Where Do Appraisers Come Up With Stuff Like This?

[Eli]

From a NC Appraisal Board newsletter August 2006 http://www.ncappraisalboard.org/bulletins/aug06.pdf

Appraisers know that they cannot use a land/home package as a comparable sale. The question often received by Board staff is: How do I recognize a land/home package?

Some land/home package sales are simple to recognize. A check of the public records may indicate that the property transferred was only a lot, but the HUD-1 (settlement form) shows the sales price of both the land and the home. If public records indicate that only the land transferred, this is a land/home package sale and cannot be used as a comparable sale.

In other instances, what may look like a land/home package is actually a legitimate sale. In the past several years, more developers have been building subdivisions and advertising the properties on MLS as presales. The buyer goes to a sales office, selects a lot, and then selects from a limited number of the developer’s floor plans to be built on the lot. There may be a limited list of custom features available that adds to the cost of the package. When the home is finished, both the lot and the house convey as one unit, which is reflected in the public records.

If, however, the buyer goes to a developer and buys a lot, then selects his own builder who builds a home customized to the buyer, this is not a legitimate sale to use as a comp. The key is that the combination of the lot and home has not been exposed to the market and negotiated between a willing buyer and seller.

There are some instances where real estate agents report a land/home package sale on MLS. There are some red flags that could indicate such a sale. Some agents will make a remark that the sale is for information purposes only and is not to be used as a comp. Other agents may state that the sale is for comp purposes only. The property may show that it was only on the market for one or two days. Even if the sale is reported on the MLS, that does not always make it a legitimate, arm’s length transaction. It is the appraiser’s responsibility to verify the legitimacy of the sale.

Remember, Standards Rule 1-4 of USPAP requires that you collect, verify and analyze the data used in the report. For example, if you collect comparable sales information form MLS, you then verify the information by calling the listing or sales agent, the tax office, or another source. If there is any discrepancy between these two sources, you must continue to research the sale until you are confident that the information you will use in your analysis is correct. This is especially important if you receive verbal information or a HUD-1 that conflicts with public records.

You should also be careful to correctly identify both your data source and verification source, and to keep in your workfile a copy of the information relied upon for the appraisal. For example, if you use MLS as your data source and tax records as your verification source, you should have a copy of the MLS sheet and tax record in your file. Sometimes you may receive information orally, such as from the listing broker over the telephone. You should make a note for the file of your conversation, including the name and telephone number of the source of information and the date, as well as a summary of the information received.

Good post Rex. That's right on Dog.!!!!!!

 

[Eli]

Goes back to how market value definition is unique. If one can't say yes to all the steps in the FNMA definition of market value, then don't give an opinion of market value on the form 1004. Of course USPAP is involved with this as well.

 

[Eli]

This one here worries me a little though. It obviously worries me more than the OP, but I understand the position Tim is in. I don't like it though. I see Tim as being in somewhat of a compromised position. That is why I sincerely think sometimes that appraisers should be more like law enforcement or other government employees or contractors. But I don't know all the facts in this case. But I always go back to the fact that the government is guaranteeing the deposits and mortgages. I think that million dollars a day or whatever our debt is growing proves who is guaranteeing the deposits and loans. I don't know who is going to pay it and we sure don't need bad appraisers adding to it. Leadership is missing somewhere.

 

[BRCJR]

HUD-1 is no longer the closing document.

The closing document is now identified as the Closing Document.

Wonder how they came up with the name.....

 

[Eli]

But, but, but, sometimes I think it is not leadership that is missing but it is the structure of things in government that is so screwed up when it comes to the appraisal profession. The structure just needs to be overhauled. ONE central board that anybody has to go through to do anything and it be comprised of at least a 50/50 of experts who are non real estate professionals. The non-real estate professionals on the board could be labor union professionals or military experts or academic professionals or economic professionals or the list goes on and on like social care professionals or law enforcement professionals. Probably need a notable psychiatrist on there, maybe two. Terms would be short for non government appointees so they didn't get too frustrated and the short terms would help to encourage some of the best in their respective fields to serve. Maybe 20 member board max with a wide open door policy.

