others will argue but reality says if I kick back 10K I got 10K less, so the price I got just went down by 10K. What would you do if that 15K "incentive" was a new car? Adjust dollar for dollar for the comps based on the concessions for each sale. The "incentives" in the contract are meaningless. Just appraise it based on the comps. Adjusted for sales concessions. Easy.

Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s
reaction to the financing or concessions based on the appraiser’s judgment.

There is nothing to argue about. THIS above is on the certs of the 1004 form (since lending work uses these forms ) and we sign that is what we did. You are interjecting net to seller, what they got more or less as their in their net, with the above which concerns price as measured by the market ( the market reaction ) . There are times when dollar for dollar is the same as the effect on price, then explain that is why you based it on $ 4$. But if the price is not affected, if it is equivalent to what other properties sold for without the concession, then we make no adjustment and explain why

 

[J Grant]

Builder sales are hard to adjust for wrt concessions - sometimes they need it, sometimes they don't. The builders invent prices anyway, for everything, based on cost, and a builder's cost is whatever they can charge their buyers, not necessarily what a contractor would charge. Same for lot premiums and upgrades. Builders can inflate a base house model price to cover the "concession" their preferred lender gives - so it is really a wash.

 

[J Grant]

Is the purchase agreement for a new construction SFR assumed to be part of the client Engagement with an appraiser?
Would the appraiser comment on an item in the purchase agreement with which he or she can't comply?

If we were supposed to "comply" with sale contracts then we would have to appraise to the SC price, right? (sarcasm)
A purchase contract is binding on a buyer and seller, not on an appraiser or the lawn guy or the home inspector or the movers -

 

[J Grant]

Yeah, a side note for a small item, like air conditioner, fireplace or small patio, etc., how you guy do the adjustment? Normally I put $3000-$5000 on it. But if lender want me provide pair analysis, it will be almost impossible because there are no exact same two houses in the world, you can't tell less than 1% value difference is because of air conditioner, fireplace or small patio, etc., If you didn't put adjustment there, lender will ask you again: Why you didn't put adjustment there? These items have to have some value on it, right? Seems you didn't do a good work to analysis, blah, blah.

Most experienced appraisers don't adjust for very low-value items like a fireplace or patio size (unless it is an extreme difference in patio like a small slab , or covered vs open but a 10 x 20 patio vs a 8 x10 patio, no, not happening.
Don't line item the fireplace and you won't have to adjust for it. ( or make no adjustment for it ) problem solved. Minor items, like fireplaces, smaller or bigger patio, a new AC etc are lumped in with the total upgrades. Only if they are significant enough to affect value over some petty amount are they line item out for an adjustment.
The purpose of making adjustments is not to make every house equal in every feature. It is to adjust for larger items that affect price enough to matter to narrow the adjusted range of the comps.