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Smart Appraisers Make Dumb Mistakes?

ZZGAMAZZ

Senior Member
Supporting Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
I am 52 years-old. I don't want to hear the new 2019 REO Speedwagon song that I will never hear on the radio. I want to hear "Golden Country" or "Heard it From a Friend" or another song that I grew up with. I want to hear Styx play "Suite Madam Blue" or almost anything from the Paradise Theater album.

Free Bird or Stairway to Heaven is never bad at a concert. We went to the Heart concert in September and they played Stairway to Heaven and Barracuda. It was the best part of the concert. They played some songs that I had never heard of and I was bored.

Play to the audience. What the band wants does not matter; what the audience wants is what matters.
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Michigan CG: If you are indeed from Michigan, you must have an affinity for Mitch Ryder and the Detroit Wheels . . . fast forward to Marshall Mathers, AKA Slim Shady !!!!!!!
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
FHA -Fannie-Freddie all require the SC approach and the Income Approach but the income approach is completed to support the SC approach and it doesn't matter what number ends up in the income approach the final OMV is the value used for loan purposes. So it often seems like an-act of futility to develop the income approach in some cases but 2 to 4 units are considered residential and not commercial income properties. This was done so mom-pop could purchase with a low down payment and loser underwriting guidelines. They also designed the 1025 Form to force the appraiser to have to think through the process and when there is a total disconnect between sales comparison and income approach that is a Red-Flag for the appraiser to consider if the property is really worth X-amount. The
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Newbie 101 Question: I recently submitted a 1025 with an opinion of value above results of the SCA and below results of the IA, with plenty of description of my rationale, which to a large extent reflected the implications of your statement above. The FHA "review appraiser" just imposed stips because the result was above the SCA opinion of market value. Should the engagement letter have stated that the appraiser can't "use" the IA, but if not, why bother developing it? {I'm real confused about the role/responsibility/authority of the FHA review appraiser, and don't know if it is an in-house reviewer or a fee panel appraiser, although that shouldn't happen, although I was advised recently on the Forum that the FHA underwriter has total authority to stipulate anything/everything he or she wants . . . for example, my CB4 for a contractor's inspection because of faulty foundation supports was returned to me from the lender rather than to the contractor, as I indicated. It's very confusing not knowing who has the wherewithal to say or do. I realize that I'm the ONLY person responsible to ensure credibility of the report, and don't know if/how that's affected with FHA work, and there doesn't seem to be such a thing as FHA continuing education via any of the course providers, or even via HUD. Please advise if possible though I realize this comment could be the source of numerous threads, most of which probably have been dead for a long time...
No when you sign up with FHA/HUD you are agree to their guidelines and engagement letters can be more stringent than FHA but never less stringent than your 4000.1 handbook. In your case your mentor should know that FHA-Fannie-Freddie-VA all consider 2 to 4 units as residential and that was deigned so mom and pops could purchase with less stringent underwriting guidelines and low down payments. Also all 2 to 4 under these programs only fund, buy or insure loans where the final opinion of market value is based on the sales comparison approach, SO IN YOUR FINAL RECONCILIATION you state that you completed the sales comparison approach , and the income and cost appraoch which gave additional support to your final opinion of market value which was based on the sales comparison approach

The income and cost approach were incorporated years ago into the 1025 to make the appraiser think through the process. It can be frustrating sometimes because in some cases its almost an-act of futility. On the other hand it helps keep the appraiser in practice and with the rental comps and income and operating issues. The FHA DE Underwriter is in the Wheel House and essentially the Captain of the ship, and she is held responsible by HUD that the appraisal meets FHA guidelines. If she signs off on a 2 to 4 where the appraiser has placed the most weight on the income or cost approach it's rejected by HUD for mortgage insurance purposes and the mortgage is not insurable. On Private assignments you can place the most weight on any approach you want, or on 5 units or more you can place more weight on the income approach but you may need a CG license.

