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I believe the property is acceptable to Fannie Mae under the following guide:
Fannie Mae’s acceptance of unique property types.
If the appraiser cannot locate recent comparable sales of the same design and appeal, but is able to determine sound adjustments for the differences between the comparables that are available and the subject property and demonstrate the marketability of the property based on older comparable sales, comparable sales in competing neighborhoods, the existence of similar properties in the market area, and any other reliable market data, the property is acceptable as security for a mortgage deliverable to Fannie Mae;
I believe that the underwriter should have made his request about 2 months ago when he reviewed the appraisal and stated his conditions for loan approval.
Despite his tardiness, I believe we can request that the appraisal be more compliant with Fannie Mae's guidelines and the underwriters wishes.
I do not believe there is a solid requirement for an appraisers to find 2 comparables within 2 years and 2 miles. Fannie Mae specifically says appraisers can when necessary look outside of 2 years and they can look at other comparable neighborhoods when justified. Although fanny suggests the above outlined method, The appraiser also has the option to follow the underwriters suggestion by using 3 of the the 10 existing 4 unit sales within the 2 year 2 mile criteria and simply make market adjustments for things like the TLV (Total Living Area).
We do need the appraiser to make statements supporting the value of the property!!! We do need the appraiser remove dumb statements like: "No 4 unit properties were used...." (obvious red flag).
Its clear that the appraiser needs to make statements about the marketability of the property!!! This is the central issue at hand. I have no doubt that the appraiser can do it if we can get him off his lazy ass. Because at 400k this property is definitely marketable.
You are a perfect example of how a little information can be dangerous. First, yes, you can talk to the appraiser, but he doesn't have to listen. And, realistically, if you want to spout off about how incompetent he is, and then expect him to make any changes, you're deluding yourself.
Just because you don't like the comparables he chose, doesn't mean the appraisal doesn't comply with Fannie Mae guidelines. And, neither you nor anyone else, has any say in which comparables or statements are made. An underwriter can make a request, but it is up to the appraiser if he makes any changes. The "dumb statement" you don't like is a required part of the appraisal.
Just because a property can meet Fannie guidelines, doesn't mean any lender HAS to lend money on the property.
Also, you don't understand what is being asked about the marektability of the property. You could end up with a statement such as, "As the Subject is considerably smaller than other similar properties, this could negatively impact the marketability, as it would require longer than normal marketing exposure"
The appraiser's job is to prepare a report for the lender, for their use and only their use, and disclose any known issues. It is NOT to make your loan, hit your number, or make you happy.
Maybe the appraisers here can chime in, but you are aware your originator cannot contact the appraiser? You are certainly free to call the appraiser - I have had buyers do that, only to have the appraiser mention it in the report and the UW declare the appraisal invalid for inappropriate contact. If the originator has direct contact with the appraiser, the appraiser is required to report it and the originator will be sanctioned, fined, or both.
Hopefully, your originator knows what he is doing.
I believe the property is acceptable to Fannie Mae under the following guide:
Fannie Mae’s acceptance of unique property types.
If the appraiser cannot locate recent comparable sales of the same design and appeal, but is able to determine sound adjustments for the differences between the comparables that are available and the subject property and demonstrate the marketability of the property based on older comparable sales, comparable sales in competing neighborhoods, the existence of similar properties in the market area, and any other reliable market data, the property is acceptable as security for a mortgage deliverable to Fannie Mae;
I believe that the underwriter should have made his request about 2 months ago when he reviewed the appraisal and stated his conditions for loan approval.
Despite his tardiness, I believe we can request that the appraisal be more compliant with Fannie Mae's guidelines and the underwriters wishes.
I do not believe there is a solid requirement for an appraisers to find 2 comparables within 2 years and 2 miles. Fannie Mae specifically says appraisers can when necessary look outside of 2 years and they can look at other comparable neighborhoods when justified. Although fanny suggests the above outlined method, The appraiser also has the option to follow the underwriters suggestion by using 3 of the the 10 existing 4 unit sales within the 2 year 2 mile criteria and simply make market adjustments for things like the TLV (Total Living Area).
We do need the appraiser to make statements supporting the value of the property!!! We do need the appraiser remove dumb statements like: "No 4 unit properties were used...." (obvious red flag).
Its clear that the appraiser needs to make statements about the marketability of the property!!! This is the central issue at hand. I have no doubt that the appraiser can do it if we can get him off his lazy ass. Because at 400k this property is definitely marketable.