 

[Terrel L. Shields]

Wonder how they came up with the name.....

You can bet it was a committee decision

 

[timd354]

And gloating about it on the internet, don't forget that part.

Either you are the reviewer, or,
you are the appraiser.

If you don't understand why the appraiser thought those sales were inappropriate, and the explanation in the report was not clear, then you ask them to clarify and explain their reasoning.

But, once underwriters start deciding which sales, or which group of sales are to be considered comparables, you have crossed the line into being the appraiser,

and hence, should hold the liability for what is in the report.

If you want to "be" the appraiser, than "be" the appraiser.

.

This post and the subsequent "like" by Eli are just too perfect...lol.

 

[timd354]

It sounds as if the appraiser is operating under the misconception that the property he's appraising IS, in fact, a "created sale" which may result from ignorance, sloppiness, poor training, or having his chops busted by some reviewer who hammered her into using only sales of completed houses.

Nope, that's not it....I am sure that he had a copy of the same contract that is in the loan file which clearly shows that not to be the case. It is also patently obvious from the available assessor's records that none of the sales in the subdivision were the result of a land sale combined with a separate construction contract.

 

[timd354]

From a NC Appraisal Board newsletter August 2006 http://www.ncappraisalboard.org/bulletins/aug06.pdf

Appraisers know that they cannot use a land/home package as a comparable sale. The question often received by Board staff is: How do I recognize a land/home package?

Some land/home package sales are simple to recognize. A check of the public records may indicate that the property transferred was only a lot, but the HUD-1 (settlement form) shows the sales price of both the land and the home. If public records indicate that only the land transferred, this is a land/home package sale and cannot be used as a comparable sale.

In other instances, what may look like a land/home package is actually a legitimate sale. In the past several years, more developers have been building subdivisions and advertising the properties on MLS as presales. The buyer goes to a sales office, selects a lot, and then selects from a limited number of the developer’s floor plans to be built on the lot. There may be a limited list of custom features available that adds to the cost of the package. When the home is finished, both the lot and the house convey as one unit, which is reflected in the public records.

If, however, the buyer goes to a developer and buys a lot, then selects his own builder who builds a home customized to the buyer, this is not a legitimate sale to use as a comp. The key is that the combination of the lot and home has not been exposed to the market and negotiated between a willing buyer and seller.

There are some instances where real estate agents report a land/home package sale on MLS. There are some red flags that could indicate such a sale. Some agents will make a remark that the sale is for information purposes only and is not to be used as a comp. Other agents may state that the sale is for comp purposes only. The property may show that it was only on the market for one or two days. Even if the sale is reported on the MLS, that does not always make it a legitimate, arm’s length transaction. It is the appraiser’s responsibility to verify the legitimacy of the sale.

Remember, Standards Rule 1-4 of USPAP requires that you collect, verify and analyze the data used in the report. For example, if you collect comparable sales information form MLS, you then verify the information by calling the listing or sales agent, the tax office, or another source. If there is any discrepancy between these two sources, you must continue to research the sale until you are confident that the information you will use in your analysis is correct. This is especially important if you receive verbal information or a HUD-1 that conflicts with public records.

You should also be careful to correctly identify both your data source and verification source, and to keep in your workfile a copy of the information relied upon for the appraisal. For example, if you use MLS as your data source and tax records as your verification source, you should have a copy of the MLS sheet and tax record in your file. Sometimes you may receive information orally, such as from the listing broker over the telephone. You should make a note for the file of your conversation, including the name and telephone number of the source of information and the date, as well as a summary of the information received.

Again, not a terribly difficult concept....it is actually kind of sad that a state board felt the need to publish guidance regarding this issue.

 

[gregb]

Again, not a terribly difficult concept....it is actually kind of sad that a state board felt the need to publish guidance regarding this issue.

If the issue is good enough for the AF, its good enough for the NC state board.