The author, David Hintz, of Accurate Appraisals & Consulting of AZ is an active residential appraiser in Maricopa and Pinal Counties, AZ. David actively blogs on both on ActiveRain and Blogger.com.
I did an appraisal recently on a new build in a new subdivision. The buyers (one real estate agent and one loan officer) that I have received business from (sporadicly) over the past two years, had the loan officer's company order an appraisal on the house they were buying. It was a RUSH order, that needed to close before Xmas.
My research found five good comparable sales in the market area less than one mile from the subject property that has sold within the past two months. I also found three active listings and one pending sale that were good comps in the same area. I delivered my report with my value opinion . . . and everyone was happy! 
The next day I receive an email the from lender and started getting calls from borrowers! They need (lender words) a minor detail change. It seems the buyers will need to come up with an additional 5% down. Why? Because the box for declining market was checked instead of stable.
"The report needs to be changed and all graphs included in the report removed."
My reply - Can't do that! My research data (documented in my work file - data, spreadsheets, graphs) and analysis of the market conditions of the subject's market area and surrounding area (for the past twelve months each), and city (for the past seven years) all indicate and support a declining market conclusion. Doing so would result in a misleading report and a violation of regulations.
Lender says they can't use the report. One borrower is crying, screaming, and cussing me out over the phone for ruining their Christmas. The other borrower is claiming they recently closed two deals where the appraisals showed a stable market, by two other appraisers, and if I won't change the report, they will get one of the other appraisers "who will do it right" and not do business with me in the future!
With all the dramatic changes in the Real Estate Market during 2007, it is still common practice for the appraiser to be blamed by everyone when a deal falls thru. Either by loosing clients and business, being black listed or added to a "Do Not Use List", having complaints filed against them, or threatened with lawsuits by everyone and their brother, it is quite clear that others in the real estate industry still do not understand the role of the appraiser.
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While there are many unethical appraisers, who disregard regulations and requirements, providing service to others in the industry that seek them out as "team players", it is the ethical appraisers who are being diminished. So I am providing this information (without going into too much depth) to enlighten those of what is required and expected of a real estate appraiser.
Appraisers have regulations that they are suppose to abide by to retain their license. Lenders have some also.
In addition to USPAP - Uniform Standards or Professional Appraisal Practice (which has changes going into effect Jan 1, 2008), appraisers are expected to follow and meet FannieMae requirements and FreddieMac requirements also, which is to the benefit of Lenders when selling the mortgage loans.
FannieMae issued amended guidelines, earlier this year, for Lenders and Appraisers regarding Collateral Valuation Practices and Declining Markets. I'm sure everyone is or should be aware of. Here is part of it.
Reiteration of Appraisal Guidelines
As stated in Part XI of the Selling Guide, lenders are ultimately responsible for the accuracy of both the appraisal and its assessment of the marketability of the property. In addition, both the lender and the appraiser have certain responsibilities related to the valuation, as reiterated below.
Lender Responsibilities
The lender has the sole responsibility for managing the appraiser relationship and general activities of the appraiser it selects. As such, the lender should verify that the appraiser provides an accurate, independent, and adequately supported opinion of the value and property description, and has considered available public and non-public information concerning local trends in home prices.
At a minimum, the lender is expected to:
· Review the appraisal report to ensure consistency with our appraisal standards, analyze the property based on the appraisal, and evaluate the property's acceptability as security for the requested mortgage loan in view of its market value and marketability.· Ensure that the appraiser analyzes listings and contract sales, if available, along with the most recent closed or settled sales. If the lender determines that the appraisal does not accurately reflect the current market conditions, the lender is expected to request additional clarification or justification from the appraiser, as necessary, to make an informed decision about the property value.
