Fannie messed up with ANSI

[djd09]

MISLEADING: Intentionally or unintentionally misrepresenting, misstating, or concealing relevant facts or conclusions.

the cert 23 users will have at it

 

[alebrewer]

???? When would that ever apply?

But who can define "the market"?

I always thought the appraiser defined the market for the subject property... No?

 

[Terrel L. Shields]

I always thought the appraiser defined the market for the subject property... No?

Well, we can define the market area. We can describe the market conditions, but we cannot make the market. When someone says that the "market" for say, homes with pools, is weak and most buyers discount it, don't you have some obligation to demonstrate that this is a valid observation (if not a fact?)

using phrases as " the market sees it as XX"

As JG points out we appraisers often comment about what the market supposedly sees...but the "market" sees nothing. We are generally only overlaying our own biases upon top of some scant market evidence that is entirely subjective and poorly, if at all, supported by the "market" evidence we have. It is simply our heuristic assumptions (rule of thumb, gut feeling, guestimate) talking.

The most common thing over the years I have seen, and perhaps have been guilty of in days past was saying something to the effect that "most houses in this market area are owner-occupied therefore the income approach is not applicable." However, when I really got to looking I found out that a lot of such "neighbors" or small towns like I work, clearly had 30% or more houses non owner-occupied. That means almost one in three homes are rented therefore the data are there, if we only take the time to find it. So the income approach is not only applicable but we should be able to determine a GRM and typical rent on many many properties. Only the high end homes in most the towns I work are not frequently rented. I can develop an income approach. I don't but I don't say the approach is NOT applicable rather I say it is NOT necessary.

So the punch line is when someone says that the market recognizes the SF of a 6' 11" floor as GLA, then support that with evidence. And when ANSI says it isn't living space, then ANSI should be able to support that assumption...ANSI does not, it is just an arbitrary standard that paints itself into a corner all by itself.

 

[Fernando]

Well, we can define the market area. We can describe the market conditions, but we cannot make the market. When someone says that the "market" for say, homes with pools, is weak and most buyers discount it, don't you have some obligation to demonstrate that this is a valid observation (if not a fact?)

As JG points out we appraisers often comment about what the market supposedly sees...but the "market" sees nothing. We are generally only overlaying our own biases upon top of some scant market evidence that is entirely subjective and poorly, if at all, supported by the "market" evidence we have. It is simply our heuristic assumptions (rule of thumb, gut feeling, guestimate) talking.

The most common thing over the years I have seen, and perhaps have been guilty of in days past was saying something to the effect that "most houses in this market area are owner-occupied therefore the income approach is not applicable." However, when I really got to looking I found out that a lot of such "neighbors" or small towns like I work, clearly had 30% or more houses non owner-occupied. That means almost one in three homes are rented therefore the data are there, if we only take the time to find it. So the income approach is not only applicable but we should be able to determine a GRM and typical rent on many many properties. Only the high end homes in most the towns I work are not frequently rented. I can develop an income approach. I don't but I don't say the approach is NOT applicable rather I say it is NOT necessary.

Buyers who buy as owner occupied generally place higher value than an investor. I lost my recent bid because I looked at the numbers and didn't make sense.
Majority of owner occupied buyers in market pay premium not for economic but emotional response to the property. Thus income approach not as prevalent in such markets.

So the punch line is when someone says that the market recognizes the SF of a 6' 11" floor as GLA, then support that with evidence. And when ANSI says it isn't living space, then ANSI should be able to support that assumption...ANSI does not, it is just an arbitrary standard that paints itself into a corner all by itself.

I agree. My older remodeled family room behind garage has 7 feet ceilings. When Fannie announced ANSI, I was worried my family room lost a whole room and square footage. In terms of marketing, my home would have lost value. Thank goodness I measured and was like 7 feet half inch. So happy. Sorry for others who has 6'11.5" ceilings.

 

[Terrel L. Shields]

Buyers who buy as owner occupied generally place higher value than an investor.

The buyer of rentals is valuing the income stream...and as you say the owner-occupant is buying for emotional issues.

Take small farm land sales. Sometimes a neighbor buys land at a premium or even pays MV for a landlocked acreage that joins them. Other buyers would not want a landlocked tract so the neighbor has a physical reason to pay that price which no one else would. A beef rancher would favor the property closest to them all other things being equal. This means they spend less money traveling back and forth feeding cattle, drive less on the roads with a tractor, or, in other words, economically it makes sense for them to pay a premium whereas a parcel 20 miles away would be unnecessarily difficult to operate. I know some cattlemen who drive 100 miles or more a day servicing pastures but that is expensive and comes off the bottom line. They can only afford to do it by virtue of the economy of scale. When operating 300-600 momma cows, putting together the necessary acreage to feed and house them is difficult in all but the most remote areas.

