FHFA - Underutilization of Appraisal Time Adjustments

[NC Appraising]

If appraisers are not making adjustments that are warranted or are making adjustments that are not warranted or are supporting contract prices that can't be supported with market data, or not supporting contract prices that market data supports, I am all for hanging them out to dry. You don't find those individual instances by maligning an entire group. The skunks and monkeys in the sewer lobbing grenades that nail everyone in search of a few are far more egregious than the least competent and most unethical appraisers.

I find it funny when I look at appraisals that were done in 2020-2022 and the appraisers marked stable.

Average Sales Price of Houses Sold for the United States

Graph and download economic data for Average Sales Price of Houses Sold for the United States (ASPUS) from Q1 1963 to Q2 2025 about sales, housing, and USA.

fred.stlouisfed.org

That being said, I have also seen appraisers use market condition adjustments to inflate values (meet the contract price).

At the end of the day, is there really a difference? An unethical appraiser is what it is.... use superior sales (location, condition, quality) to inflate the value or market condition adjustments.

 

[TerryRohrer]

I find it funny when I look at appraisals that were done in 2020-2022 and the appraisers marked stable.

Average Sales Price of Houses Sold for the United States

Graph and download economic data for Average Sales Price of Houses Sold for the United States (ASPUS) from Q1 1963 to Q2 2025 about sales, housing, and USA.

fred.stlouisfed.org

That being said, I have also seen appraisers use market condition adjustments to inflate values (meet the contract price).

At the end of the day, is there really a difference? An unethical appraiser is what it is.... use superior sales (location, condition, quality) to inflate the value or market condition adjustments.

And those appraisers will not be identified and removed through the "analyses" being spewed by the GSEs. Of course, when they are intended to promote a political agenda and not to improve the level of ethics within the appraisal community, that isn't surprising.

None of these "realizations" are new. Had the GSEs stopped taking such appraisals decades ago, when these issues became apparent, there would be a much smaller problem today. Making stupid pronouncements won't likely move the needle much.

 

[madeluca1]

Excellent point. Same for my market. The past year has been extremely difficult to determine if the market was stable, decreasing or increasing. It was changing quarter to quarter. Then for new construction you had those interest rate buydowns...

Big data can be useful, but it can also be mis-leading.

Another data point to consider is how the higher-end homes are affecting the median sale prices. In my market, starter homes are very low, whereas high-end homes are more of the market in terms of % sales. Therefore, the median sale prices are showing increasing trends.

Yes, did you see the fannie letter on site adjustments a few months back? I think they said something like appraisers were not making site adjustments 60% of the time their model indicated a site adjustment should be made. If I developed a model and 60% of the workers in the field were not making an adjustment, I'd figure I was missing something in my model, not that 60% of the field workers were wrong. Just replace site adjustment with coin flipping. 60% of the time the coin did not land on the side predicted by the model ... the field workers must be flipping the coin incorrectly!

 

[Mejappz]

And those appraisers will not be identified and removed the the "analyses" being spewed by the GSEs. Of course, when they are intended to promote a political agenda and not to improve the level of ethics within the appraisal community, that isn't surprising.

None of these "realizations" are new. Had the GSEs stopped taking such appraisals decades ago, when these issues became apparent, there would be a much smaller problem today. Making stupid pronouncements won't likely move the needle much.

Exactly! I've been saying this for a while. However, the report doesn't mention the ones who are responsible for hiring these appraisers (the AMC) or the ones who accept these reports (the lender) and GSEs). They too should be held accountable. But friends don't turn in friends.

 

[NC Appraising]

Yes, did you see the fannie letter on site adjustments a few months back? I think they said something like appraisers were not making site adjustments 60% of the time their model indicated a site adjustment should be made. If I developed a model and 60% of the workers in the field were not making an adjustment, I'd figure I was missing something in my model, not that 60% of the field workers were wrong. Just replace site adjustment with coin flipping. 60% of the time the coin did not land on the side predicted by the model ... the field workers must be flipping the coin incorrectly!

I have been stiped by my lender on this several times, due to this. One was for that my adjustment was not large enough. I already commented for the below in my report, so it is not that big of a issue.

90% of my appraisals are in tract home developments. one comp is 8,000 sqft. one is 9,000 sqft and one is 10,000 sqft. The subject is 8,500 sqft. I'm I going to make an adjustment? No. I treat site adjustments similar to GLA and age adjustments. There has to be enough of a variance before adjustments are applied. If you think about it, if the appraiser is staying in the subdivision, most of the time the lot sizes do not vary that much except for corner and cds lots. So, most of the time, site adjustments are not needed.

I hope.....the new forms will have a separate section for topography, shape, etc.

 

[djd09]

Appraisal adjustments lagged soaring home values​

Homes came in underappraised as much as 15% of the time in the recent period of rapid price hikes, and mandated adjustments were typically not performed, according to research from the

Appraisal adjustments lagged soaring home values

Analysis conducted by the Federal Housing Finance Agency found values coming in under contract price as often as 15% of the time in recent years, with appraisers failing to account for quickly changing market conditions.

www.nationalmortgagenews.com

 

[Joe Flacco]

If you guys go back to the market conditions threads from 2020-2022, then it is obvious that the majority of appraisers were under-reporting market conditions adjustments.

Most appraisers were of the mind that if the buyers want to over-pay then they should bring more cash to closing. It's just hard to see it in real-time, especially during the spring market. I am sure everyone believed they were doing the right thing at the moment. In hindsight, "Appraisal adjustments lagged soaring home values" is factual.

 

[Joe Flacco]

What is the market conditions and price trend?
What is the adjustment?
Which comps require an adjustment and by how much?

Analyzing, reporting, and applying market conditions is very complex.

 

[djd09]

recent sales reflect current market conditions.

 

[shrubberyvaluation]

Yes, did you see the fannie letter on site adjustments a few months back? I think they said something like appraisers were not making site adjustments 60% of the time their model indicated a site adjustment should be made. If I developed a model and 60% of the workers in the field were not making an adjustment, I'd figure I was missing something in my model, not that 60% of the field workers were wrong. Just replace site adjustment with coin flipping. 60% of the time the coin did not land on the side predicted by the model ... the field workers must be flipping the coin incorrectly!

I think this was for lot sizes under 4,000 SF or something. These are typically townhomes and sometimes there isn't a market reaction for a slightly different lot size.