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FHA/VA vs Conventional.

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Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Does anyone out there make any adjustments to comparables that have FHA or VA backed financing??
I feel that these programs are, in essence, designed to make an otherwise undesirable borrower look desirable in the eyes of the conventional lender. Therefore should be no difference and I do not see any difference reflected in my market. Most values here are above the program limits. Is there an issue I am missing?
 

larryhaskell

Senior Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Nevada
Frederick:

I don't do VA appraisals so can't say about those. I don't make an adjustment just because the financing was FHA but typically these are the types of loans where concessions are offered. If an adjustment is made, it for the concession, not the type of financing.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
I have to watch out for the occasional 'repairs' made by the seller which get listed as concessions on MLS sheets.

Beyond that in my market I see no evidence of value difference, the only potential differences are in condition... which does affect value, so finding out if they put on a new roof or added a HVAC or etc...
~~~~~
EXCEPT on HUD repossessed properties... on those you had best have either seen the property or have good second hand information. Due to the out of town agent sometimes things get past the reports...
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Here, I have to watch for those 'special' programs, but most are recognized by the sale price being higher than the listed price after 90+ days on the market.

The Realtors are now doing everything they can think of to hide these deals and make sure appraisers can't find the concessions - even to telling me point blank that they won't tell me about the concessions!
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Since VA/FHA is the norm here...unless the discount points paid by the seller exceed what is normal and customary, no adjustment!
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
No----no adjustment made for VA/FHA. Unless I have done the FHA or the VA, I do not have a copy of the P.A. and do not know what the full agreement was. Therefore, I make no adjustment. In most conventional financing in our area, it is customary for the seller to pay a couple of points or pick up a few closing costs. Again, since I am not sure what actually transpired, I stay away from making any adjustments.

And be careful about your generalizations about FHA and VA being for low down otherwise unqualified buyers! I bought my present house FHA. The house I moved out of was purchased VA. I certainly hope that Judy and I are not to be classified as “otherwise unqualified buyers”.

Generalizations like these are anathemas in the appraisal profession. You are typing a class of buyer and that is a very big NO NO!!!! Just like you would not type a certain neighborhood as containing a certain class or race of people, don't type a certain class of buyers. You are taking an indefensible position.
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Richard,
No slight intended, what I said was, and I quote " I feel that these programs borrower look desirable in the eyes of the conventional lender."
I did not say that all borrowers using the program are otherwise desirable or as you misquoted ' “otherwise unqualified buyers” '.

Richard might I suggest that read something twice before you pontificate!
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Fred

I did not mean to come of as a pontiff. Sorry.

I do think these programs were designed to fill a niche in the financing market. For us as appraisers to pass judgment on the people who use these programs is, I believe, wrong. If it is not germane to value, we would be better off to stay away from getting into broad judgments on the quality of the borrowers.

My main concern is that generalizations when made are generally sometimes right and sometimes wrong, all at the same time. And those to whom your generalizations are wrong, may take offense at what you say and you may find yourself trying to defend a position of generalization that makes it look like you have certain prejudices. I personally think that these areas should be off limits for consideration of value. We don't and can't use race as an appraisal factor. Why then is it acceptable to generalize about people who use one or another type of financing?

That in essence is my concern about a situation that no appraiser wants or needs to get into.
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
Richard-

Let's try it this way.

Are there any differing motivations by either the borrowers or the lenders, due to the financing program type, and discount points, that a reasonable appraiser should consider in setting a VA/FHA financed transaction equal to the subject---in terms of the terms and concession line?

I hear what Fred is saying.

My response, to be as accurate as possible on a comp basis, I'd say yes and I do. In reality, the forgivingness of the appraisal process, will lend this margin of error negligable at the bottom line range of values when all comps are considered.
 
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