Where Do Appraisers Come Up With Stuff Like This?

[J Grant]

Sounds like a prudent move on your part! Good to know someone cares !

 

[TRESinc]

One thing to note in this is again, AMCs sell themselves on quality and tout their "review" process when all it is is getting the correct boxes checked or making sure we use the correct canned comments.

doesn't really apply here since the lender owns the AMC. who would they brag to?

Useless boilerplate is the result of AMC stips. It is not a secret. Appraiser works for ABC AMC this week and gets a stip and they create a boilerplate comment that goes into every single report. Appraiser works for XYZ next week and they come up with a stip. Appraiser writes a boilerplate comment to address that stip that then goes in every single report.

yep, prior to AMCs no appraisers used canned comments. pardon me while i find a way to hide my growing nose...

 

[SutnNC]

Oh yeah, new home sales in a "subject subdivision" are not market transactions nor are they reliable indicators of value.....LOVE this conversation each quarter.

 

[Terrel L. Shields]

any loans from any mortgage originator that is affiliated with a builder or real estate brokerage as I believe that there is an inherent conflict of interest in such arrangements, but again I don't get to make the rules.

HUD occasionally pounds some title company / Realtor / builder combo that crosses the line but to me the line should be a lot brighter and the "firewall" between builder, Realtor and lender should be much greater. Just like the firewall between Realtor / Appraiser / lender should be quite high.

One thing I disagree with is that new construction was a large cause of the housing crash. In my opinion, the housing bubble was a credit bubble created by easy credit loans in which anyone with a pulse could qualify for a mortgage

Yes. I agree. We have a long time local MAI who recalled the days back in the 1970s when the energy crunch crushed some young builders and they rebuilt their businesses slowly vowing never to "do it again" (get over-extended). This MAI produces a quarterly construction report for private parties but is generous enough to give our local appraiser group a summary of the year's events. He mused once as things were very over-heated, that those very builders (now older) were again in a state of frenzied activity and borrowing money from multiple lenders. Within a year of that, many were bankrupted. They could not resist the temptation of easy money, and people standing in the street offering to buy their homes before they were even finished. That's too "easy" credit.

 

[Meandering]

Oh yeah, new home sales in a "subject subdivision" are not market transactions nor are they reliable indicators of value.....LOVE this conversation each quarter.

We probably have this discussion regularly because Cert 8 on Fannie's pre-printed certification says you can't use them, and then the selling guide says;

In no instance may the appraiser create comparable sales by combining vacant land sales with the contract purchase price of a home (improvements only). While these transactions cannot be used to meet the required minimum three closed comparables, these transactions, which are often completed as part of a construction-to-permanent loan transaction, may be included as additional support with appropriate commentary.

https://www.fanniemae.com/content/guide/selling/b4/1.3/08.html

So there is a conflict with the certification (8), which we are not allowed to change or diminish in anyway.

Just more Fannie double talk to keep the confusion going.

.

 

[Terrel L. Shields]

there is a conflict with the certification (8), which we are not allowed to change or diminish in anyway.

I know here, the builder owns the lot and builds on it. He may build to custom specs but the property sold is entirely the builder/developers.

 

[DWiley]

As some of the posts in this thread illustarate, this continues to be an issue, in part, because some assume/believe that cert 8 applies to all new home sales

Some apparently connot understand the distinction between the sale of a new home under construction and the combination of a vacant land sale with the cost to build a new home to "create" a sale.

 

[J Grant]

In no instance may the appraiser create comparable sales by combining vacant land sales with the contract purchase price of a home (improvements only)

The Above does not describe builder sales which are house and lot sold as one. The typical builder sale is allowed as a comp because it is a house AND lot sold as one package.

The cert refers to when a buyer purchases a vacant site, and then contracts to build/purchase a home on it ( the improvement). One Contract for the site, one for the improvement. As opposed to how buyers typically buy in a new home development, purchasing a house and lot together. To which they can add on lot premiums and options if they choose

 

[J Grant]

Well said DW. Sounds like the original appraiser perhaps did not understand the distinction?

That said, imo the way SC prices of new homes are arrived at by adding up lot premiums and options/upgrades line item by line item, cash register style, is so far removed from how buyers purchase resale homes that two or more resales should be required in new construction purchase appraisals.

 

[SutnNC]

A tract home built on a sight where other tract homes are being built and sold for their land and improvements along WITH outside sales and/or other market support for an analysis is way different than a spot-built home in a subdivision for a buyer that contracts to build on a site they had previously purchased as a separate transaction.

They should read this way: Cert 8 "damned if you do"......Selling guide "damned if you don't".

OR

Cert 8: "If we can't nail you on the front"......Selling guide "we'll nail you on the back".

Wide open to interpretation depending on motivation but a 1- land pruchase [then] home construction contract (or placement) AND 2- a builder sale of house on a lot are different.