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APPRAISING IN TODAYS MARKET

General Issues

Comparables

Single Family Homes

Fee Simple Townhouses/PUDs

Condominiums

Appraiser Packet

Questions

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GENERAL ISSUES

Who is reading

the appraisal

today?

Buyers

Sellers

Selling Agents

Listing Agent

Buyers/Sellers

Attorneys

Loan Officer

Mortgage Underwriter

Review Appraiser

Mortgage Insurance

Underwriter

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GENERAL ISSUES

HVCC (Home

Valuation Code of

Conduct) NAR is heavily

petitioning to

sunset this code

Adopted May 1, 2009

Enacted by Fannie Mae/Freddie Mac

Recently adopted by FHA

AMCs (Appraisal Management

Companies)

Higher fees

Slower turn times

Appraisers from outside of area

Helps eliminate appraiser

pressure

Many lenders have hired appraisal

coordinators)

Cannot be involved in the loan

production

All about risk management

Lenders have their own

approved appraisers

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GENERAL ISSUES

Appraisal

Inspection

Treat the appraisal

inspection as the most

important showing to date!

Make sure the property

is clean.

Try to have any needed

repairs addressed prior

to the inspection.

Explain to the sellers whatto expect, and how

important the appraisal is.

SHOW UP!

Answer Questions

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GENERAL ISSUES

FHA appraisal inspection Appraisal is tied to property for 6 months

More in depth inspection

www.hud.gov - Homeownership ReferenceGuide

Utilities must be active

Necessary repairs may be conditioned

Concerned by the 3 Ss

Safety

Security

Soundness

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GENERAL ISSUES

Gross living area (GLA) The total area of finished, ABOVE GRADE, square

footage that is finished in similar manner as the rest

of the property. Fannie Mae/Freddie Mac guidelines

Condominium units, lower level is included in GLA

Only bedroom/bathroom above grade is included in

BR/BA count

Basement finishing, as well as BR/BA are a separate

adjustment

Single family homes measured from exterior,

condominiums measured from interior walls

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GENERAL ISSUES

Contracts

The stronger the

buyer the less

scrutinized theappraisal

5% down versus

20% down

Mortgage Insurance

underwriters moreparticular than typical

mortgage underwriter

Concessions Repair Credits

May raise a red flag

Include on attorneyreview, and not initialcontract

Personal property

Furniture, TVs, etc.

Not considered in

appraisal Closing Costs

3% limit, use to be6%

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COMPARABLES

Arms Length Transaction:

A transaction in which neither buyer

nor seller is acting under duress, theproperty is offered on the open market

for a reasonable length of time, and

both buyer and seller have a reasonable

knowledge of the property, its assets,and its defects. (Fundamentals of Real EstateAppraisal 8th Ed.)

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COMPARABLES

Old Requirements

(Pre-market

crash)

3 closed

comparables

within 12 months Typically within 1

mile

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COMPARABLES

New

requirements

(Typical)

1-2 closed sales

within 90 days

1-2 closed saleswithin 6 months

4-5 total closed

sales

1-2 pending listings

1-2 active listings

Within 1 mile

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COMPARABLES

Justification for citing dated

comparables:

Same project Same subdivision, and/or close

proximity

Same model Lack of recent data

Similar external obsolescence

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COMPARABLES

External

Obsolescence

A feature made undesirable

or unnecessary because of

conditions outside of the

property. (Fundamentals of

Real Estate Appraisal 8thEd.)

Must cite comparables with

similar obsolescence

Examples

View of the train

Proximity to airport

View of a busy street

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COMPARABLES

Short-Sales and REOs (Foreclosures) Not considered an arms length transaction

Typically omitted

If utilized typically require a conditionadjustment

Utilized if these transactions are the bulk ofmarket activity

May be utilized in order to meet certain lender

requirements/criteria Typically given less weight in the overall

reconciliation of values

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SINGLE FAMILY HOMES

Plat of survey:

Provides lot lines

Shows anyeasements/encroachments

Provides legal description

Typically required for all sales otherthan condominiums or co-ops

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SINGLE FAMILY HOMES

StandardAdjustments Date of sale

LOCATION Site view

Design

Quality ofconstruction

Age Overall condition

Bedroom/bathroomcount

Gross living area

Basement

Basement finishing

Functional utility

Heating/cooling

Parking Outdoor space

Energy efficiency

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SINGLE FAMILY HOMES

Discretionary

Adjustments

Kitchen/bathroomquality

Fireplace count

Professional

landscaping

Amenities

Smart-home

Wine cellar

Home-theater

Pool

Coach house

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PLANNED UNIT DEVELOPEMENT

Commonly referred to as PUDs

Typically townhouses or suburban

subdivisions

Still have an association

Governed by covenants, conditions, and

restrictions (CCRs)

Lower/minimal dues

Similar adjustments as single family houses

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PLANNED UNIT DEVELOPMENT

Condominium

Townhouse

Higher monthlyassessment

Governed by rules

& regulations

Covered by

common

insurance

No land ownership

PUD Townhouse

Lower monthlyassessment (may

be monthly orquarterly)

Governed byCCRs

No common

insurance Own land, roof,

exterior walls

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CONDOMINIUMS

Standard

Adjustments

Date of sale Location

Recreation

facilities

Floor location View

Design

Quality ofconstruction

Age

Overall condition

Bedroom &bathroom count

Gross living area

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CONDOMINIUMS

Standard Adjustments

(Cont)

Gross living area Functional utility

Heating/cooling

Outdoor space

Parking

Outdoor space

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CONDOMINIUMS

Discretionary

Adjustments

Kitchen/bathroomquality

Fireplace count

In-Unit Laundry

Amenities

Roof-Rights Audio/visual

wiring

Home-theater

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CONDOMINIUMS

Project information

# of stories

# of elevators Year built

Construction (brick, concrete, frame,etc)

Roof material # of parking spots

Type of parking

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CONDOMINIUMS

Project information (cont) # of units

# of units sold

# of units completed

# of units for sale

# of units sold

# of units rented (MI limit 33%)

# of units owner occupied (or secondhomes)

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CONDOMINIUMS

Project information (cont)

# of phases

Developer in control of HOA? Management company/contact

Any entity own more than 10% of project

Date of conversion

Status of completion

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CONDOMINIUMS

Project information (cont)

Status of completion (common areas)

Commercial space (limit 20-25%

) Current monthly assessment

Assessments include

Special assessment amount

Special assessment covers what?

Project subject to ground rent?

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APPRAISER PACKET

Be PROACTIVE

Do not wait until the appraisal is aproblem

You are the expert on the property

Assist in whatever manner possible

Create an appraiser packet

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APPRAISER PACKET

RELEVANTcomparables

Executedcontract Executed Date

Seller-owner of record

Concessions

Anything unusual

Plat of survey

List of upgrades

or improvements Zoning certificate

Floor plans

Project

information

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APPRAISER PACKET

Agent Metrics/MLS Reports

Show the rate of

appreciation/depreciation, orstabilization

Demonstrate an accurate sales-to-list

price ratio

Analyze median/average price for

market

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OMMITTED PROPERTY

2-4 unit properties

Vacant land Cooperative interest

(Co-Ops)

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QUESTIONS