Good, Average, Fair, Poor

[Craig Sewell]

I could find no information on the Fannie Mae website, it does not appear to be very user friendly. My Fannie May printed information must be 10-12 years old and I consequently do not trust it. So here is my question: how does Fannie deal with property ratings of fair or poor? I was told(by a mortgage broker) they will not loan on a house with a fair or poor condition rating, even if the market value meets or exceeds the sale price. I see a lot of reports with the neighborhood marked suburban to get around the "rural" problem. Do all houses have to be rated "average" to get around the fair or poor problem? I just finished a report on a house that was in fair condition and I refused to change it to average, because it wasn't average. If house conditions are rated on a bell curve(a reasonable assumption), wouldn't half of them be fair or poor. So is Fannie going to lend on only half the houses in America? Not. I will quit rambling. Does anyone have any definitive comments?

 

[Jo Ann Meyer Stratton]

Fannie Mae has new guidelines that go into effect June 30, 2002. You can down load a copy to your computer. Down load the 4_12 file. The other file is the old property and appraisal chapter from 1995.

http://www.srappraisal.com/FNMA

 

[Richard Carlsen]

"Does anyone have any definitive comments?"

Craig, we have comments but the definitive comments will cost you more.

Seriously, if there were any way to definitively tell if a house is fair or average, things would be a lot easier. What is acceptable in one market is not acceptable in another. This goes for size, style and condition. When I mark a house "average", that is based on what the market activity is at the time and what is available to the average buyer. One thing to be careful of is to not interject your own likes and dislikes into the house.

As far are the old bugaboo, urban, suburban and rural, how do we in an area with no urban areas and only pockets of urban density define suburban? The nearest area designated is 110 miles south and about 110 miles north in Canada. We fight with it all of the time. My way of thinking is that if the distance to shopping/schools/employment is not considered too far for the average buyer (i.e. market resistance) then it is marked suburban as it proximates that of more built up areas. The form only provides for 3 choices.

 

[jt]

Craig,

The answer to your question is no. To state a dwelling is in average physical condition in your report when it isn’t, is misleading.

All reports will not end-up with Fannie Mae.

The mortgage broker does not make the rules or do they loan the money, unless they are a mortgage banker. However, the mortgage banker may keep the loan in-house, sell it on the secondary market or to some other investor. Some investors have their own criteria in purchasing a particular type of property. Fannie Mae requires an explanation when a property’s physical condition is rated fair or poor. Either the mortgage broker is misinformed as to Fannie Maes’ requirements or they are selling it to a private investor who requires property to be in average or above average physical condition before they will purchase the mortgage.

You should communicate with your client, as you would not know the physical condition of the dwelling unless you inspected the interior. If after your inspection, you considered the interior to be below average, I would call the client and inform them of your opinion. Certainly, I would establish a fee with your client, prior to your inspection, in the event the subject was less than average, and in the event they did not want to move forward with completing the appraisal report.

Also, you don’t usually need to use the terminology of fair, poor, good or excellent, try... average, above average or below average.

 

[Dave Smith]

I concur with jt's comment:

Also, you don’t usually need to use the terminology of fair, poor, good or excellent, try... average, above average or below average.

I have used above average and below average to indicate a condition that is better than average but less than good, or less than average but better than fair for about a year now (when appropriate), with no complaints from anywhere. Works for me.

Comments :?:

 

[Richard Carlsen]

I tend to make it more difficult for the UW by using Fair, Below Average, Average, Good, Very Good and Very Good/New.

These represent the estimated effective ages I assign the properties and I make my adjustments there rather than any age adjustments.

Works for me.

 

[airphoto]

All good ideas, BUT:

There's areas here in woodchuck country where the average tin house is occupied by a woodchuckin' cigarette suckin' beer swillin' lowlife. That's not to say that the aforementioned woodchucks may not be the best, and absolute salt of the earth .. but they tend to leave their mark in a residence (creosote, woodchips, slime on the walls, etc.) The 'average' of tinhouses here in woodchuck country is not the 'average' for a normal market. How do you wanna handle it?

 

[Dave Smith]

airphoto sed:

The 'average' of tinhouses here in woodchuck country is not the 'average' for a normal market. How do you wanna handle it?

I sez to myself: Self, "how does it compare to other tinhouses in woodchuck country?"

Cuz I was taught to say it was "average, as compared to other woodchuck houses in the market area"

If its better than the average woodchuck house than its above average or good.

If its worse than the average woodchuck house than its below average or fair.

I compare woodchuck houses to woodchuck houses in the woods, and muskrat houses to muskrat houes in the swamp. :lol:

Have a WONDERFUL weekend :!: :!: :!:

 

[Terrel L. Shields]

I like to replace average with the word normal occasionally just to drive the UWs nuts.

 

[BarbaraNJ]

Another 2 cents:

Must concur with Dave (cheesehead?) I learned the same in my very first AI course----"average" is average for the area. If everyone for a square mile is living in a 20,000 s.f. new home and your subject is an adequately maintained forty year old cape COD 1,500 s.f., you subject is "below average" FOR THE AREA, in all respects. As said, if everyone is in a "tin shack", and so on...

The suggestions about "below average" is good, and in my experience alot better received by lender than "fair". I have, on occasion, used "fair". I have never used "poor". Not that I would be hesitant to use it if I felt it were necessary, but I think people know better than to even try to get a loan on a home in poor condition.

Lenders vary in their acceptance of the evaluation and granting the loan. If the borrower is putting down 75% and borrowing 25%, they will probably let it go through; if the applicant is borrowing 95%, its a different story. The applicant may have a co signer, or may be a developer with a great credit line with the lender or have some other situation which will allow the lender to accept the home in its current condition.

Your responsibility is to value the home, not to worry if the applicant will get their money. Hopefully, your client won't stop sending you work just because one loan doesn't go through.

In this case as in all others, we just hope that our honesty is appreciated, not punished.

Whenever you are TEMPTED to change your opinion, just re read all of the posts in this forum about lawsuits.


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