The FHA DE-Underwriter CANNOT tell the appraiser what the value should be, she cannot tell you what adjustments or comparable's to use or make you do anything that is not required by 4000.1 although if the lender has more stringent standard than MPR that is allowable, but those items should be included in your engagement letter. Again Fannie & Freddie are the same regarding the SC appraoch being the anchor , except they don't make you flush toilets and operate mechanical equipment etc.

There are many private providers on FHA education, HUD really has not given any good education in many years and you will need to take some courses from private companies. Also poke your mentor and if he/she does not know what is required on 2 to 4 units, they either dont do many or they are not keeping up.
 

ZZGAMAZZ

Senior Member
Supporting Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
FHA -Fannie-Freddie all require the SC approach and the Income Approach but the income approach is completed to support the SC approach and it doesn't matter what number ends up in the income approach the final OMV is the value used for loan purposes. So it often seems like an-act of futility to develop the income approach in some cases but 2 to 4 units are considered residential and not commercial income properties. This was done so mom-pop could purchase with a low down payment and loser underwriting guidelines. They also designed the 1025 Form to force the appraiser to have to think through the process and when there is a total disconnect between sales comparison and income approach that is a Red-Flag for the appraiser to consider if the property is really worth X-amount. The

No when you sign up with FHA/HUD you are agree to their guidelines and engagement letters can be more stringent than FHA but never less stringent than your 4000.1 handbook. In your case your mentor should know that FHA-Fannie-Freddie-VA all consider 2 to 4 units as residential and that was deigned so mom and pops could purchase with less stringent underwriting guidelines and low down payments. Also all 2 to 4 under these programs only fund, buy or insure loans where the final opinion of market value is based on the sales comparison approach, SO IN YOUR FINAL RECONCILIATION you state that you completed the sales comparison approach , and the income and cost appraoch which gave additional support to your final opinion of market value which was based on the sales comparison approach

The income and cost approach were incorporated years ago into the 1025 to make the appraiser think through the process. It can be frustrating sometimes because in some cases its almost an-act of futility. On the other hand it helps keep the appraiser in practice and with the rental comps and income and operating issues. The FHA DE Underwriter is in the Wheel House and essentially the Captain of the ship, and she is held responsible by HUD that the appraisal meets FHA guidelines. If she signs off on a 2 to 4 where the appraiser has placed the most weight on the income or cost approach it's rejected by HUD for mortgage insurance purposes and the mortgage is not insurable. On Private assignments you can place the most weight on any approach you want, or on 5 units or more you can place more weight on the income approach but you may need a CG license.

The FHA DE-Underwriter CANNOT tell the appraiser what the value should be, she cannot tell you what adjustments or comparable's to use or make you do anything that is not required by 4000.1 although if the lender has more stringent standard than MPR that is allowable, but those items should be included in your engagement letter. Again Fannie & Freddie are the same regarding the SC appraoch being the anchor , except they don't make you flush toilets and operate mechanical equipment etc.

There are many private providers on FHA education, HUD really has not given any good education in many years and you will need to take some courses from private companies. Also poke your mentor and if he/she does not know what is required on 2 to 4 units, they either dont do many or they are not keeping up.
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1) #1 best AF response of all time.
2) Do the URAR 1004 Certifications and Limiting Conditions correspond with FNMAE requirements?
3) Regarding an FHA assignment with a "Subject to" checkbox for various issues, e.g., in-ground pool empty of water; locked door to water heater cabinet that must be double-strapped; and the illegal addition of a gas stove to a permitted storage shed that obviously has been converted into an ADU although building permits were finaled to add a bathroom.
--Should the "Subject To" narrative explain what needs to be done to address address/resolve the issues, or just describe the problems?
--Should the "Subject To" narrative reference specific sections of the 4000.1 Handbook that are not being met?
--Does the "Subject To" status consequently warrant the statement that 4000.1 Hanbook standards are, indeed, met based upon the underlying HC?

Possibly "scary" questions like JG noted, but it's a work-in-progress.

Kindest regards.
 
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