FNMA and Permits and Extraordinary Assumptions

[Sadie]

It is absolutely correct to say that the GSEs allow for use of EAs. It is even more correct to say that they allow EAs only when requiring some sort of inspection and using CB4 in the reconciliation section.

One cannot, for example, just insert an EA in a text addendum, because doing so is contrary to the SOW statement that says that one cannot add assumptions (an EA is an assumption). This is an intentional construct - as risk cannot really be managed if one allows for the addition of unlimited assumptions.

I don't disagree, I just had a problem with the blanket statement FNMA does not allow EAs.

 

[CGinMN]

So back to the OP... can an appraiser use Checkbox 4 in the following manner:

subject to the following required inspection based on the extraordinary assumption that the condition or deficiency does not require alteration or repair: local building permit authority

 

[Lee Lansford]

Look at DWiley's last post (#58)

What? I understand about the EA check-box requirement for any EA as that was what I have been asserting.

 

[BRCJR]

I don't disagree, I just had a problem with the blanket statement FNMA does not allow EAs.

The OP ask a question about the use of an EA in a particular case. You are not addressing (extraordinary assumptions regarding permits) the OP properly, in my opinion..

 

[J Grant]

Seems some appraisers think that making an EA reduces their risk when many times it INCREASES their risk. The only times it reduces risk is when appraiser has a high degree of support for making the EA. Otherwise, it is just a guess. So why assume that risk?

For the doubters, the URAR form allows an appraiser to make an EA, but the EA then MUST also be made and checked CB 4 subject to inspection. Which actually protects the appraiser.

Take this topic, a permit. Appraiser makes EA that a permit exists on a URAR form. Thus they must make that EA subject to inspection- either a search that will reveal a permit, or inspection by county for code and when passes inspection owner applies for and gets a building permit ) Yes folks, a permit can be granted AFTER something is built if it meets code ( in my area ) but that , can take months and perhaps require an owner altering the construction if any part of it does not meet code. Ok, a PITA for owner but appraiser has the right to ask for it as an EA made subject to.

OR, the appraiser if not sure about a permit and a search did not find a permit, then just state the knowable facts : "A search was made as a normal course of business, the search did not find a permit , however the construction is of workmanlike quality and non permitted additions are market accepted in the area " ( if that is true), then provide a similar comp or comps and be done- THE END

 

[Mike Kennedy]

Physical Deficiencies That Affect Safety, Soundness, or Structural Integrity of the Subject Property​

The appraisal report must identify and describe physical deficiencies that could affect a property’s safety, soundness, or structural integrity. If the appraiser has identified any of these deficiencies, the property must be appraised subject to completion of the specific repairs or alterations. In these instances, the property condition and quality ratings must reflect the condition and quality of the property based on the hypothetical condition that the repairs or alterations have been completed.

If the appraiser is not qualified to evaluate the alterations or repairs needed, the appraisal must identify and describe the deficiencies and the property must be appraised subject to a satisfactory inspection by a qualified professional. The appraisal may have to be revised based upon the results of the inspection. If so, the report must indicate the impact, if any, on the final opinion of value. The lender must review the revised appraisal report to confirm that no physical deficiencies or conditions that would affect the safety, soundness, or structural integrity of the property are indicated. A certification of completion is required to confirm the necessary alterations or repairs have been completed prior to delivery of the loan.

B4-1.3-06, Property Condition and Quality of Construction of the Improvements (03/01/2023)

This topic contains information on property condition and quality of construction, including:

selling-guide.fanniemae.com

 

[glenn walker]

This was most evident in Fannies release on the 2055 Exterior Appraisals where for years appraisers have been slipping in Extraordinary Assumptions within the body of their reports stating that it was assumed the interior condition was similar to the exteriors condition and others also many never going outside the box of Average and later using a C-4 on all exteriors. Now Fannie has made it clear that unlike Non-GSE- or Private the appraiser is bound by the Fannie Certifications which cannot be modified and the extraordinary assumptions within the body are essentially Null & Void and not worth the paper they are written on. So In reality the residential loan production appraiser is Limited by the Boxes he/she is allowed to check.

Do you need to invoke and EA and Inspection ? Or do you need to just disclose and complete "As Is" and report what you inspected and what you observed ? Most Permit Issues on additions as long as the area was completed in a Professional Manner and has market acceptance-and no health or safety issues then a Permit is a Non-Event. The appraiser simply states No permit found or provided but included in GLA and be done.

Like the infamous Richard Tong once told me --Son-you can't EA your way out of liability when the facts is you already know the answer to your own question --It either has a permit-or it doesn't have a permit or you just don't know so stop trying to wiggle your way out - Yes-No- Or Unknown : ) LMAO