I Am I Correct?

[Kevin Curtis]

RW,

thanks for the welcome. I understand skippy now. How do we eliminate these so called "skippy's"...they are killing the integrity of our lively hood. I like to think I am actually an appraiser, not a value giver.

As for a lending background, I have none. Just something I researched for an appraisal in the past.

 

[Michael Boyd]

No, this guy is one of the appraisers in my town who the lenders use a lot and refer to him as a good appraiser. He was trained by a gentleman who served on our state board.

It has been my understanding that you adjust the comparable, if warranted, for the difference in what the property would have sold for without any concessions. I don't understand what difference it makes what FHA or VA or any other enity allows for, if an adjustment is warranted for seller paid concessions then the adjustment is made.

 

[JSmith43]

I thogh this adjustment for "Concessions" in the Sales Comparison grid was market derived and based on that particular sale and not adjusted to the subject's seller concessions?

You should continue to think that way, IMO.

 

[Tim Hicks (Texas)]

Originally posted by Kevin Curtis@Feb 1 2005, 02:21 PM
This my understanding...Loans Have different limits for seller contributions:
VA: The seller can contribute up to 4% of the sale price toward buyer costs, plus discount points. FHA: Maximum seller contribution is 6%, but the buyer must have at least 3% in personal contribution to any combination of down payment and closing costs. Conventional: If there is less than 10% down, then the seller can contribute a maximum of 3%. If there is 10% to 24% down the seller's limit is 6%. If there is 25% or more down, the seller can contribute as much as 9% of the sale price. :dance:

So, how am I seeing 10-15% seller contributions in our area?

 

[Robert Anderson]

Originally posted by Michael Boyd@Feb 1 2005, 04:49 PM
It has been my understanding that you adjust the comparable, if warranted, for the difference in what the property would have sold for without any concessions. I don't understand what difference it makes what FHA or VA or any other enity allows for, if an adjustment is warranted for seller paid concessions then the adjustment is made.

Michael,

The original appraiser was wrong and your understanding is correct. The following is what the Fannie Mae 1004B form has to say on this issue:

Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradition or law in a market; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgment.

 

[Michael Boyd]

Thanks everyone!

 

[Elliott]

Kevin,
You asked how to kill a Skippy....that's the problem, there is
no way. USPAP doesn't kill them, state boards don't kill
them, I don't even think a stake to the heart will do it. Plus
they have puppy mills that produce them faster than a
tsunami could kill them.

Undoubtedly, congress and the appraisal organizations, fannie,
freddie and the banksallowed a great big flaw in the system....shocking,
until you realize there are just too many people who benefit
from having "accomodating" appraisers. In the future, someone
will look back at Real Estate equity as an obsolete concept.

Regarding concessions. All I know is Fannie started allowing
them and because someone had some concern about the
definition of market value, at least a few state boards told
their licensees that they had to report the concession and
deduct it from the sales price (though its ok to appraise the
original subject/sale property including the concession).
Aren't you glad you asked?

elliott

 

[The Bob]

HUD has issued a letter on seller concessions that is basically more in line with Fannie's guidelines. I even called them (HUD) in the process of doing a field review where the appraiser did not adjust for seller concessions that were added into the list price. I was told that, yes, the appraiser should have adjusted, even though the concession was only about 3%, but they are not real strict on this. I then asked about the 6% threshold and he said that really wasn't right anymore, but no they would not go after appraiser who did not adjust for seller concessions (thank God for the government!). I really feel this is one area where the client's guidelines are in direct conflict with USPAP. How the hell do you not adjust for something like closing costs added into the list price, just to make a deal go thru. If the price was influenced by the concession, you adjust for it.

 

[jonathan asbury]

ok, i'm confussed

if the appraiser made a -$600 adjustment to all the comparables How could that be classified as a skippy? isn't he LOWERING the value by making these negitive adjustment?

I though skippys' were suppost to INCREASE the value for no reason :lol:

jonathan

 

[JSmith43]

If the price was influenced by the concession, you adjust for it.

Sorry, Jim. That is way wrong. My guess is that you need to chat with someone else at HUD, or, the two of you were not on the same page. Why do you care if the price was influenced when your job is to look to the market for evidence of market value?

Example: Agent lists home for $200,000. Day 5 on market offer comes in at $200,000 including $6,001 seller paid closing costs & /or prepaid expenses.

Appraiser measures 1,000 SF generic rambler. Woopee! There are 3 recent rambler sales in same development. $196,000 $198,000 & $200,001. The appraiser can hardly tell the difference between the three sales, 2 of which were conventionally financed 0 pts & one was FHA 0 Pts. It just so happens that the $200,001 sale was the most recent and is given primary emphasis.

What the heck does anything have to do with how the subject transaction is structured? Nothing, unless you are backing into a value estimate using the assumption that the listing agent did a perfect market analysis and sellers react dollar for dollar to offers with concessions. Heck, it is amazing how many sellers hold out for price (ego or neighborhood bragging rights?) & skip over little things like the bottom line of the net sheet.

Concessions offered on the subject property may be interesting & should be reported, but the market evidence of value comes from the comparable sales transactions.