Positive Adjustment on Seller Concessions

[PropertyEconomics]

The Fannie Selling Guide further states :

Positive concession adjustments ARE NOT ALLOWED!

 

[Calvin the Airedale]

The Fannie Selling Guide further states :

Positive concession adjustments ARE NOT ALLOWED!

To further muddy the water, and apart from any GSE assignments, I can absolutely see making positive concession adjustments depending upon the definition of value I am aiming at.

For instance, if my assignment is to estimate the probable sale price with a marketing time of short duration and for which the seller is willing to provide up to 5% of the sale price as seller paid points and prepaids. The question then becomes, not market value, but most probable price, given the client constraints applied to the potential transaction.

 

[gregb]

Have at it!
http://www.appraisalinstitute.org/library/bok/concessions.pdf
http://www.naifa.com/resource/resmgr/legislation/adjusting_comparable_sales_f.pdf

 

[Mark K]

Mark,


We are instructed not to make a mechanical adjustment. If you can't abide by this, then it is an unacceptable assignment and you need to turn down all assignments where the lender wants you to appraise to FNMA's MV definition.

According to someone a recent pole indicated that 2/3 of the forumites make $4$ adjustments. So you're saying 2/3 of the appraisers here should be turning down all GSE work based on your opinion that a $ does not = a $?

Since only about 2-3% of my work falls into this category, no big loss, not that I'll turn it down. I've always done it this way and always will since I know that $ 4 $ is a very reliable and supportable number, much more so than numbers arrived at by trying to estimate a "market reaction".

If experience shows that concessions = $4$, then the "mechanical" method MUST be used.

 

[residentialguy]

If I can remember correctly, that was a flawed pole. It did not stress that the $4$ was mechanical and would never change. I don't believe that 2/3 of the members here were agree to that.



"If experience shows that concessions = $4$, then the "mechanical" method MUST be used."

Then, per USPAP, the assignment must be turned down, if that is how you feel.

 

[Marty Boone]

To elaborate just a second more on that subject. If everyone did it, markets would gain in value, without any real cash contribution. Ignoring cash equivalency is a sure fire way to promote unfounded inflation. How could people who do that even live with themselves? Probably because they're completely self centered.

The 1% other times spoken of is new construction, and definitely not the resale market.

Offsetting or ignoring the cash equivalency of concessions is in fact, another way to say manufacturing value or number hitting.

Great point, sales become comps and so on and so on.

 

[gregb]

If I can remember correctly, that was a flawed pole. It did not stress that the $4$ was mechanical and would never change. I don't believe that 2/3 of the members here were agree to that.



"If experience shows that concessions = $4$, then the "mechanical" method MUST be used."

Then, per USPAP, the assignment must be turned down, if that is how you feel.

I am trying to picture turning down an assignment after it has been accepted, when the appraiser determines one or more comparables cannot be appropriately adjusted for sales concessions...

 

[residentialguy]

If it is a FNMA form, he can't accept the assignment if he doesn't agree and won't follow the requirements of the lender and the certifications to which he is signing that he agrees. Performing an assignment under such conditions violates USPAP

 

[Mike Garrett RAA]

Come on guys....

Adjustments should not be mechanical $4$.

Fannie Mae says...no positive adjustments.

End of discussion.

 

[Mike Garrett RAA]

This just in from FHA

In a separate Federal Register notice to be published soon, the FHA will propose to reduce the maximum allowable seller concession from its current level to one more in line with industry norms. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. The revised proposal reflects public comments received on an earlier proposal published in a Federal Register notice on July, 15, 2010. The revised proposal calls for a 30 day comment period. Following an analysis of the public comments received, a final rule will be issued.

Details of the changes announced today are available on the HUD website and will soon be published in the Federal Register as a final rule.