Final Opinion Matching Sales Approach

[Cowgirl]

Is it just me or does anyone else get the request to change my Final Opinion of Value to match, exactly, the Sales Approach. This has been only since the forms changed in 2005. I explain that the Sales Approach, even if it carries the most weight, is not the only deciding factor in the Final Opinion of Value. And that the change of the forms did not change the appraisal process. I still complete the cost approach on every report, required or not, but most are back to requiring it completed and still want the Final Opinion of Value to match exactly the Sales Approach.
ATM/Servicelink (Bank of America) is the main company that I have a problem with now, most have realized thier error when I let them know I am also an REO appraiser for FNMA who created the forms and they have no such requirement. I also offer to provide them contacts with FNMA or the Appraisal Board. But still Servicelink will not layoff.
This may be petty but if we keep letting lenders/clients dictate the appraisal process where will we be.

Does anyone have any advise to stop this preassure? How do I bring it to an end?
Is there actually someone I can report this action to if it continues, as they do threaten to not send anymore buisness. But, I do hold my ground!!

I have a huge problem with the lenders/clients attempting to alter the appraisal process.

 

[stefan olafson]

Teresa,

Ethical appraisers often do more than is required and since the demise of the cost approach, the underwriters aren't typically trained to look for it.

I too wonder what ever happened to the three approaches to value and the RECONCILIATION? If you use the new 1004 you see what Fannie wanted by the size of the reconciliation section. I often find myself going beyond that small space to an addendum page which may or may not ever be read.

Keep doing it the right way and educating the underwriters.

 

[Chris White]

If you stated that you valued the cost appoach to X degree, then I dont thnik you should change the value. Simple write a canned phase you can include in each report stating that equal weight was placed on all approaches(or 2 or whatever) and that is how you arrived at your opinion of value.

 

[PropertyEconomics]

Im going to go against the grain a bit here, what else is new right, but exactly how much weight does one give to the cost approach in this market? I would believe in single family residential appraisal the market approach is the most indicative of market reaction and Im just curious as to how much difference you are finding in your reconciliation?
Under what circumstances to you not conclude on the market value estimate by the sales comparision approach?

Im just curious please ...

 

[RSW]

I agree with PE and would also add: Look at the definition of market value in the URAR that Fannie Mae has provided.

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a pecified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a
reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.

What is a better indication of the market value of the subject property other than the sales comparison analysis in most cases?

 

[PropertyEconomics]

I suppose my question is, which of the "three" approaches is most reliable for a single family residential?
The income approach is most probably not applicable since the property will be owner occupied or purchased for owner occupancy in the vast majority of the time.
The cost approach is subject to accurate determination of land value, an accurate determination of depreciation, and an accurate determination of both incentive and profit. Does the poster have such good information as to provide a very strong and accurate indication of value by the cost approach?
The sales comparision approach, utilizes sales from the market, which are exposed to market participants for purchase. The sales utilized are closed, reflective of purchaser reactions to the market and their desires to purchase as well as, most importantly, a buyer and seller having a meeting of the minds as to the value of the real estate being purchased, ie your comparable sales.

I am certainly not saying there are not instances where a reconciliation between the three approaches may not be appropriate, however, I think we need more information as to how the OP is reconciling the values and on what basis such reconciliation is occurring.

 

[Calvin the Airedale]

Dear Teresa,

Ditto for everything just said by PE & RSW.

On the other hand, I can conceive of circumstances which may require a different weighting in the reconcilation. Given that the reconciliation is a requirement of USPAP Standards Rule 1-6, and assuming you have fulfilled this obligation, then if you are bounced off the AMC's list, you have a cause for complaint or action against B of A.

You must make it clear to the AMC via email or written correspondence, that reconciliation is a requirement of USPAP and dismisal for failure to comply with their reconcilation scheme is a violation of CFR regulations(Title 12, CFR 34.44). I am positive they will have no idea of what you're talking about.

B of A, however, will. Any compliant so filed with the OCC starts by being reported to the chief executive by OCC's examination staff. It works its way down from there. You've heard the expression "$hit rolls down hill"? No compliance officer, chief appraiser or manager wants to deal with this stuff. My guess is you'd find yourself back on the list pretty quick.

FYI, here is a link to online CFR regs: http://ecfr.gpoaccess.gov/.

Good luck.

 

[PropertyEconomics]

I hope Ms Biggers will come back and answer some of the questions posted by forum members.

 

[bart nathan]

Remember whan the first test 1004 were sent out they did not have the cost approach section included.

That didnt last long.

 

[Mztk1]

Read Appraiser's Certification #4.