Thanks for asking Denis.
FAQS do not revise or replace FNMA requirements:
Part B, Origination Through Closing
Subpart 4, Underwriting Property
Chapter 1, Appraisal Requirements, General Appraisal Requirements
April 15, 2014
B4 1.1-04 Unacceptable Appraisal Practices (04/15/2014)
Introduction
This topic contains examples of unacceptable practices, many of which are reflected in the appraiser’s certifications on the appraisal reports.
Unacceptable Appraisal Practices
The following are examples of unacceptable appraisal practices:
• development of or reporting an opinion of market value that is not supportable by market data or is misleading;
• development of a valuation conclusion based either partially or completely on the sex, race, color, religion, handicap, national origin, familial status, or other protected classes of either the prospective owners or occupants of the subject property or the present owners or occupants of the properties in the vicinity of the subject property;
• development of a valuation conclusion based on factors that local, state, or federal law designate as discriminatory, and thus, prohibited;
• misrepresentation of the physical characteristics of the subject property, improvements, or comparable sales;
• failure to comment on negative factors with respect to the subject neighborhood, the subject
property, or proximity of the subject property to adverse influences;
• development of or reporting an appraisal in a manner that is inconsistent with the requirements of the USPAP in place as of the effective date of the appraisal.
Highest and Best Use
Fannie Mae will only purchase or securitize a mortgage that represents the highest and best use of the siteas improved. If the current improvements clearly do not represent the highest and best use of the site as an improved site, it must be indicated on the appraisal report.
The appraiser determines highest and best use of a site as the reasonable and probable use that supports the highest present value on the effective date of the appraisal.
For improvements to represent the highest and best use of a site, they must be legally permitted, financially feasible, and physically possible, and must provide more profit than any other use of the site would generate. All of those criteria must be met if the improvements are to be considered as the highest and best use of a site.
USPAP 2014-15
Ethics Rule, Conduct
An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests
An appraiser:
must not perform an assignment with bias;
• must not advocate the cause or interest of any party or issue;
must not use or communicate a report that is known by the appraiser to be misleading or fraudulent;
• must not knowingly permit an employee or other person to communicate a misleading or fraudulent report;
• must not perform an assignment in a grossly negligent manner.
Competency Rule
Competency requires:
Being Competent
1. the ability to properly identify the problem to be addressed; and
2. the knowledge and experience to complete the assignment competently; and
3. recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment.
Scope of Work Rule
Acceptability
The scope of work must include the research and analyses that are necessary to develop credible assignment results.
SR 1-1 (b) (c)
SR 1-2b (e) (e) identify the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal,
(i) its location and physical, legal, and economic attributes; including:
(iv) any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature;
SR 1-3
(b) develop an opinion of the highest and best use of the real estate.
Comment: An appraiser must analyze the relevant legal, physical, and economic factors to the extent necessary to support the appraiser’s highest and best use conclusion(s).
SR 2-2 (a)
(iii) summarize information sufficient to identify the real estate involved in the appraisal, including the physical, legal, and economic property characteristics relevant to the assignment;
Comment: The real estate involved in the appraisal can be specified, for example, by
a legal description, address, map reference, copy of a survey or map, property sketch,
and/or photographs or the like. The summarized information can include a property
sketch and photographs in addition to written comments about the legal, physical,
and economic attributes of the real estate relevant to the type and definition of value and intended use of the appraisal.
(x) when an opinion of highest and best use was developed by the appraiser, summarize the support and rationale for that opinion;
SR 2-3 Appraiser's Certification
"I certify that, to the best of my knowledge and belief, my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice."
[FONT="]Appraisal of RE 12th Edition
"HIGHEST AND BEST USE[/FONT][FONT="]
The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability."[/FONT]
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