Can I ask the really obvious questions first?
(1) Why are you attempting to make your case by quoting text from the Fannie Mae Single Family Selling Guide when the property under discussion is a multi-unit property?
(2) Where did you obtain your information if not from the FM Multi-Family website?
(3) Why do you consider a multi-unit property unique? (Lenders do NOT like anything "unique". It makes risk go up, way up!)
Last edited by TexasDillo; 03-07-2015 at 10:17 AM..
Maybe the appraisers here can chime in, but you are aware your originator cannot contact the appraiser? You are certainly free to call the appraiser - I have had buyers do that, only to have the appraiser mention it in the report and the UW declare the appraisal invalid for inappropriate contact. If the originator has direct contact with the appraiser, the appraiser is required to report it and the originator will be sanctioned, fined, or both.
Hopefully, your originator knows what he is doing.
HUD guidance and Truth in Lender Act (TILA) does permit contact with the appraiser by anyone associated with the transaction and specifically names buyer, seller, RE agents, etc.
However, no discussion of the appraised value can occur. More specifically, no pressure of any type can be applied to the appraiser as it is a violation of Appraiser Independence standards.
Unfortunately, some parties wanting to contact the appraiser are emotionally compromised because they are stakeholders in the buying/selling process. Buyers want to buy low, sellers want to sell high, and RE agents just want the deal to close so they support whichever side is their client. Most appraisers are not averse to chatting with participants of the buying/selling process if you act reasonably and rationally.
Appraisers do not report every contact by a buyer, seller, or RE agent but are REQUIRED to report attempts to influence the opinion of value. As SmartMoney stated above, lenders have denied mortgages based upon this attempted influence.
In more severe cases, attempts to influence appraised value have been reported to HUD/FHA, FM, OCC, CFPB, and other agencies as necessary to be in compliance with the appraiser independence requirement outlined in TILA. The penalties for violating appraiser independence are severe, including a fine of $10,000 per day per violation.
(1) Why are you attempting to make your case by quoting text from the Fannie Mae Single Family Selling Guide when the property under discussion is a multi-unit property?
A. Because I am an an emotional armature.
(3) Why do you consider a multi-unit property unique? (Lenders do NOT like anything "unique". It makes risk go up, way up!)
A. See above answer,,,, I think your point is that multi-unit properties are not unique. and i tend to agree. In fact multi-unit properties are quite common in the subject neighborhood.
It seems to me the mufti-unit guidelines spells it out even more clearly that appraisers can use properties that are not identical to the subject, so long as it is explained.
The appraiser is responsible for determining which comparables are the best and most appropriate for the assignment. Fannie Mae expects the appraiser to account for all factors that affect value when completing the analysis. Comparable sales should have similar physical and legal characteristics when compared to the subject property. These characteristics include, but are not limited to, site, room count, gross living area, style, and condition. This does not mean that the comparable must be identical to the subject property, but it should be competitive and appeal to the same market participants that would also consider purchasing the subject property. Comparables that are significantly different from the subject property may be acceptable; however, the appraiser must describe the differences, consider these factors in the market value, and provide an explanation justifying the use of the comparable(s).
My appraiser used a very similar 3 unit property to find the value of the 4 unit subject. I think he did a good job, except,,,,..... I think he neglected to say: "Investors who seek to purchase 3 unit properties would likely also consider 4 unit properties.
I think its undeniable that a significant portion of investors who would buy a 3 unit property would also consider a similar 4 unit property.
I guess it all boils down to the appraiser putting the appropriate verbiage onto the document.
I'll tell you exactly what happened (well, likely ). Appraisals are now ran through a system and the loan is assigned a "risk score" based on certain criteria. This one likely came back with a higher than desired risk score and the lender is worried FNMA will not accept it. Find a lender that keeps loans in house and this will not be an issue.
My appraiser used a very similar 3 unit property to find the value of the 4 unit subject. I think he did a good job, except,,,,..... I think he neglected to say: "Investors who seek to purchase 3 unit properties would likely also consider 4 unit properties.
I think its undeniable that a significant portion of investors who would buy a 3 unit property would also consider a similar 4 unit property.
I guess it all boils down to the appraiser putting the appropriate verbiage onto the document.
