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Fannie Mae Form 2000 & the 3 Year Rule

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rtubbs

Junior Member
Joined
Jan 15, 2002
I posted this under the Fannie Mae forum and didn't get any comments. Thought I would try it here:

Posted: Sun Dec 22, 2002 7:25 pm Post subject: Form 2000 and the 3 Year Rule

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The revised Form 2000 has been issued by Fannie Mae (see Fannie Mae Announcement 02-13, dated December 17, 2002).

If the review appraiser provides a new opinion of value, he/she identifies 3 comparable sales (which may also be the sales used in the original appraisal) and...

"provides a sale/transfer history for a minimum of three years prior to the effective date of the original appraisal..."

What's with this if the original appraisal is required to provide a 3-year sales history for the subject only?

Anyone have any ideas?
 

Jo Ann Meyer Stratton

Elite Member
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Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
The Fannie Mae forms as for history on the subject and all comparables. The forms, since they were created in 1993, say within one year. But because of USPAP going into effect 1/1/2003; three year history is necessary. And it is all part of the due diligence that an appraiser needs to practice. Fannie Mae, Freddie Mac, VA, HUD and individual clients can have additional guidelines that go beyond USPAP as long as they do not contradict USPAP. So as I have commented several times in several different posts---if a reviewer of your report or an investigator for your state board can find a three year history of sales and/or listings for your subject property and comparables used--you better report them!
 

rtubbs

Junior Member
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Jan 15, 2002
But Jo Ann, USPAP does not address a 3 year sales history of comparable properties, does it? My point, or question, was: if there is not a requirement to report prior sales (w/i last 3 years) in the appraisal, why is it a requirement to report it in a Review appraisal?
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
The client can require anything they want as long as it is not in conflict with USPAP. They could require a complete five year listing and sale history on each subject, on each comparable used in the report, a list of every property you considered including a five year history of each one, a cost approach on each comparable both in your report and those you considered and through about, etc, etc. That would not be in conflict with USPAP. If the client is expecting that type of reporting, tells you up front, you then can agree on a fee. If the two of you cannot agree on a fee, you say goodbye and that becomes the end of that story. If you do agree on a fee, then you provide the additional information that the client has requested. The client has the right to request any additional information they want to help them make a decision, they cannot demand less than USPAP. Now we are getting into the Scope of Work and you and the client come to an agreement on what you will provide and what you will charge. Or you remove them from your approved client list and tell them to never darken your email or fax again.
 

bradellis

Member
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Jan 16, 2002
Ron,

Fannie Mae's requirements are, in fact, supplemental standards. Therefore, if they want a 3 year on the comps you must provide it in order to comply with USPAP.

The reasoning behind this requirement is two fold. First, it will tell the reader what has happened with both the subject and comps as regards appreciation in that market.

Second, it that is will uncover flips of either the subject or comps. For example, you use a comp that is 6 months old at $100K, but it transferred 7 months before that for only $25K. If all the comps have similar circumstances, you could easily be looking at an over valued subject. It generally takes flipped comps to "prove" the flipped value for the subject.

Now, my bank requires a 5 year history, for some of the same reasons- concentrating upon the first one. Because we are not a GSE, it does not involve USPAP after the 3 years. Difference is that FAnnie is a GSE and we are not.

Brad Ellis, IFA, RAA
 

rtubbs

Junior Member
Joined
Jan 15, 2002
Ya'll are missing my question. Form 2000 is the new review appraisal form. My question is: If Fannie Mae does not require a 3 year history on comps for an appraisal, why does Fannie Mae require a 3 year history on the review (only if the review appraiser develops a different value)?
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
The answer to your question at this point in time. All other Fannie Mae forms were developed in 1993 and 1996 when 1993 and later USPAP Standard 1-5 (a) required an appraiser to consider and analyze any current agreement of sale, option or listing of the property being appraised, if such information is available to the appraiser in the normal course of business (b) consider and analyze any prior sales of the property being appraised that occurred within the following time periods: (i) one year for one to four family residential property. Fannie Mae decided (which they have a right to do) that as Advisory Opinion G-1 (1993 USPAP) states "Just as the appraiser must take into account pending and recent sales of comparable property, the appraiser must take into account any pending and recent sales of the subject property itself. ---the appraiser's failure to consider, analyze and report these facts may exclude important informatuion from the sales comparison approach to value. Information pertaining to the current market status and the sales history of the subject property may also be useful information for the determination of highest and best use or the analysis of market trends." 2003 USPAP that goes into effect 1/1/2003 changes that to a three year time period for the subject property and now we have Advisory Opinion 1 that continues the older USPAP. So now with Fannie Mae created a new review form for single family properties, they have updated their form to reflect the soon to be current USPAP Standard 1-5b for a three year history. And as Fannie Mae has the right to do they decided that the sentence "Just as the appraiser must analyse pending and recent sales of comparable properties---" in Advisory Opinion 1 for 2003 remains valid and they will require a three year history for comparables. Which also means regardless of that the 1993 version of the 1004 asking for a one year history--Fannie Mae is expecting to see a three year history on the original appraisal report. The printing won't be able to be changed until Fannie Mae reissues an updated 1004. In the meantime, an appraiser is supposed to know what is required.

An appraiser must always, always practice due diligence!!!!
 
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