· Have appropriate business controls in place to ensure that no actions are taken by its employees, agents, or third-party originators that may compromise the accuracy of the appraisal report. Such controls may include separating the appraisal ordering process, if possible, from those who have a financial interest, both internal and external, in the transaction. It is unacceptable for a lender's employee, agent, or third-party originator to apply pressure or unduly influence the appraiser to reflect certain results in his/her analysis or reporting. Any identified instances of appraiser pressure will cause the mortgage loan to be subject to immediate repurchase by the lender. (I have to interject here - This can also occur when an appraiser does not get paid for the service provided.)
Appraiser Responsibilities
The appraiser's role is to provide the lender with an accurate and adequately supported opinion of value and an accurate description of the property. We expect the appraiser to accurately report on the primary indicators of market conditions in a given neighborhood whether increasing, stable, or declining.
At a minimum, the appraiser is expected to:· Use the most recent and similar comparable sales available as part of the sales comparison approach. Because excessive sales concessions can artificially inflate the sales price of a property, particular attention should be given to unusual sales or financing concessions in markets experiencing:
o Declining property values,
o An over-supply of properties, or
o Marketing times in excess of six months.· Provide an objective assessment of the primary indicators of market conditions in a given neighborhood whether they are increasing, stable, or declining. For example, when indicators such as price changes, supply and demand, and market activity reflect a decline in property values, an over-supply of homes, and/or marketing times in excess of six months, Fannie Mae expects that the appraiser has considered these factors as part of his or her analysis, and accurately reflects this information in the appraisal report.
· Describe the reasons for these trends and indicate what, if any, impacts these trends have on the opinion of the market value for the subject property. It is unacceptable for the appraiser to ignore these issues and not report the factual property value trends and market conditions.
• Research and/or review available information regarding the home price trends of the market in question.
FreddieMac issued a bulletin in November 2007 - Here is part of it.
DECLINING MARKETS
Lending Practices in Declining Markets
Many areas of the country are experiencing significant and on-going property value depreciation. While the decline in average home prices is widespread, the amount of the decline varies and may be significantly worse than the national average in some areas. In light of these market conditions, we are reinforcing our appraisal standards and underwriting expectations related to maximum financing in declining markets.
Appraiser responsibilities when performing an appraisal
The purpose of an appraisal is to provide the Seller with an accurate and adequately supported opinion of value, based on our definition of market value. Appraisers must determine whether the property they are appraising is located in an increasing, stable or declining market. In reporting the property-value trends, appraisers certify that they have performed an objective and complete analysis of quantifiable data supporting their conclusion. Appraisers must support their conclusions by providing relevant information relating to the property-value trends, demand/supply and marketing time.
Appraisers must also provide a description of the prevalence and impact of financing assistance, e.g. concessions, gifts, or down payment assistance, paid on behalf of a Borrower as well as the assistance generally available in the market. They must also research and comment on the days-on-market, including expired listings of the subject and comparables, as well as list-to-sale price ratios, and the availability of financing. The opinions of value must reflect the value and marketability of the property without concession.
Seller responsibilities for appraisals
While it is an appraiser's responsibility to indicate the property-value trends in the market in which subject properties are located, Freddie Mac expects Sellers to be aware of market trends in their lending areas. We hold the Seller accountable for the quality, integrity and accuracy of the appraisal.
Among other things, Sellers are responsible for:
� Selection of an appraiser qualified to perform an appraisal of the subject property, without attempting to influence the appraiser's results;
� Providing the appraiser with the sales contract and other information available about the subject property and transaction, including any funds paid on behalf of the Borrower, whether or not the funds are considered an interested-party contribution subject to contribution limits
� Properly underwriting the appraisal to ensure that the appraiser's opinion of value meets the definition of ‘market value', and that the appraisal is accurate and fully supported
Sellers are reminded that appraisals must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), applicable Advisory Opinions, laws and regulations, and Freddie Mac requirements.
The author, David Hintz, of Accurate Appraisals & Consulting of AZ is an active residential appraiser in Maricopa and Pinal Counties, AZ. David actively blogs on both on ActiveRain and Blogger.com.
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