 

[DWiley]

The most common thing over the years I have seen, and perhaps have been guilty of in days past was saying something to the effect that "most houses in this market area are owner-occupied therefore the income approach is not applicable." However, when I really got to looking I found out that a lot of such "neighbors" or small towns like I work, clearly had 30% or more houses non owner-occupied. That means almost one in three homes are rented therefore the data are there, if we only take the time to find it. So the income approach is not only applicable but we should be able to determine a GRM and typical rent on many many properties. Only the high end homes in most the towns I work are not frequently rented. I can develop an income approach. I don't but I don't say the approach is NOT applicable rather I say it is NOT necessary.

I have observed the same. There are far more rentals than most appraisers seem to think As most first boss was fond of saying, N/A should not stand for not attempted

I was asked once, on the witness stand, if I could provide my extraction calculations for land value, since my value was so much higher than the other appraiser. I said that I could not, as I did not use extraction, I used the three lot sales on the subject street that had all sold within the past year. The other appraiser had just assumed no such sales existed in that well established neighborhood.

 

[Amy Perkins]

While walking with my dog late this afternoon in my neighborhood, I started reflecting about ANSI and saw how it worked on some of the houses I saw.
I was surprise many home downslopes with 2nd and 3rd levels below street level.
With ANSI, those levels would not be counted in GLA or square footage as ANSI would call it.
It's not the silly 1/10th foot which we should be worry about which is a pain in the as*, it's how we call the square footage.

Am I the only smart Appraiser who sees this dilemma?
Appraisers have to separate the square footage between above grade and below grade and same with the comps.
Before I get criticize for trying to compare my GLA close to public records with comps public records. Its the best we got in comparing subject with comps.

With ANSI, appraisers will separate the levels as well as the room count for subject and comps.
No exception and deviation as Fannie demanded.

If I was a reviewer (and thank goodness for y'all that I'm not), I can see from the subject's photos if the square footage was calculated correctly.
If not, as a reviewer, I'll tell the appraiser to separate the levels as according to ANSI, you fool.
Appraisers will have to redraw the sketch and have separate line for the below grade as well as adjusting for the comps' levels.

Also, I can see how this separation of levels can be misuse for fraud.
There is this house that sold quickly and house downslopes and has unobstructed million dollar view.
Across street is a house that backs to a hill with lower two levels below grade because they back to a hill. This house has been sitting on the market for months.
Even though it has some views from upper level, it's location is not comparable to the million dollar view home.
On paper, an unethical appraiser can use that million dollar home as a comp to justify an inflated appraised value.
Reviewers not that smart will accept that higher comp being close proximity.

I heard there is a new 1004 form coming in few years. We'll see if the form can address this above and below grade fiasco.

This is a tough one, especially homes that are several levels to enhance a view of a river or ocean. My attitude is that it depends on whether the space feels like a basement or not. How high area the ceilings? Are there ceiling tiles? Is it below the quality of the main floor? I tend to put a separate a adjustment for finished basement areas below the grade. If it's a custom property with 11 foot ceilings and a view, I may decide it's upgraded enough to adjust at the same amount as the rest of the GLA. It depends. As long as you are comparing the same thing and not just whatever is on MLS is fine. They include the sf in the GLA all the time from the basement, pool houses, second units, etc... If you have outstanding quality on the main floor and average sf on the pool house, don't include the pool house as GLA. Adjust for it separately. For the most part, I agree with Fannie, but there are always exceptions.

 

[Amy Perkins]

Q14. The ANSI standard requires any area that is
partially or wholly below grade to be counted as
basement; what defines ‘partially’ below grade?

A floor level is partially or wholly below grade if any portion of its
walls is not entirely at or above ground level.

In the form the word grade is defined as the level of the ground, not the quality of the building. I suppose some appraisers interpret it in different ways, such as quality level the same as the subject, but I always thought it meant under ground. I suppose one could interpret it either way and there is some confusion on this... If it's similar quality, adjust the price at the same price per SF. As long as it's the truth. They just haven't gotten appraisers to all do it the same way so it's messing up their AVM ways to data mine us out of a job. They will never get the agents to do it, so good luck trying to get this type of compliance. I already decided to do it like this years ago.

 

[djd09]

ansi is junk. it is so bad that fannie needed to have 20 FAQ to clarify and counterdict themselves

 

[djd09]

Measuring with ANSI and the 2021 ANSI Update
Thursday, May 12th | 12pm-4pm CT
4h Live-Virtual CE | $109.95
Instructor: Hamp Thomas