So Punk, Can You Prove Your Adjustments, Go Ahead Prove Them !

[Artemis Fowl]

Paired sales is like the first thing they teach in principles of appraising.

 

[miktay]

Sure they can be proven....as soon as it can be proven that people make informed, rational buying decisions that are based solely on property characteristics delineated on the report grid .

Ding-Ding-Ding....Winner!!!

 

[Deleted member 130081]

Paired sales is like the first thing they teach in principles of appraising.

Yes. And the first thing a new appraiser, who actually has a bit of math and analytical skills, realizes can almost never be applied, due to a lack of data. This in turn leaves the new appraiser, and older appraisers who continue to strive towards ethics and competence, to wonder why so many classes teach it over and over again. This also begins the search for alternative methods, which also yield similar results, though for different reasons, and again leaves the ethical and competent appraiser wondering, why is the dollar adjustment method regarded with anything more than a laugh. If there really were ways to credibly extract dollar adjustments that also included a means for us to support them on paper with math, we would all be doing it and this debate would not be happening. The word credible ends up getting in the way of moving forward on this issue, as some appraisers think a credible and supported adjustment is similar to a painter opening a can of paint, throwing it on the wall, and calling it painted.

This argument would be hilarious, if it weren't for situations like the one our OP is experiencing, which all of us also experience all too often.

Again, an issue where a single voice would be a good thing.

 

[J Grant]

Got this email update on Fannie Changes from a very "classy" AMC:


"Yes, there may be revisions! FNMA, states "

the

underwriter must determine if the opinion of value is adequately supported".

Your report should be demonstrating that the scope of work conducted was sufficient to produce credible results.

The following is taken from the FNMA's web site which provides the appraiser and lender, Fannie Mae's expectations and guidance regarding the Analysis of Adjustments.

Analysis of Adjustments:

Adjustments must be market based (the value the market has proven for difference in properties). "

I came from a science background, where the word "proof" meant something. Do you think adjustments can be "proven?"

They can not be "proven" to a scientific standard ( and should not asked to be that ). They can be evident in the market and supported in the market, and the method used to derive them understandable and based on the evidence market shows as indicators. But that's it. To pretend there is a mathematical or scientific "proof" distorts the limits of what an appraisal offers as its model of value development. For example statistics can "prove" its own result, but are the results relevant to the subject and smaller group of comps an identified typically motivated buyer for subject would consider?

 

[J Grant]

Yes. And the first thing a new appraiser, who actually has a bit of math and analytical skills, realizes can almost never be applied, due to a lack of data. This in turn leaves the new appraiser, and older appraisers who continue to strive towards ethics and competence, to wonder why so many classes teach it over and over again. This also begins the search for alternative methods, which also yield similar results, though for different reasons, and again leaves the ethical and competent appraiser wondering, why is the dollar adjustment method regarded with anything more than a laugh. If there really were ways to credibly extract dollar adjustments that also included a means for us to support them on paper with math, we would all be doing it and this debate would not be happening. The word credible ends up getting in the way of moving forward on this issue, as some appraisers think a credible and supported adjustment is similar to a painter opening a can of paint, throwing it on the wall, and calling it painted.

This argument would be hilarious, if it weren't for situations like the one our OP is experiencing, which all of us also experience all too often.

Again, an issue where a single voice would be a good thing.

?? Paired sales does not mean exact matched sales, or matched except for one differential. It means the appraiser is pairing sales comps a buyer would consider, and using that pairing to extract out adjustments. If you have comps, you have data to use for pairing sales.

 

[J Grant]

Paired sales can work, can be misleading. Pairing 1 & 2 =$40/SF Pairing 2 & 3 =$70/SF. Pairing 1 & 3 = $55/SF....Which pair is right?

You can put them all the grid and pair them all to the subject. Adjust for other major differences and that leaves SF. Apply a few variable figures for SF across the board, the figure, ( for example $50 sf) that brings the comp's adjusted prices closest together is an indicated adjustment for SF. Of course one can refine it after that or make changes, and provide additional support or information such as depreciated cost, RE agent feedback, regression, Adjustments made on past appraisals on similar properties in area show etc.

 

[Terrel L. Shields]

djust for other major differences and that leaves SF.

That's assumed, see sensitivity chart in post below which has pairing too..

 

[Deleted member 130081]

But, if our peers are following FNMA input on the matter, and FNMA is the Rule maker, then we all would be correct.......Less work, More pay....No Stips

The "rules" for appraisers, written by FNMA, are included in the GSE forms. When it comes to adjustments, the only written "rule" is the statement concerning concessions.

The underwriter does not really care if your adjustments are supported or not. What they want, is for the appraiser to state that they are, and then sign their name to that. Once an appraiser does that, so long as the statement is "worthy of belief", the underwriter can conclude (achieve plausible deniability) the appraisal qualifies, which allows the loan to illegible for sale to FNMA. If an appraiser writes a bunch of BS to satisfy the underwriter demands, they are participating in mortgage fraud.

Expectations of FNMA? FNMA expects the appraiser to act impartially, as they are professionally licensed to do. FNMA expects the underwriter will follow the rules written for underwriters (The Selling Guide), which includes not undermining the appraiser independence. FNMA does not expect the underwriter and appraiser to act together to produce a BS document. FNMA expects that some appraisals will not measure up and subsequently, not all loans will be eligible. In this event, it might not have anything to do with an appraisers competence (though that could be the case too), it might just be that there are instances when the data does not allow an appraiser to produce a result that qualifies for their program. For instance, 1004 form Cert #4 states in part "...I have adequate market data to develop a reliable sales comparison approach for this appraisal assignment." So, if you have one of those properties/assignments where the data stinks, FNMA is expecting you to withdraw from the assignment, as your professional ethics would keep you from signing the report. However, FNMA is not the client, the originating lender is. So if the appraisers says "I have no comps", and the lender says "Do your best", there is nothing wrong with that, so long as the appraiser clearly discloses the discrepancy in the report. In essence, the client is asking you to complete an assignment that is not eligible for sale to FNMA, which is fine, until they go ahead and sell it to FNMA. The vulnerability of the appraiser here is if they do not clearly disclose the discrepancy in the report, otherwise, its all on the lender, who is the party with a relationship with FNMA. Best practice in these cases is to not use the GSE form for the assignment.

So if you cite you used matched pairs, when anyone with half a brain can go back and see that would be impossible, you put yourself in a very precarious position. Best to just be honest about the whole thing IMO.

 

[Deleted member 130081]

?? Paired sales does not mean exact matched sales, or matched except for one differential. It means the appraiser is pairing sales comps a buyer would consider, and using that pairing to extract out adjustments. If you have comps, you have data to use for pairing sales.

Wait, what?

 

[J Grant]

That's assumed, see sensitivity chart in post below which has pairing too..

Where is the chart?