Fannie/Freddie guidelines - adjustments etc

[Meandering]

Oh yeah, final estimate of value was 21% over purchase price.

and is bracketed by the comps used. Other sales closer in GLA than the comps used were not used or addressed.

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[J Grant]

Following adjustment guidelines does not make a good or poor appraisal, just as exceeding guidelines does not make a good or poor appraisal.

We all recognize there are situations where exceeding guidelines reflects market conditions/and or is due to scarce sales data or a unique subject.

However, when there is ample sales of more similar comps and an OA used less similar comps (why?), and the use of less similar comps or poorly chosen comps resulted in large adjustments, both the comp choices and adjustments are open to question. An appraiser ignoring more equivalent GLA sales or not bracketing with a superior sale when that sale was avail is pretty easy to spot on review once the reviewer pulls up the retro data.

Imo it is not necessary to quote a Fannie guideline about adjustments, the issue is not that FF adjustments were not followed, it is that excessive adjustments were applied due to poor comp choice (resulting in a value not credible/well supported)

 

[klaarkent]

Convert an Appraisal to FHA

Hey Guys, AMC is asking me to "convert" a report to FHA that I dont think meets FHA standards. First theres the problem of converting an appraisal. What I proposed is a new appraisal since it was done in November. After reviewing the old appraisal, I dont think it meets FHA standards. The subject is listed publicly at 2/1, 600 sqft. 3/2, 1,180 sqft with a "den" room being 8x6 and the entry to the 2nd bathroom is only accessable from the exterior of the subject. I found in public records a notice to stop work due to lack of permits. The work that was being done was the unpermitted additions that are now completed. The 1st appraisal was done using the legal sqft and room count with a diagram of the subject as it stands with the unpermited additions and it clearly states (in several places)that the subject has unpermitted additions that were given no value. Am I correct in saying that the subject does not meet FHA standards? I have expressed this along with declining the assignment. The order is back in my e mail this morning. We already got a letter from FHA telling us to clean up our act (start putting porches on scetches and labeling them). Has anyone else had this problem. Any advice would be greatly appreciated.

 

[Randolph Kinney]

Hey Guys, AMC is asking me to "convert" a report to FHA that I dont think meets FHA standards. First theres the problem of converting an appraisal. What I proposed is a new appraisal since it was done in November. After reviewing the old appraisal, I dont think it meets FHA standards. The subject is listed publicly at 2/1, 600 sqft. 3/2, 1,180 sqft with a "den" room being 8x6 and the entry to the 2nd bathroom is only accessable from the exterior of the subject. I found in public records a notice to stop work due to lack of permits. The work that was being done was the unpermitted additions that are now completed. The 1st appraisal was done using the legal sqft and room count with a diagram of the subject as it stands with the unpermited additions and it clearly states (in several places)that the subject has unpermitted additions that were given no value. Am I correct in saying that the subject does not meet FHA standards? I have expressed this along with declining the assignment. The order is back in my e mail this morning. We already got a letter from FHA telling us to clean up our act (start putting porches on scetches and labeling them). Has anyone else had this problem. Any advice would be greatly appreciated.

There are several problems here.

FHA has minium property standards (essentially, health, safety and soundness). As long as the improvements (with permits or not) meets MPR, FHA will take it.

You cannot decide to give something that exists "no value". You have to show or prove that. Functional obsolescence will subtract from total value as in a bathroom that only can be used by exiting the home to use it.

You have to show what the local zoning and building authority codes are for additions, discuss whether or not that they actively enforce those codes and if they allow retro-permitting. Next, you have to look to the market for acceptances of additions done with out permits. If you have sales that included additions with out permits, that demonstrates acceptance. Then you need to determine the affect on value; did sales of properties that had additions with out permits add to the value when compared to properties with out additions?

Now, altering an appraisal that was done in November from a conventional lending assignment to FHA is a new assignment; different SOW and additional intended user.

If your client wants to order a retrospective appraisal done to FHA protocol for the appraisal done in November, then that is your decision: accept or decline.

Also, look up the condition of when the FHA number is assigned.