Big Changes in Conventional
Appraisal Standards Began September 1
Appraisals
continue to be the knothole in a lot of real estate
transactions. Underwriters and lenders struggle to make sense of the
hodge-podge of commentary and adjustments on appraisals as well.
In
an attempt to provide consistency and accuracy to the appraisal process, Fannie
Mae and Freddie Mac have implemented the UMDP (Uniform Mortgage Data
Program) and, ready or not, it rolled out on all appraisals completed
on or after September 1, 2011. (FHA has issued guidance that they will
follow suit with all case numbers issued January 1, 2012 and after.)
Obviously, the appraiser's job changes with this. But
what does this mean to the rest of us - REALTORS, Sellers, Buyers, Refinancing Homeowners?
While
it is the most common source used for information gathering on comparable sales
and currently, the MLS may or may not
provide all of the data that appraisers will now be required to report. Therefore,
they will have to call the listing REALTOR to get it. This could
slow things down a bit, and prompt responses by all will be very important to
getting appraisals completed on a timely basis.
Some
of the significant data changes include the way the following items are
reported:
- Days On the Market
- Offering Price
- Sale Type
- Financial Assistance
- Site Area
- Property View
- Property Style
- Condition of the subject property
- Sale Date of Comps
- Quality of Construction (This is one of the biggest changes being made!)
- Basement and Finished Rooms Below Grade
- Appraisal Management Company Reporting
Home sellers will need to help their REALTOR with the gathering of some of the above data points. They need to make known what improvements, especially kitchen & baths, have been made and the costs of those improvements.
Home buyers and home owners taking advantage of the current rate market to refinance their home may face a longer lead time as these changes are put in place.
On a final note: 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. There is a process that takes place once the appraisal is in that tests the appraiser’s result against an automated valuation model for QC purposes. If this process detects that there are other, potentially closer or more recent comps, it will red flag the appraisal data. The underwriter may then have to further investigate value through the use of a review appraisal or by getting additional information from the current appraiser. So, it’s never over these days until we have a firm commitment from the Underwriter. At Fairway, we have in-house underwriting so we can reach out if needed.
Note to REALTORs: We have developed a Cheat Sheet for our REALTOR
partners to use. It will be a great supplement to your listing
appointments and your work in writing purchase agreements.
Please contact me to
learn more about the high points of the specific changes to the appraisal
process and how Fairway can help keep your transactions moving smoothly to
closing.
918-528-4010
Tim Epps
Sr Loan Officer918-528-4010
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