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New One For Me - FNMA Analytics

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Tawfik Ahdab

Senior Member
Joined
Feb 19, 2003
Professional Status
Certified Residential Appraiser
State
Oregon
I received this comment after submitting an appraisal of a view property.

Appraiser please note, FNMA analytics indicates that there should be substantial adjustments for variance in lot sizes. Please provide additional commentary on the lack of any adjustments for variance with support for the treatment. Thank you.


In response, I wrote this.

FNMA analytics has not seen the site, which is steeply sloping, and despite a larger site size, has very limited utility due to the steep slope noted in Addendum #3. In addition and as explained in Addendum #5, it is the view that confers much of the site value, a factor reflected in the fact that all comparables had views and so had equivalent site values. There was no basis for adjustments for site size alone no matter what FNMA analytics says. This is just one example where a computer program's ability to do extensive statistical analysis does not replace actual human expertise.

Furthermore, please be reminded that appraisers are held to a standard where their conclusions must be supported. If the client or AMC is going to cite FNMA Analytics as a basis to seek a correction to the appraisal, the least the client or AMC could do would be to provide support for the conclusion - if one can call it that - spit out by FNMA Analytics.
 

Tom D

Senior Member
Gold Supporting Member
Joined
May 22, 2015
Professional Status
Certified Residential Appraiser
State
Pennsylvania
i'm basically an urban guy, but sometimes i think a steeply sloping lot has more benefits than a level lot.
1. less grass to mow
2. usually, no neighbor to look at
3. will be easier to shoot the zombies when the world ends.
liked your reply a lot. everybody wants a big report explaining everything, but somehow can't find your comments because the report is too big.
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
I received this comment after submitting an appraisal of a view property.

Appraiser please note, FNMA analytics indicates that there should be substantial adjustments for variance in lot sizes. Please provide additional commentary on the lack of any adjustments for variance with support for the treatment. Thank you.


In response, I wrote this.

FNMA analytics has not seen the site, which is steeply sloping, and despite a larger site size, has very limited utility due to the steep slope noted in Addendum #3. In addition and as explained in Addendum #5, it is the view that confers much of the site value, a factor reflected in the fact that all comparables had views and so had equivalent site values. There was no basis for adjustments for site size alone no matter what FNMA analytics says. This is just one example where a computer program's ability to do extensive statistical analysis does not replace actual human expertise.

Furthermore, please be reminded that appraisers are held to a standard where their conclusions must be supported. If the client or AMC is going to cite FNMA Analytics as a basis to seek a correction to the appraisal, the least the client or AMC could do would be to provide support for the conclusion - if one can call it that - spit out by FNMA Analytics.
APPLAUSE.gif
 

Michigan CG

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Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
................the least the client or AMC could do.................

Sounds like everything was in the report so the least they can do is read it first.
 

bnmappraisal

Elite Member
Gold Supporting Member
Joined
Nov 9, 2011
Professional Status
Certified Residential Appraiser
State
Florida
Good for you Tawfik!
Let me guess, their response was "Oh" and just sent your report
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
This is just one example where a computer program's ability to do extensive statistical analysis does not replace actual human expertise.

Response : Dear Appraiser our computers have analyzed 100 appraisals you completed in the great State of Oregon and you continually score 4 to 5 when your peers are scoring 1-3 so after analyzing over a million appraisals in your State our computers statistical analysis has replaced human expertise and this computer generated letter proves it by removing your name and license number from our list of eligible appraisers. :)


Thank You : Hal- The Computer

 

Zero

Member
Joined
Jun 7, 2006
Professional Status
Certified Residential Appraiser
State
Virginia
I received this comment after submitting an appraisal of a view property.

Appraiser please note, FNMA analytics indicates that there should be substantial adjustments for variance in lot sizes. Please provide additional commentary on the lack of any adjustments for variance with support for the treatment. Thank you.


In response, I wrote this.

FNMA analytics has not seen the site, which is steeply sloping, and despite a larger site size, has very limited utility due to the steep slope noted in Addendum #3. In addition and as explained in Addendum #5, it is the view that confers much of the site value, a factor reflected in the fact that all comparables had views and so had equivalent site values. There was no basis for adjustments for site size alone no matter what FNMA analytics says.

Your response doesn't make a whole lot of sense and is problematic. You are making claims about the comparables' "land values," they are asking about the effect of site size on value. This is NOT the same thing. Did you develop and report a value of the the land for each comparable in the appraisal...or even develop it in your work file? Only by valuing the land (and analyzing the dominant features such as site size, view and location) could you make a statement like that and not be misleading. But I think it is problematic for more than one reason and I have seen appraisers received stiff penalties from the state for such arcane practices.
.
For a Fannie assignment, Site (size) adjustments are to be made on the lines provided on the 1004 sales comparison grid, with the Site line specifically indicating adjustment for site SIZE and the View and Location lines reserved for those units, specifically. This is consistent with the AI Guidebook, which states on p. 28 & 42 that “adjustments for size differences should be based on analysis of market evidence to determine the impact of size on value.” They're not asking you about view, they're asking about the impact of size on value, which is a legitimate and relevant question. There is a reason why Site (size), View and Location are separate lines on the sales comparison grid. Making the adjustments directly on the 1004 Sales Comparison Approach grid allows the reader to glean the salient information/adjustments from the 1004 grid, without the appraiser having to take additional steps to repeat the site valuation techniques elsewhere in the report, only to make a mystical single-line, combined adjustment.

