Fair condition, typical for the area

[Tim Hicks (Texas)]

Where did appraisers and reviewers get the idea that if fair condition is typical that means "average" condition? If you your property and all or most sales are REO properties that need numerous cosmetic updates, they are still in fair condition based on their actual condition regardless if every property in the neighborhood is in the same condition. Repairing the property will make the property superior to the other properties, but necessary to get occupancy. Just because they all need work, it does not mean they "average," it means they are "typical."

Sorry, just butted heads with a QC'er who thinks I should change an REO duplex to "average" condition because all sales are in similar fair condition needing making them all "average" for the neighborhood.

 

[CANative]

Sounds fair to me.

I think Mike Garrett started all this a long time ago.

 

[hastalavista]

Sorry, just butted heads with a QC'er who thinks I should change an REO duplex to "average" condition because all sales are in similar fair condition needing making them all "average" for the neighborhood.

The QC'er is a little mixed-up. Fair condition may be average for the neighborhood but that doesn't transmute fair-condition into average-condition (like lead into gold :laugh.

 

[CANative]

It was nothing more than an appraiser/broker trick to avoid using the "F" word on a property.

 

[CigarDad]

Based on the Fannie Mae Selling Guide the QC'er is correct.

"Average, to indicate that the characteristics of the subject property are equal to those that represent the "norm" for that market area and that are considered acceptable in the competing properties."

"Fair, to indicate that the characteristics of the subject property are inferior to those that are considered acceptable in the competing properties."


Examples:

If the subject property is in a rural location that has no public transportation, the appraiser would report the adequacy of public transpiration as "average" if the absence of public transpiration is typical of the competing neighborhoods. Similarly, if a property is characterized by a lack of maintenance, the appraiser would consider the subject property as "average" if the same conditions are typical of competing properties. In both instances, the subject properties would be acceptable regardless of the rating.

 

[hastalavista]

Based on the Fannie Mae Selling Guide the QC'er is correct.

"Average, to indicate that the characteristics of the subject property are equal to those that represent the "norm" for that market area and that are considered acceptable in the competing properties."

"Fair, to indicate that the characteristics of the subject property are inferior to those that are considered acceptable in the competing properties."


Examples:

If the subject property is in a rural location that has no public transportation, the appraiser would report the adequacy of public transpiration as "average" if the absence of public transpiration is typical of the competing neighborhoods. Similarly, if a property is characterized by a lack of maintenance, the appraiser would consider the subject property as "average" if the same conditions are typical of competing properties. In both instances, the subject properties would be acceptable regardless of the rating.

CigarDad-

Where are those quotes in the selling guide?

 

[Mike Kennedy]

Fannie Mae Appraisal Guidance for Lenders and Appraisers April 2009 FM 0409 Page 5 of 26

Unacceptable Appraisal Practices​

Because Fannie Mae holds the lender responsible for the quality of the appraisal used to support the value of a security property, the lender should take appropriate action to ensure that the appraisers it uses do not engage in unacceptable practices. The following are examples of appraisal practices that Fannie Mae considers unacceptable:​

Development of and/or reporting an opinion of market value that is not supportable by market data or that is misleading
Development of a valuation conclusion that is based—either partially or completely—on the sex, race, color, religion, handicap, national origin, or familial status of either the prospective owners or occupants of the subject property or the present owners or occupants of the properties in the vicinity of the subject property; or that is based on any other factor that local, state, or federal law designates as being discriminatory, and thus, prohibited

Misrepresentation of the physical characteristics of the subject property, improvements, or comparable sales

Failure to comment on negative factors with respect to the subject neighborhood, subject property, or proximity of the subject property to adverse influences
Failure to adequately analyze and report any current contract of sale, option, offering, or listing of the subject property and the prior sales of the subject property and the comparable sales;
Selection and use of inappropriate comparable sales or the failure to use comparable sales that are locationally and physically the most similar to the subject property
Creation of comparable sales by combining vacant land sales with the contract purchase price of a home that has been built or will be built on the land
Use of comparable sales in the valuation process even though the appraiser has not personally inspected the exterior of the comparable properties by, at least, driving by them
Use of adjustments to the comparable sales that do not reflect the market’s reaction to the differences between the subject property and the comparable sales, not supporting the adjustments in the sales comparison approach, or the failure to make adjustments when they are clearly indicated
Use of data—particularly comparable sales data—that was provided by parties who have a financial interest in the sale or financing of the subject property without the appraiser’s verification of the information from a disinterested source (for example, it would be inappropriate for an appraiser to use comparable sales provided by the real estate broker who is handling the sale of the subject property, unless the appraiser verifies the accuracy of the data provided with another source and makes an independent investigation to determine that the comparable sales provided were the best ones available.)
Development of and/or reporting an appraisal in a manner or direction that favors either the cause of the client or any related party, the amount of the opinion of value, the attainment of a specific result, or the occurrence of a subsequent event in order to receive compensation and/or employment for performing the appraisal and/or in anticipation of receiving future assignments.
Development of and/or reporting an appraisal in a manner that is inconsistent with the requirements of the Uniform Standards of Professional Appraisal Practice that were in place as of the effective date of the appraisal

 

[CigarDad]

CigarDad-

Where are those quotes in the selling guide?

Those are found in my Selling Guide from 1993 when I worked at Fannie page 750 (Neighborhood) & 758 (Property condition). I believe they should be still found in the new on-line guide section 402 regarding neighborhood use of Good, Average, Fair, Poor and in section 405 for property condition and the use of Good, Average, Fair, Poor.

Since I am old I find the older presentation to be much easier for me to reference. Back in the day when we reviewed an appraisal and found the appraiser to be in error we always referenced the FNMA section in the review so the appraiser could reference and hopefully learn, and we always sent a copy of the review to the appraiser in question. Not the same today.

 

[KenAZ]

If you are doing an appraisal in a luxury neighborhood of high quality custom homes, and the subject is a luxury high quality custom home, then your subject is in average condition, average construction quality, etc. It is average for the neighborhood.

I see many appraisers describe "Excellent, Very Good, Spectacular, Very Excellent, etc" I understand the temption, but really, they are typically all average.

I have been surprised, because I say average on all my luxury home reports, and no one has complained yet. Typically if the home I am appraising or a comparable was just updated, remodeled or rennovated, I just enter the description, instead of Good or Excellent.

Sorry to have to agree with the QC guy, but in this case he is right.

 

[Mike Kennedy]

http://appraisersforum.com/showthread.php?p=1997212#post1997212