Sales Price Addendum After Appraisal Submitted

[Honey West]

All you need do is comment that the price changed on X signed date ( whenever new price was signed by both parties) , and that lender forwarded it to you for inclusion in appraisal, put your comments and date them on the addendum. Why would you refuse to make the revision for client? Why do you need to "protect yourself" ?? Your value opinion did not change, the effective inspection date did not change: nothing changed in the appraisal except you are acknowledging the sale price was re negotiated after appraisal was done on the subject. o

 

[Honey West]

An appraisal is performed with a given set of facts, effective as of the date specified on the report, signed, sealed and delivered. For the lender to introduce new material facts, at some point-on a spectrum, a change in the sales price would involve a new appraisal , in my humble opinion. Would I have selected a different set of comparables, or valued the subject differently in relation to the comparables, if it had been purchased at a materially different price? If not, then why not? So, I submit, that at some point, it is unreasonable to ask an appraiser to simply cut and paste a new sales price into an appraisal that has been completed. Th Bureau of Appraisers in California touches on this subject, perhaps obliquely, under the 1004D update...stating that in fact, that is a new appraisal.
Anyway, I got my answer from Ohio, much obliged!

 

[residentialguy]

Nevermind

 

[sjohns34]

The FNMA announcement solves the need for it for FNMA, but Freddie to my knowledge has not made the same statement. The URAR is both a Fannie and Freddie form.

I'd like to point out the effective date is simply addressing the condition of that property on that day. It has nothing to do with what information was available at that time. This is proven by considering retrospective appraisals. What is important is the the date of the report and knowing it is different than the effective date. You can update the date of the report and keep the same effective date. For instance, I was hired to do a retrospective appraisal on a property with an effective date of 6/1/2016. For legal reasons, one party was being forced to sell the property to the second party (divorce) and the contract was not written up until 3 months later, 9/1/2016 but they wanted the property valued as of 6/1/2016. The contract didn't even exist as of the effective date of the appraisal.

But again like discussed, being able to do something vs. having to do something is two different questions. Do you have to update the report with a sales contract provided after you did the appraisal- no, you don't. But can you, clearly you can. The question is then just a business decision, not an appraisal decision.

 

[Mike Kennedy]

All comes down to whether or not it affects value.

Fannie:
Disclosure of Information to Appraisers Currently, we require the lender to provide the appraiser with all amendments made to a sales contract, including amendments that are made after completion of the appraisal. With this update, we have clarified when the appraiser must be provided with updates to the sales contract and circumstances that warrant updates to the appraisal. For example, if the contract is amended in a way that affects the description of the real property used by the appraiser, then the lender must provide the updated contract to the appraiser and the appraisal should be updated. However, minor updates to the contract, such as changes to seller paid closing costs or changes to the contract price, do not require an updated appraisal. In addition, we have updated the policy to require disclosure of changes to financing information (such as loan fees and charges, and subordinate financing provided by interested parties) to the appraiser only for purchase transactions.

When they come to their senses, they will delete the last sentence as well. Market Value is demonstrated by competitive closed sales (possibly supported by contracted / active listings). Financing for the subject is irrelevant to an objective and independent, competitive-market's (OTHER properties, actions of other buyers and sellers) indication of Market Value. Meanwhile, the Bull$eye lives on.........and on.........

IOW, what would a property sell for based on a hypothetical sale on the effective date of appraisal? who the parties are, who the lenders are, and whether or not a contract exists or what the financing terms may be are IRRELEVANT.

 

[J Grant]

An appraisal is performed with a given set of facts, effective as of the date specified on the report, signed, sealed and delivered. For the lender to introduce new material facts, at some point-on a spectrum, a change in the sales price would involve a new appraisal , in my humble opinion. Would I have selected a different set of comparables, or valued the subject differently in relation to the comparables, if it had been purchased at a materially different price? If not, then why not? So, I submit, that at some point, it is unreasonable to ask an appraiser to simply cut and paste a new sales price into an appraisal that has been completed. Th Bureau of Appraisers in California touches on this subject, perhaps obliquely, under the 1004D update...stating that in fact, that is a new appraisal.
Anyway, I got my answer from Ohio, much obliged!

First of all, a 1004 update to appraisal request ( new assignment ) is not the same as a contract price changed and client asks you to update the contract section /on an addendum with that information.

Hard to address your viewpoint that a change in contract price ( with no change to the property itself) would mean a new value or new appraisal - If you would have picked different comparable merely because the sale price was different-...

We choose our comparable because their physical characteristics most closely line up with that of the subject ( substitute properties a buyer would consider instead of the subject.) While prices can be an element of selection or elimination at some point in the , process, price is not supposed to drive the selection of comps ..for this very reason, choosing comps around whether or not the resulting value opinion meets a SC price. ..)

 

[residentialguy]

Fannie:
Disclosure of Information to Appraisers Currently, we require the lender to provide the appraiser with all amendments made to a sales contract, including amendments that are made after completion of the appraisal. With this update, we have clarified when the appraiser must be provided with updates to the sales contract and circumstances that warrant updates to the appraisal. For example, if the contract is amended in a way that affects the description of the real property used by the appraiser, then the lender must provide the updated contract to the appraiser and the appraisal should be updated. However, minor updates to the contract, such as changes to seller paid closing costs or changes to the contract price, do not require an updated appraisal.

yeah, if it didn't affect value. If it did, then an update is necessary.

 

[J Grant]

yeah, if it didn't affect value. If it did, then an update is necessary.

Lol, why would a change in contract price alone affect value? If no physical changes to the property was made, why would a change in contract price after the appraisal retroactive effective date change the appraisers' opinion of value? Unless the main support for the opinion of value came from the contract price itself...good luck explaining that lol

 

[residentialguy]

Lol, why would a change in contract price alone affect value? If no physical changes to the property was made, why would a change in contract price after the appraisal retroactive effective date change the appraisers' opinion of value? Unless the main support for the opinion of value came from the contract price itself...good luck explaining that lol

If you verified the conditions of sale and it was a good indicator of value, you may have placed weight on that contract in you OMV. If the price changes, your opinion of value, if not changed, does not reflect the correct sale price of that market indicator consideration.

 

[hastalavista]

yeah, if it didn't affect value. If it did, then an update is necessary.

The term "Appraisal Update" has a specific meaning for us. In the Fannie citation (quoted by Mike) I do not believe they meant an "Appraisal Update". I believe they mean a revision.
In the real world, revisions to appraisals due to new information happen all the time. I know- in my capacity as a reviewer for a regulated institution sees them on a regular basis (sometimes the value goes up, sometimes it goes down based on the new information). But unless the new information is so significant that it causes a change in, let's say, the property's H&BU, it is handled as a revision.

Having said that, Fannie used a term which is too close to "Appraisal Update". As such, if an appraiser determined that their use of that term required a new appraisal (an Appraisal Update), I think they'd have a basis for making that argument (whether I'd agree or disagree is immaterial).
For the discussion at hand, I'd be comfortable revising the report to incorporate the new information. Another could decide an appraisal update (or new assignment) is what Fannie requires.