Appraised Value Below Contract Price

[J Grant]

Maybe some of you need to read FNMA

Selling Guide: Fannie Mae Single Family​

Published August 21, 2012

"The lender must provide the appraiser with all appropriate financing data and sales concessions

for the subject property that will be, or have been, granted by anyone associated with the
transaction. In addition, the lender must provide the appraiser with a copy of the complete,
ratified sales contract and all addenda for the property that is to be appraised, therefore ensuring
that the appraiser has been given the opportunity to consider the financing and sales concessions​

in the transaction and their effect on value."



Oh dear....did they just say they wanted to know about the subject's contract and it's effect on market value?

You added in market value, the fannie guideline did not state that, nice try! The Fannie guideline sticks to what is known, the facts of the contract, such as concessions and terms, and how they , or other elements of the contract such as financing, impacts value.

It does not mention market value, or the appraiser's market value opinion.

 

[mark hurlock]

And where did I say that?

"If you have a neighborhood where everything is selling for $250,000 and there is one sale for $200,000 you don't "analyze" the price, i.e. do some research? Find out why?"



No MORE or LESS than everything selling for $250000 And it's the circumstances not the price that I am investigating.

Get it?

 

[residentialguy]

What about where a simple sale between unrelated parties has $200,000 with a simple 8 page contract with nothing unusual and your opinion based on the market is $190,000?

What is the explanation? What further analysis will reveal the discrepancy?

That's what you should try to find out. Is there concessions affecting the price? What's the motivations of the buyer/seller? Are they friends? Is the same agent handling both buyer/seller? Is the buyer's first house he walked in?

That's part of the analysis.

again..

Selling Guide: Fannie Mae Single Family​

Published August 21, 2012

"The lender must provide the appraiser with all appropriate financing data and sales concessions
for the subject property that will be, or have been, granted by anyone associated with the

transaction. In addition, the lender must provide the appraiser with a copy of the complete,
ratified sales contract and all addenda for the property that is to be appraised, therefore ensuring
that the appraiser has been given the opportunity to consider the financing and sales concessions​

in the transaction and their effect on value."


USPAP says to consider all relevent market data. It also says that you must adhere to the intender user's requirements. (see above) IOW, that is now a USPAP rule.



***State boards are disiplining appraisers for just reporting contract date, price and concessions***

DISCIPLINARY REPORT​

May 17, 2012

The Respondent did not analyze the agreement of sale, but only

listed facts that were in the contract such as sales price, date of the contract, and sales
concessions. There was not analysis as to the motivation of buyer or seller, no
consideration of whether both parties were well informed or advised, no analysis of
whether there was reasonable exposure to the open market or whether the price was​

influenced by special or creative financing.

 

[Calvin the Airedale]

Sorry, Calvin, your analysis is not much different than mine as far as level of detail, and you atually provide nothing of value...not to single you out, but most appraiser's analysis of contracts are pretty much like yours...talking about concessions or the like, you say the circumstances are motivations are unknown, which is truthful, but you aren't adding any additional facts or level of knowledge .

The MVO is derived using a HYPOTHETICAL PRESUMED SALE per MV definition, it does not relate to the actual SC and sale price of subject.

How would more, lengthy analysis of the subject SC change the MV definition presumed hypothetical sale?

The hypothetical MV sale is what we use to derive MV, so the actual terms of sale for subject could be totally peculiar, and it should not affect the MVO one bit.

From what I've seen, most appraisers doing mortgage work simply regurgitate the price and terms. Nothing more.

As for "The MVO is derived using a HYPOTHETICAL PRESUMED SALE per MV definition, it does not relate to the actual SC and sale price of subject." Really? No relation whatsoever?

Wow.

 

[Calvin the Airedale]

Seriously, I already knew that from reading and comprehending the report. Exactly what did you explain to me that I did not comprehend from the rest of the report?

