Educational

Several months ago, I received an email from one of SAMCO’s appraisers. Now, I’m proud of the quality work that all of our appraisers provide, and I’m also proud that many of them feel like they can call or email me to discuss challenges and issues they run across. With all of the stress the real estate industry has faced over the past few years, I feel our own little corner of it, appraising, has just become more and more professional. What this appraiser was concerned about was valid. Sometimes you just need someone standing a little further away from the fire to get a clearer perspective, and that’s what I was able to provide here.

Listed below is the left-hand side of the sales comparison grid, which should look familiar;

SAMCO’s appraisal requirements are available here /appraisal-requirements. They are just good basic “rules of thumb” to follow, and most are based on Fannie/Freddie requirements. One of those rules is having all of your adjusted comparables within 20% of the subject’s estimate of value. Many lenders require all of the adjusted comparables to be within 15%, but at SAMCO, due to our clients being in rural areas, we have relaxed that a bit. After all, you are to adjust the comparable to the subject, and in a perfect world, that would mean all of your adjusted comparables would be within 0%! This isn’t a perfect world, though!

Fannie Mae’s Selling Guide is very specific for appraisal requirements. Let’s review some specifics that must always be met.

Above-Grade Room Count and Gross Living Area

Only finished above-grade areas can be included in the calculation of the gross living area for an appraisal. Basements and other partially below-grade areas must be considered separately and the appraisal adjusted accordingly.

Selecting recent sales most similar to the subject can be challenging, especially in rural areas. SAMCO understands that. I want to share with you one way to reduce underwriting requests for additional comparable sales.

The days of jumping through hoops to keep the Loan Officer happy (or you wouldn’t receive anymore orders) thankfully are gone. But that doesn’t mean that taking care of our customer (the community bank) is gone. No, in fact, it’s been ramped up to a certain degree.

Follow along the trail of Service:

Fact One: Appraising is rural areas can be difficult.
Fact Two: When an appraiser is armpit deep into an appraisal, confusion can happen.

Below are three ‘real life’ photographs of properties located in the same rural market, all on 1-3 acres. At a glance, which 2 of these properties are comparable to each other? I think most would say unquestionably it’s the first one, and the third one. Do you agree?

The Fannie Mae Selling Guide specifically addresses verification source(s). On the left-hand side of the Sales Comparison Grid under "FEATURE", five boxes down, is "Data Source." Place your primary source of data for each comparable in this box. Your data source may be the county auditor, MLS, or even your own files. Fannie/Freddie stresses the importance of verifying your data source to ensure it is correct. In Using Residential Report Forms, a must-read for every appraiser, Mark Rattermann states, "Appraisers who use the minimum amount of data should confirm that data to a reasonable degree.

"Bracketing can't always be done"; I agree. "Bracketing doesn't make sense"; I disagree. Bracketing is a requirement that produces a defensible report. Striving for a defensible report is reason enough for appraisers to ensure that;

This assists in balancing the report and making it defensible. You might have to utilize additional comparables and a second grid. Your best indicator of value may be on that second grid!

The National Flood Insurance program has changed their requirements and this change affects all appraisers’ photo addenda. Effective immediately, ALL IMPROVEMENTS on a subject property are required to be documented with a photograph. This includes, and is definitely NOT limited to personal property non-fixtures such as yard sheds and above ground pools, playhouses, grain bins, chicken coops, or any barn or structure that has collapsed and is not provided value.

Providing photographs of collapsed buildings or fully depreciated structures is very important as the bank would have photographic proof that would protect them after loan closing for any claims.