In order to make supportable (and not misleading) adjustments on the 1004 Sales Comparison Site line based on “site value,” the methodology for determining that site value (adjustment) must be made explicit in the report, such as that described in the Site Valuation Section p. 26-29 in the Appraisal Institute Guidebook. Note that the AI Guidebook’s site valuation grid (rightly) includes Location, Site Size and Site view as separate and distinct units of comparison, considered to independently influence value. So, if the appraiser chooses not to make location and view adjustments on the appraisal grid and instead decides to make all adjustments on the Site line a combined (lump sum) “site value” adjustment, the site valuation method must be explicit, including all of the steps necessary to develop a credible site valuation, in which the appraiser must describe and present their “site valuation in a logical and thorough sequence to allow specific features of the comparable properties to be noted, analyzed, adjusted, and compared to the subject. The task of the appraiser is to apply realistic market-based adjustments” (p. 27).



That said, it seems the appraiser has two reasonable choices in making credible adjustments for site:


1) Apply site SIZE adjustments on the 1004 Sales Comparison grid and utilize Location and View lines to account for those differences (adding units of comparison to the grid, if necessary), or


2) Develop and report the site value utilizing an acceptable methodology (e.g. as outlined in the AI Guidebook) and report the site valuation results, which must then correspond to the adjustments made on the sales comparison grid.



Appraisal Institute Guidebook AI-100

http://www.appraisalinstitute.org/assets/1/7/aireportsguidebook.pdf
 

Tawfik Ahdab

Senior Member
Joined
Feb 19, 2003
Professional Status
Certified Residential Appraiser
State
Oregon
I'm not sure what you're trying to get at exactly except that I made very clear that site size is not in itself a value influencing factor as compared to other factors that influence site value, so whatever the manual says if it's not relevant to this market I will not provide an artificial analysis to conform to or comply with standards that do not actually apply to the subject property for which reason I reject direction about how I am being instructed to value view properties in my market area. I'm glad you can quote the book but it doesn't impress me in any way when it doesn't help in solving actual valuation problems in this market area. The notion that you can actually analyze view influences versus site size influences on value is a concept that may apply in other and usually larger market areas but not necessarily apply in small ones where there is scarce market activity and corresponding market data and therefore such differentiation cannot be demonstrated. It's not misleading if you say what it is and how it is and why it's so. If you don't believe me you can always interview all the realtors in the market area. Please take time to do so if you prefer not to rely on the expertise of your local appraiser so you won't waste so much time pooh-poohing the appraiser' hard-won knowledge

By the way every last sale ( a sale of vacant land ofr sites with views) is referenced in the cost approach by MLS number, so yes I do have information in the workfile and in the report itself and the support is easily reproducible by anyone who has access to the actual data used by me. So what is problematic is the implication by citing FNMA analytics that I am lax in my work when in fact the analysis is meticulously developed. I don't know who you are but before you impugn my competence and thoroughness of analysis I urge you to carefully re-read what has been written. And if you are a reviewer and find access to the report, I urge you to read it thoroughly before imagining defects in my appraisal. And if you are part of the Fannie Mae analytics team you've got a lot more work to do before you impress me and the real estate community with number- crunching prowess that does not specifically address value influencing factors as drawn from the actual market. So much for mystical single line adjustments. Except in rare cases, adjustment for size alone for view or frontage property in my market area would be exactly that - a mystical single line adjustment - for which reason I cautiously avoid it. Sorry to let you down

Appraisal is not statistics and statistics is not appraisal. We are not automatons, nor slaves to techniques that may not apply, and should if anything be free from being browbeaten and told we are compelled to solve the appraisal problem solely within the confines of the sales comparison grid and secondary market guidelines.

Let's focus on solving the appraisal problem and not on satisfying checklist or grid-filling expectations that cannot always be met due to limited market data and the idiosyncrasies of individual markets.

Quoting the AI is a noble attempt to establish order in the interpretation of real estate market information. However using AI literature to justify grid-filling being done one way and not another is ironic when one considers that the secondary market imposes methodologies or protocols of its own that are at times disconnected from the orthodoxy of appraisal methods and techniques.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
We are not automatons
Attempting to value small lots by SF results in whacky range of values. If I could locate a few old plats with prices, I can't think of any subd. where lots priced by SF. They sold per lot often the exact same price, builders chose as first lot, one that you could see straight ahead of you when turning into subdivision.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
I recently had a conversation with a AMC review guy and he said that whenever UAD cannot "pre-score" a property that it spits out that commentary even though I had already commented on the site adjustments or lack thereof.
 
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