Big Changes in Appraisal Standards Begin Today – Sept 1 2011:
Appraisals continue to be a challenge in many real estate transactions. If you live in Texas and have ever had value come in low, then you know how frustrating it can be to look at the comparable sales and try to make sense of how the Certified Appraiser came up with that value.
Underwriters and Lending Investors throughout the country struggle to make sense of the Appraiser’s commentary and adjustments on appraisals as well.
In an attempt to provide consistency and accuracy to the appraisal process, Fanniemae and Freddiemac have implemented the UMDP (Uniform Mortgage Data Program) and — ready or not, it rolls out on all appraisals completed on or after September 1,
FHA has issued guidance that they will follow suit shortly thereafter.
So what does this mean?
The MLS is the most common source Appraisers use for their information gathering on comparable sales and currently, it MAY OR MAY NOT provide all of the data the Appraiser will be required to report.
Therefore, they will have to call you (the Realtor) to get the information if you’re the Listing Agent and have not accurately
input the information into the MLS to begin with. This will slow things down somewhat — and your timely response will assist in
keeping the desired turn times on appraisals to a minimum.
Fortunately for the Appraiser members to the Houston Association of Realtors (HAR) MLS, the HAR system is quite comprehensive which will hopefully expedite the new UAD (Uniform Appraisal Dataset) requirements and eliminate any potential delays to the mortgage financing process for all parties involved in a transaction.
It is up to all HAR MLS members and Realtor partners responsible for inputting the property data into the MLS to be
sure they are detailed from the beginning — and (just as important) that they keep up with any updates and changes to the status of the property from listing to closing.
Here are some of the significant data changes taking affect September 1, 2011:
Days On the Market: Days on market (DOM) is now defined as the total number of continuous days. DOM is required for the
subject and the comparables. So, even if it is taken off the market for a short while and then relisted, the appraiser will have to count all of the days it has been listed.
Offering Price: The original offering price and history of all price changes must be reported.
Sale Type: Sale type must now be reported and the allowable choices are:
1. REO sale
2. Short sale
3. Court ordered sale
4. Estate sale
5. Relocation sale
6. Non-arms length sale
7. Arms length sale
Financial Assistance: All financial assistance must be reported.
Site Area: Sites and parcels with less than one acre must be reported in square footage. Sites over 1 acre are reported in acres.
Property View: A view rating and view factor must be assigned to all sites. The allowed rating choices are: Neutral, Beneficial or
Adverse. There are 12 established view factors which include water view, golf course view, industrial view, power lines, etc.
Property Style: Appraisers must use appropriate architectural design type indicators such as “Ranch”, “Colonial”, “Rambler”,
“Farmhouse”, etc. Descriptions such as 1 story, 1 1/2 story and 2 stories are no longer acceptable.
Condition of the subject property: An overall condition rating must be assigned from the predefined condition categories provided. The appraiser must also report any “material work” done to the kitchen and bathrooms in the last 15 years. The work must be categorized as “not updated”, “updated” or “renovated”.
Sale Date of Comps: The appraiser must now report the contract date as well as the closing date of all comps.
Quality of Construction: This is one of the most significant changes being made!
The appraiser must report a quality of construction rating if the subject and all comps from a list of 6 predefined quality levels.
AMC Reporting: The appraiser is now required to report the name of the Appraisal Management Company involved in the assignment.
In closing, Big Changes in Appraisal Standards begin September 1, 2011. Despite all of these changes, nothing takes the place of the Underwriter’s review in the process. It is ultimately the Underwriter who is held responsible for insuring that the appraisal is acceptable and supports the value of the property.
There is an internal process that takes place once the appraisal is reviewed in underwriting that tests the Appraiser’s valuation result against an Automated Valuation Model for QC purposes. In the Fairway Mortgage (Houston) “internal ops” system known as Fraudguard – if this QC process detects that there are other, potentially closer or more recent comparable sales, it will “red flag” the appraisal data and the Underwriter may have to further investigate value through the use of a review appraisal or by getting additional information from the current Appraiser.
So, as you can see — it’s never over these days until we have a firm commitment from the Underwriter. Let’s hope that all parties involved in a real estate transaction from the Appraisers, to the Realtors that input and maintain the relevant data into the MLS system, provide the most complete and accurate data in order to provide an appraisal that results in Fair Market Value.
Together – we are better! Let’s all work to be Better Together!