Be flippant all you want. It is obvious you've never loaned $1 on collateral or underwritten a loan to CFR guidelines. Clients are looking for all the help and guidance they can get. Especially nowadays. Lending is a scary business. Would it hurt to hold their hands a bit?

 

[J Grant]

From what I've seen, most appraisers doing mortgage work simply regurgitate the price and terms. Nothing more.

As for "The MVO is derived using a HYPOTHETICAL PRESUMED SALE per MV definition, it does not relate to the actual SC and sale price of subject." Really? No relation whatsoever?

Wow.

Seriously?

Review the definition of MV . It is a presumed sale, or hypothetical sale. It reads, "What a property SHOULD bring in an open market....."

That is why, in a refinance, where there is no actual contract of sale, we still apply the presumed MV sale def sale terms for our subject.

So, in a case where there is a real SC and price, that exists outside of the development of MV, which is developed per the presumed MV definition sale terms. ''

AFTER the MVO is developed, you can compare it to the SC price as additional data. But if you are mixing in elements of the actual subject sale into the presumed MV def in order to develop the MVO, that is misleading.

It's the same kind of problem when the subject is an REO, doesn't matter if a subject is REO owned in a MV purpose apprasial, for value development, it's the MV presumed sale terms that are used.

 

[Mr Rex]

JGrant thinks the contract is irrelevant, but I bet she doesn't say so in her reports.:new_smile-l:

 

[CANative]

That's what you should try to find out. Is there concessions affecting the price? What's the motivations of the buyer/seller? Are they friends? Is the same agent handling both buyer/seller? Is the buyer's first house he walked in?

That's part of the analysis.

again..

Selling Guide: Fannie Mae Single Family​

Published August 21, 2012

"The lender must provide the appraiser with all appropriate financing data and sales concessions
for the subject property that will be, or have been, granted by anyone associated with the

transaction. In addition, the lender must provide the appraiser with a copy of the complete,
ratified sales contract and all addenda for the property that is to be appraised, therefore ensuring
that the appraiser has been given the opportunity to consider the financing and sales concessions​

in the transaction and their effect on value."


USPAP says to consider all relevent market data. It also says that you must adhere to the intender user's requirements. (see above) IOW, that is now a USPAP rule.



***State boards are disiplining appraisers for just reporting contract date, price and concessions***

DISCIPLINARY REPORT​

May 17, 2012

The Respondent did not analyze the agreement of sale, but only

listed facts that were in the contract such as sales price, date of the contract, and sales
concessions. There was not analysis as to the motivation of buyer or seller, no
consideration of whether both parties were well informed or advised, no analysis of
whether there was reasonable exposure to the open market or whether the price was​

influenced by special or creative financing.

Reread the scenario.

What about where a simple sale between unrelated parties has $200,000 with a simple 8 page contract with nothing unusual

The assumption is that there is nothing going on.

The opposition's position is that any variance between contract and opinion automatically places a requirement on the appraiser to explain why and this is a requirement of some CFR, GSE guideline or USPAP. It's my position that this is not factual.

 

[J Grant]

JGrant thinks the contract is irrelevant, but I bet she doesn't say so in her reports.:new_smile-l:

You are a real A...$$.

My lender clients don't see me showing evidence that I think the contract is irrelevant.

 

[J Grant]

Be flippant all you want. It is obvious you've never loaned $1 on collateral or underwritten a loan to CFR guidelines. Clients are looking for all the help and guidance they can get. Especially nowadays. Lending is a scary business. Would it hurt to hold their hands a bit?

Okay, so now it's changed to holding their hands, a customer service function, which is what I've been saying all along. It's not regulatory, it has nothing to do with an appraiser not analyzing a contract, it's a client service add on to help a lender appease the realtor, and to offer a summation of explanation, since reading the whole report and absorbing it may be asking too much. Fine, I can do that.

But if you have any interaction with regulators, you might want to let them know that this explanation is far more necessary, when the SC price and MVO line up. Not for the customer, they're happy, but for the other users of the appraisal, such as the secondary market investors (if the client cares about them)