FHA Appraisal Requirements In Changing Markets

[NJ Valuator]

Is the requirement of providing at least 2 comparable sales that closed within 90 days and 2 active listings or pending sales only for increasing or decreasing markets or is this a requirement for every FHA appraisal?

I thought this requirement was only for increasing or decreasing markets, but someone is telling me differently.

 

[RSW]

This is taken from the 4000.1 and it is my opinion that it is for all assignments:

(2) Required Analysis and Reporting
The Appraiser must accurately report market conditions and determine when
housing trends are increasing, stable or declining. The Appraiser must provide a
summary comment as to the continuance of the current trend or if the trend
appears to be changing, and provide support for all conclusions. If the Appraiser
bases the adjustment on a published source, the Appraiser must include a copy of
which must be included in the addendum.
The Appraiser must include an absorption rate analysis, and at least two
comparable sales that closed within 90 Days prior to the effective date of the
appraisal. If the Appraiser cannot comply with this requirement due to the lack of
market data, a detailed explanation is required.
The Appraiser must include a minimum of two active listings or pending sales on
the appraisal grid (in addition to at least three recently settled sales).
For active listings or pending sales, the Appraiser must:
ensure they are market tested and have reasonable market exposure to
avoid the use of overpriced properties as comparable properties;
use the actual contract purchase price, or, when not available, adjust
comparable properties to reflect listing to sale price ratios;
include the original list price, any revised list prices, and calculate the total
Days on Market (DOM). The Appraiser must provide an explanation for
the DOM that does not approximate periods reported in the
“Neighborhood” section of the appraisal reporting form;
reconcile the Adjusted Values of active listings or pending sales with the
Adjusted Values of the settled sales provided; and
if the Adjusted Values of the settled comparable properties are higher than
the Adjusted Values of the active listings or pending sales, determine if a
Market Condition Adjustment is appropriate.

 

[NJ Valuator]

This is taken from the 4000.1 and it is my opinion that it is for all assignments:

(2) Required Analysis and Reporting
The Appraiser must accurately report market conditions and determine when
housing trends are increasing, stable or declining. The Appraiser must provide a
summary comment as to the continuance of the current trend or if the trend
appears to be changing, and provide support for all conclusions. If the Appraiser
bases the adjustment on a published source, the Appraiser must include a copy of
which must be included in the addendum.
The Appraiser must include an absorption rate analysis, and at least two
comparable sales that closed within 90 Days prior to the effective date of the
appraisal. If the Appraiser cannot comply with this requirement due to the lack of
market data, a detailed explanation is required.
The Appraiser must include a minimum of two active listings or pending sales on
the appraisal grid (in addition to at least three recently settled sales).
For active listings or pending sales, the Appraiser must:
ensure they are market tested and have reasonable market exposure to
avoid the use of overpriced properties as comparable properties;
use the actual contract purchase price, or, when not available, adjust
comparable properties to reflect listing to sale price ratios;
include the original list price, any revised list prices, and calculate the total
Days on Market (DOM). The Appraiser must provide an explanation for
the DOM that does not approximate periods reported in the
“Neighborhood” section of the appraisal reporting form;
reconcile the Adjusted Values of active listings or pending sales with the
Adjusted Values of the settled sales provided; and
if the Adjusted Values of the settled comparable properties are higher than
the Adjusted Values of the active listings or pending sales, determine if a
Market Condition Adjustment is appropriate.

This is under the topic of Changing Markets so that why I am not sure.

 

[NJ Valuator]

Does anyone else have any feedback on this issue?

 

[Mr Rex]

Much ado about the same thing. Many orders if not most since 2008 had this same verbiage. Don't have good (aka reasonable) comps in the past 90 days, comment. It ain't rocket surgery and you can't chew the MLS and excrete comps that aren't there.

 

[Mike Ault]

When I listened to one of the webinars I was under the impression that it was for all FHA assignments also however the only time those particular requirements appear in the handbook is under the "Changing market section" that starts on page 464. the required analysis and reporting for typical markets can be found on page 461 where it states

"The Appraiser must include at least three sales that settled no longer than 12 months prior to the effective date of the appraisal"

just my opinion.....

 

[Tom D]

i think it's more for a declining, or collapsed market, which kinda makes sense (that's where they lose money). we have hot areas here, but i just say stable, so never had the issue. if your value is over the high end i guess they would like to see higher recent listings or pendings. when you start making time adjustments i would wanna know what is happening as close to the date of appraisal as possible.

 

[bnmappraisal]

IMO, most lenders (sadly) just default these days to "3 closed (at least 2 within 90 days if possible, otherwise comment and maybe add a 4th closed) AND 2 active pending"

I guess you can try to fight with them about it, but generally speaking, that's what I've been running into ... even in stable markets

 

[Mike Ault]

IMO, most lenders (sadly) just default these days to "3 closed (at least 2 within 90 days if possible, otherwise comment and maybe add a 4th closed) AND 2 active pending"

I guess you can try to fight with them about it, but generally speaking, that's what I've been running into ... even in stable markets

And I certainly don't have a problem providing this information, after all - we are in the information providing business! Clients that follow published GSE/FHA appraisal standards get charged the base fee, clients that want documentation surpassing published appraisal standards politely get charged extra as long as their expectations are clearly spelled out up front. Clients that order appraisals and then have additional requirements (such as those above) surpassing published standards that are nowhere to be found in the Letter of Engagement - after the fee has been negotiated, the appraisal completed and submitted - get fired.....