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FNMA Unacceptable Assignment Condition?

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Have Laser-Will Travel

Thread Starter
Junior Member
Joined
May 17, 2009
Professional Status
Certified Residential Appraiser
State
Nevada
The selling guide requires that the estimate of value be within the range of comparable sale prices. There can be different scenarios where this prevents an appraiser-defined estimate of market value. Firstly, it means that Income or Cost Approach must be tempered by the Market Approach-I thought the appraiser decided that?

Secondly, suppose there are across-the-board adjustments for time that support an estimate above the sale prices? Or, what if the most similar comparables are all inferior?

FNMA also says you must use to the most similar sales and that you can't pick a less similar sale, (likely superior) sale and use it in the report and still comply with Cert. #7. And in order to meet the definition of market value, the estimate should not be constrained.
 

Tom4value

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Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
Clients tend to stick with what appraisers do; OV should be within range of adjusted sales prices, not necessarily actual sales prices
 

hastalavista

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Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
The selling guide requires that the estimate of value be within the range of comparable sale prices. There can be different scenarios where this prevents an appraiser-defined estimate of market value. Firstly, it means that Income or Cost Approach must be tempered by the Market Approach-I thought the appraiser decided that?
That's not quite how I read it.

From the Selling Guide (Sales Comparison Approach):
upload_2018-3-10_11-4-21.png

Note that it says the indicated value in the sales comparison approach must be within the range of the adjusted sales.

Now, for the reconciliation:
upload_2018-3-10_11-5-4.png

Here, the requirement is that the final value be reconciled to within the indicated values of the approaches used.

Fannie (apparently) won't accept an appraisal of a property when the final opinion of value is higher than any of the indicated values of the approaches used, not that it won't accept a value higher than the indicated value by the SCA.


There was another thread in regard to, "Is it possible to value a property higher than the unadjusted and adjusted range?" The most common occurrence for this (that I've seen) is by rounding. Therefore, for Fannie work, one wouldn't round up and above the highest indicated value by one of the approaches. Indeed, this would be the best reason to come in at $598,743 on an appraisal:
In my opinion, the subject's value is warranted at the very top of the adjusted range. The high adjusted comparable is $598,743. Normally, I would consider rounding this to $600,000. However, per the FNMA guidelines, the final value opinion cannot exceed the indicated value by any of the approaches. Therefore, I will not round the value and conclude it at $598,743.
Done.
 
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Deleted member 130081

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The selling guide requires that the estimate of value be within the range of comparable sale prices. There can be different scenarios where this prevents an appraiser-defined estimate of market value. Firstly, it means that Income or Cost Approach must be tempered by the Market Approach-I thought the appraiser decided that?

Secondly, suppose there are across-the-board adjustments for time that support an estimate above the sale prices? Or, what if the most similar comparables are all inferior?

FNMA also says you must use to the most similar sales and that you can't pick a less similar sale, (likely superior) sale and use it in the report and still comply with Cert. #7. And in order to meet the definition of market value, the estimate should not be constrained.
Lending condition, not appraiser assignment condition. If you read the first part of the selling guide that states who the selling guide applies to, you wont find the appraiser or borrower listed, yet you will find plenty of text within the selling guide that says the appraiser or borrower must do this and that. The Unacceptable Appraisal Practices are a list of tests the underwriter employs to determine if the appraisal is adequate/acceptable. If any of these are found, the loan is not eligible for sale to FNMA, however it doesn't necessarily mean the appraisal is bad. Lenders have decided to skip the formalities of independence and forward this list, and other tests they employ while their at it, to appraisers under the very clever guise of assignment conditions, which of course USPAP requires we comply with. The end result is that appraisers believe lock, stock and barrel these are regulations for us to follow. Just wait and see.

I know this whole point will sound silly to many, but it really is important if you think it over.

FNMA communicates directly and officially to the appraiser in exactly one place, the pre-printed text on the GSE forms.
 

