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Where is: FM guidelines on agent's commission?

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Smokey Bear

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Elite Member
Joined
Dec 8, 2004
Professional Status
Certified Residential Appraiser
State
California
Where in the Fannie Mae guidelines does it forbid downward adjustments on comps for the agent's commission? I'm helping a friend who got sanctioned by the board for NOT adjusting negatively for the seller's commission bonus. Like what the seller does with his money has ANYTHING to do with market value.
 

Randolph Kinney

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Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
What state board did the sanction? Did they specifically charge that the supplemental standards for Fannie Mae were violated?
 

Caterina Platt

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
New Mexico
Hey Smokey,

I don't know that Fannie Mae prohibits any such thing. What I can state is that FHA specifically states that the appraiser should adjust for the market reaction to special terms and concessions. HUD/FHA also specifically states that this adjustment should not be a mechanical dollar for dollar amount. Granted, if you're talking about the gift programs, generally it is dollar for dollar. Situations where it might be more accurately reflected as a percentage of price would be things like owner carried terms, lease purchases, etc.

Generally, this is in reference to things offered to the buyer. If the seller offers a bonus to the agent, and it didn't affect the price of the dwelling, there is no adjustment.

"I can only adjust for the amount that I can substantially support with market data, Mr/Mrs. Board Member. Here is my market data and paired sales analysis for the comparable in question versus other sales which did not have an agent bonus. No adjustment is supported or suggested by this data, and to assume otherwise and force an adjustment would be inaccurate and misleading."

Just frosts me that folks get on these boards and don't have a clue about acceptable practices.
 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
I agree. Fannie guides say nothing about agent commissions.

The prinipal guidance is the definition of market value pre-printed on the form and only applies to the comparable sales, not the subject.

Adjustments are made for special or creative financing or sales concessions which, by definition only applies to the buyer.

Agent commissions are typically paid from the proceeds due to the seller as part of his marketing costs. If he chooses a more expensive marketing plan, that is not a concession to the buyer. It does not lower the buyer's cost nor does it affect the financing terms.

I can't imagine what the board is thinking unless they think the comparable sale in question was somehow involved in fraud and also thinks that the appraiser should have somehow known that and declined to use the comparable. If there was something really smelly about a comparable sale the issue would be about not using it, not about adjusting for it.

Like Caterina said, how in the world could one extract a market based adjustment for that?
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Why is it that I suspect that there may be some details to this story that we are unaware of?
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
SB asked, does Fannie care or not care about NOT adjusting negatively for the seller's commission bonus.

Fannie execs primarily care about their bonuses and stock options. Remember,
the former Fannie wanted us to ignore concessions of seller paid closing
costs. Some state boards, said yes you should, some boards don't have
a clue.

So I guess, Fannie doesn't specify what the 'correct' commission rate or
structure is. It expects appraisers to handle that part.

Sounds like the board has other issues with the appraiser, cause this
is a 'fine tuning' of Fannie or USPAP. Y'know sometimes they just make
stuff up, cause they can.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Where in the Fannie Mae guidelines does it forbid downward adjustments on comps for the agent's commission? I'm helping a friend who got sanctioned by the board for NOT adjusting negatively for the seller's commission bonus. Like what the seller does with his money has ANYTHING to do with market value.

This would only be an appraisal issue if the comparable's sale price was artificially inflated due to the commission structure as I see it.:shrug:
 

Michael Tipton

Senior Member
Joined
Sep 25, 2005
Professional Status
Certified Residential Appraiser
State
Florida
Isn't the real estate commission and commission bonus, if any, charged to the seller on the HUD-1? Sales commissions are not listed in item C in the attached link. Commission bonuses only potentially assist the seller in marketing a property, not the purchaser.

I do not see any reference to a negative adjustment requirement in FNMA's current sales guide for real estate commissions paid by the seller.

See item C in the attached link.

http://www.allregs.com/efnma/index....FNMA/selling/part-xi/xi-ch-4/xi-406/xi-406.05
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
SB,
A couple more thoughts....I have a good friend who's a realtor,
while it would be fair to say that the standard commission is 5%,
but there are lots of time she pays for an inspections, or a minor
repair to make the deal work, or pays for a HO warranty to make
a buyer go ahead with an older house. And of course there are
lots of comments on listings about the 'listing' salesman or seller
pay a bonus of $1000 to the selling salesman for a sale before x
date. But if an appraiser didn't have the escrow closing statement,
they wouldn't routinely have access to that information. And the
expense to finally sell a house is just that, its x numbers of dollars.
A rational seller wouldn't pay any more or less to get his property
sold. I don't see that its something an appraiser would make an
adjustment for.
 

Otis Key

Elite Member
Joined
May 15, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
Smokey, to my knowledge, there is no such directive or guideline (and I have them printed and notebooked). However, you're more than welcome to search it yourself for free: https://www.efanniemae.com/sf/guides/ssg/index.jsp Click on the AllRegs link, agree to the terms and then use the search tab at the top with the keywords of "seller concessions" or something similar.

BTW, also read the definition of market value (something to the like with words similar to "in cash or equivalent terms"). Good luck.

Lee Lansford - I agree with you.
 
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