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Need suggestions on how to respond to frivolous non sequitar review questions.

Michigan CG

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It would be an improvement if the Fannie forms incorporated that section from the old UCISAR appraisal form.
The Appraisal Institute forms also provide space for a summary of Highest and Best Use.
 

George Hatch

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Quite right. Same thing. I should have used that example instead, but I don't have a copy of that form handy.
 

gregb

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ACI has this form:

2demo.jpg
 

CANative

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Why does the form need to be changed when the exact process is described by the GSEs?

Highest and Best Use

Fannie Mae will only purchase or securitize a mortgage that represents the highest and best use of the site as 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.



The appraiser’s highest and best use analysis of the subject property should consider the property as it is improved. This treatment recognizes that the existing improvements should continue in use until it is financially feasible to remove the dwelling and build a new one, or to renovate the existing dwelling. If the use of comparable sales demonstrates that the improvements are reasonably typical and compatible with market demand for the neighborhood, and the present improvements contribute to the value of the subject property so that its value is greater than the estimated vacant site value, the appraiser should consider the existing use as reasonable and report it as the highest and best use.
 

George Hatch

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IMO that's full page addendum is excessive for an SFR assignment. You can usually get it done with just a few yes/no checkboxes and a short paragraph for the conclusion.

  • Is there an existing use onsite?
  • Is the existing use legally permissible? (If not, explain below)
  • Are the existing structures onsite legally permissible? (If not, explain below)
  • Do the existing structures add to the value of the site as if vacant? (If not, explain below)
  • Is the property worth more in the current use and in its "as is" condition than if vacant?
  • Can the existing use be considered the highest and best use as improved? (If not, explain below)
Conclusion: The subject's existing use is among those uses deemed legally permissible, physically possible, financially feasible and maximally profitable; and can therefore be considered a reasonable expression of the concept of highest and best use for the property in its "as is" condition.


Copy/paste (add the y/n checkboxes) into your addenda and you're done. Modify the responses and add additional explanations if/when necessary.


In the case of a property with an existing SFR, if that SFR is not the HBU/as improved then the property shouldn't be appraised that way. Regardless of how the assignment was ordered.
 

CANative

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That assumes a weak or unmotivated appraiser.

HBU is job 1. Shouldn't need training wheels.
 

George Hatch

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Yeah, but "adequate" is nominally sufficient to the task.
 

Mr Rex

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Funny, the E&O reviewer in Alamode flags the H&BU section if the yes box is checked and there is any commentary in the provided space. It's a warning not a hard stop or UAD violation.
 

J Grant

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But it is already stated in the report that subject's value is significantly higher than predominant in the neighborhood due to having premium beach frontage - which did not satisfy the Reviewer because they want an answer to their mindless question on whether the small 2-bdrm cottage in average condition is over improved.
Just because the reviewer is ignorant does not mean the appraiser should be ignorant. As I posted earlier, if anything, this 2 bedroom cottage might be an under improvement (for its site. ) In other words, would typical buyer purchase this property and keep it as a cottage or would they tear it down and build a larger, luxury house ( or divide the lot up , or other )

This reviewer (who likely is not an appraiser ) asked a rote question from a checklist. A list of "if subject market value opinion is X% higher than predominate, ask the appraiser if subject is an over improvement. " Appraiser can easily explain the subject is higher price than predominate because predominate represent non beachfront homes in area. But a question regarding over or under improvement addresses the HBU of subject as exists, a small cottage on a ( very valuable ) beachfront lot
 
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