Have Laser-Will Travel

Thread Starter
Junior Member
Joined
May 17, 2009
Professional Status
Certified Residential Appraiser
State
Nevada
That's not quite how I read it.

From the Selling Guide (Sales Comparison Approach):
View attachment 34639

Note that it says the indicated value in the sales comparison approach must be within the range of the adjusted sales.

Now, for the reconciliation:
View attachment 34640

Here, the requirement is that the final value be reconciled to within the indicated values of the approaches used.

Fannie (apparently) won't accept an appraisal of a property when the final opinion of value is higher than any of the indicated values of the approaches used, not that it won't accept a value higher than the indicated value by the SCA.


There was another thread in regard to, "Is it possible to value a property higher than the unadjusted and adjusted range?" The most common occurrence for this (that I've seen) is by rounding. Therefore, for Fannie work, one wouldn't round up and above the highest indicated value by one of the approaches. Indeed, this would be the best reason to come in at $598,743 on an appraisal:
In my opinion, the subject's value is warranted at the very top of the adjusted range. The high adjusted comparable is $598,743. Normally, I would consider rounding this to $600,000. However, per the FNMA guidelines, the final value opinion cannot exceed the indicated value by any of the approaches. Therefore, I will not round the value and conclude it at $598,743.
Done.

Okay, yes, I need to correct myself. It doesn't say that it has to be within the range of sale prices but within the range of adjusted values. And your inclusion of further FNMA commentary clears it up. Thanks!
 

Have Laser-Will Travel

Thread Starter
Junior Member
Joined
May 17, 2009
Professional Status
Certified Residential Appraiser
State
Nevada
Lending condition, not appraiser assignment condition. If you read the first part of the selling guide that states who the selling guide applies to, you wont find the appraiser or borrower listed, yet you will find plenty of text within the selling guide that says the appraiser or borrower must do this and that. The Unacceptable Appraisal Practices are a list of tests the underwriter employs to determine if the appraisal is adequate/acceptable. If any of these are found, the loan is not eligible for sale to FNMA, however it doesn't necessarily mean the appraisal is bad. Lenders have decided to skip the formalities of independence and forward this list, and other tests they employ while their at it, to appraisers under the very clever guise of assignment conditions, which of course USPAP requires we comply with. The end result is that appraisers believe lock, stock and barrel these are regulations for us to follow. Just wait and see.

I know this whole point will sound silly to many, but it really is important if you think it over.

FNMA communicates directly and officially to the appraiser in exactly one place, the pre-printed text on the GSE forms.

Wow! I never knew. Thanks!
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
B4-1.3-08: Comparable Sales (01/31/2017) - Fannie Mae
https://www.fanniemae.com/content/guide/selling/b4/1.3/08.html
Sale activity from within the neighborhood is the best indicator of value for properties in that neighborhood as sales prices of comparable properties from the ... of sales transactions in the neighborhood, the appraiser might need to use as comparable sales, properties that are not truly comparable to the subject property.
Missing: estimate

B4-1.3-09: Adjustments to Comparable Sales (01/31/2017) - Fannie Mae
https://www.fanniemae.com/content/guide/selling/b4/1.3/09.html
Fannie Mae does not have specific limitations or guidelines associated with net or gross adjustments. The number ... Comparable sales that include sales or financing concessions must be adjusted to reflect the impact, if any, on the sales price of the comparables based on the market at the time of sale. For information ...

Additionally, the appraiser’s comments must reflect his or her reconciliation of the adjusted (or indicated) values for the comparable sales and identify why the sale(s) were given the most weight in arriving at the indicated value for the subject property. It should be noted that the indicated value in the Sales Comparison Approach must be within the range of the adjusted sales price of the comparables that are reported in the appraisal report form.
 

BRCJR

Senior Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Why don’t people read the sellers guides? Same reason the USPAP doesn’t get read, I suppose. It is mind boggling the number of people that should have done so that haven’t.
 
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