I guess no one can respond specifically to these comments as we've not seen the appraisal and are unfamiliar with your specific market other than to say that, depending on the circumstances, a three unit can be compared to a two or four unit based upon specific property characteristics including location, gross living area, site amenities, etc. While the sales comparison approach is likely given the most weight for lending purposes, the income approach and cost approach are also factors considered by the lender.
For the comment about "investors", this appraisal appears to be for the purpose of mortgage lending on a small income property (4 units and below fit this category). It is still consider to be a residential appraisal. From an "investor" perspective, a commercial appraisal may be necessary and the normal mortgage lending rules may not apply.
HUD guidance and Truth in Lender Act (TILA) does permit contact with the appraiser by anyone associated with the transaction and specifically names buyer, seller, RE agents, etc.
However, no discussion of the appraised value can occur. More specifically, no pressure of any type can be applied to the appraiser as it is a violation of Appraiser Independence standards.
Unfortunately, some parties wanting to contact the appraiser are emotionally compromised because they are stakeholders in the buying/selling process. Buyers want to buy low, sellers want to sell high, and RE agents just want the deal to close so they support whichever side is their client. Most appraisers are not averse to chatting with participants of the buying/selling process if you act reasonably and rationally.
Appraisers do not report every contact by a buyer, seller, or RE agent but are REQUIRED to report attempts to influence the opinion of value. As SmartMoney stated above, lenders have denied mortgages based upon this attempted influence.
In more severe cases, attempts to influence appraised value have been reported to HUD/FHA, FM, OCC, CFPB, and other agencies as necessary to be in compliance with the appraiser independence requirement outlined in TILA. The penalties for violating appraiser independence are severe, including a fine of $10,000 per day per violation.
Too much information, maybe? LOL
Under HVCC, we were allowed to contact the appraiser, but now, under appraiser independence, no one paid by commission is permitted to speak directly to the appraiser. Whether that is company policy or regulation, matters not, every bank I am familiar with (and I have had the misfortune of working for 4 banks in the past two years by merger and acquisition), we sign an employment agreement we will not speak to the appraiser. I worked for a large east coast bank and saw an appraisal invalidated because the LO spoke to the appraiser about missing some amenities. Didn't say anything about value, but the appraiser perceived that was the request. Appraisal declared invalid and LO fired. So, while it may technically be permitted, I do not believe I will chance it.
Just this weekend, I received a shoddy report, homeowner really upset, and understandably so. Besides missing a 4 level elevator in a prestigious community, the appraiser called a three garage a two car garage (I found that one by the photos), missed 3 zone HVAC, entire home was handicapped accessible, down to kitchen &"baths and 4 ft wide halls, they missed a 350 sq ft attic w walk up stairs ( not pull down) and window and full size door. The appraiser stated view was typical residential, (it was waterview, one house from water) and a comp used, there was a 200K adjustment for the comp being on waterfront, which was crazy. Now in the big picture, these items may not have put the value where the homeowner wanted, but it was sloppy enough for him the question the integrity of the entire report. There's quality work and quantity work, and rarely does one person do both, unless they have a well oiled machine behind them.
Under HVCC, we were allowed to contact the appraiser, but now, under appraiser independence, no one paid by commission is permitted to speak directly to the appraiser. Whether that is company policy or regulation, matters not, every bank I am familiar with (and I have had the misfortune of working for 4 banks in the past two years by merger and acquisition), we sign an employment agreement we will not speak to the appraiser. I worked for a large east coast bank and saw an appraisal invalidated because the LO spoke to the appraiser about missing some amenities. Didn't say anything about value, but the appraiser perceived that was the request. Appraisal declared invalid and LO fired. So, while it may technically be permitted, I do not believe I will chance it.
SM, I do understand your situation.
HVCC not withstanding (since it was sunsetted in 2010), D/F and TILA permit communication with limitations (as you might expect).
D/F Sec 1472, paragraph 129E
USC 12, Part 226 (TILA), paragraph 226.42 (3) Permitted Actions
Some lenders and/or brokers may impose additional restrictions as you stated above.
We do get contacted from time to time with requests for clarification or how to request a reconsideration. No worries about that. We give them the process and who to contact.
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). Appraisals are now ran through a system and the loan is assigned a "risk score" based on certain criteria. This one likely came back with a higher than desired risk score and the lender is worried FNMA will not accept it. Find a lender that keeps loans in house and this will not be an issue.
