Fannie Mae Institutes new Appraisal Guidelines

Fannie Mae has established new guidelines for filling out an appraisal report.

The following requirements and clarifications are included in the guidelines:

– Supervisory appraisers can no longer just sign off on an appraisal – they must inspect the property themselves.

– The sales contract and all addenda must be given to the appraiser. If the contract is updated, the updated contract must be given to the appraiser.

– If the appraiser uses comparable sales from outside the neighborhood where the property is located, they must explain why they are doing it.

Fannie also clarified some appraisal issues:

– Repair escrows can be used for minor problems with the property (worn carpet, minor plumbing leaks, holes in screens, cracked window glass, etc.).

– The appraiser must comment on each time the property has been listed for sale in the previous 12 months.

– The appraisal must be for the entire property, not just for a part of it (all acreage must be counted).

– If an adjustment for the effective age of the property is used in the appraisal, it must be explained.

– When anyone with a financial interest in the transaction (real estate agents, buyer, seller, mortgage broker, etc.) provides the appraiser with comps, the appraiser must verify them.

– Neighborhood boundaries cannot be expanded to encompass comps.

– Time adjustments must reflect the difference in market conditions between the date of sale of the comp and the date of the appraisal.

These guidelines go into affect January 1, 2009.

What do you all think? Are these guidelines helpful to the appraisal profession, or do they just make it more difficult to be an appraiser?

  1. Bill

    Regarding supevisors must inspect- this is only in regard to trainees. They can sign ‘did not inspect’ as the supervisor if the property was inspected by a certified appraiser, not just a trainee.

  2. Justin

    Well, I think whoever inspects the property has to sign the document. So if it’s a Certified Appraiser who inspects the property then they sign the appraisal.
    A Supervisor only needs to sign the appraisal if a Trainee has filled out the appraisal form. And now the guidelines requires that the Supervisor also inspect the property. I suspect this is to prevent supervisors from having trainees in other states filling out the appraisal forms.

  3. Bill Edwards

    How does seller paying buyers’ closing cost and adding to price of property fit into this? If sellers agree to sell at market value and then buyer needs to finance several thousand dollars in closing cost then property has to appraise for more than market value.

  4. Dod

    Sellers and buyers don’t sell at or create market value by virtue of their deal. They agree to a contract price, which may or may not have a seller concession. It is then the appraiser’s job, analysing comparable sales of other similar competing properties, if the market value is higher, lower or the same as the contract price.

  5. Most of this should be done already, but another form to complete = more $$$.

  6. Lucia

    As Mark said, this is supposed to be done on all reports already. However, no fee increases will result from this mandate, as usual.

  7. sam nelson

    It is fluff. Many of the “new” guidelines are old ones. Most are nebulous while & other too restrictive. Remember, they are just lines to guide and not rules to adhere to. I’m of the school that get a true value, do not bias the appraiser with the Sales contract. But in the end, the Lenders, Banks, AMCs, and Realtors are at the root of the problem. Sam Broker & Appraiser

  8. Mack Strickland

    More work for the ethical appraiser. This is the result of low fee AMC’s. They create an environment encouraging appraisers to skirt USPSP requirements in order to generate volume to make up for the low fees. AMC’ also are racketeering the appraisal industry buy forcing appraisers to accept low fees or not receive assignments from their past clients. HVCC is bad for the industry. It’s like the fox guarding the hen house! Banks, through AMC’s are using appraisals as a profit center. If congress wants to clean up the appraisal industry then require lenders to use a rotating pool of appraisers or require the states to police their appraisers.

  9. Corrinne Lane

    Our state regulatory board has in place suitable rules concerning when a trainee can inspect alone. It ultimately lies with the supervisor and their e and o insurance if they are willing to put themselves on the line and not inspect a property. The same goes for licensed appraisers working for a firm. They are supposed to be trained and licensed and this should be sufficient as the supervisor is responsible no matter if they inspect or not. I prefer to inspect but it is my choice right now.I hope this means the end to “as is” appraisal. Escrows are a good idea to bring back.This will end the make sure the repairs are not over a $ amount or the deal is dead theory. The rest is just repeat as we as appraisers are following USPAP already.

  10. Greg

    As stated by others, this is something that all appraisers should have been including in their reports for at least the last two or three years. You better believe I am going to hike my fees to cover this new form. My estimate is that in a good market this form will take at least an hour to complete. In a declining market with foreclosure sales you can budget 3 – 4 hours for it. I am not putting that much more work into an appraisal for nothing. They can kiss my grits and get skippy to do it and see if that gets the job done for them. At least, that’s my plan.

  11. Tom

    I think the must inspect scenario will ultimately lead to fewer trainee positions. I know I can review many more appraisals from my 3 competent trainees than it takes to accompany them on inspections. If I have to visit each property, why pay a trainee, I might as well do the job myself. The competency provision already addresses this. If a trainee is competent to complete the inspection on their own then why does the supervisor also have to inspect the property. If on Monday a person is a trainee and apparently (according to FNMA) not competent to complete an inspection on their own, then on Tuesday they get their certification number, are they magically more competent to do an inspection?

  12. steven davis

    So what else is new? I have been doing what FNMA is now demanding for years. It is office policy SOP. Of course, it is difficult if not impossible to ‘make value’ under those criteria which is why my business has languished for the past three years. I do not discount my work as I take my work and job quality very seriously. I have had to clean up after others who haven’t or have been willing to go along with the bank’s agenda for that property. But the ultimate indignity I feel is being required to sell myself as a prostitute while being expected to remain an umpire and with no one to support me, not even the Appraisal Institute of which I am a member.

  13. z. parker

    If I have to give my opinion, Appraising is a type of work – and work is always all the time hard. If your source of money is easy, then it is not work at all, it is a mystery or should I say maybe illegal?

  14. nobilis , noctuabundus

  15. Trina Rust

    i think some appraisers need to look at the big picture,and not just what they think is an asset to the home in question,or what they think the home is actually worth,i mean we are not comparing apples to appples here.i believe that everyone’s home should be based on individuality and not be compared to others in the surrounding area,for example take a raised ranch for instance and comapare it to a ranch style home,they are no where near the same,i believe that the two of them are different in many way’s.example:with a raised ranch there is potential to upgrade the lower level of the home,and add more bedrooms and maybe a livingroom and a study perhaps.and as with a single level ranch style home, you don’t have those options to make those kinds of upgrades in the i think the house as a whole should be assest in every aspect and with every intent to add all upgrades done in the what i am saying is, is that fair to the home owner if you compare every home within a 5 to a 50 mile radious of there home with someone else’s home.there needs to be fair judgement in appraising a home.and think the guidelines are not fair and unjust.i know because i am one of those people that this has happened to.and i believe that the guidelines are to bias.and they need to be that people get a fair shake at what their house’s are worth on the market.the market may not be the best we have right now,but at least give the homeowners a fair deal on the home at hand! thank you!! change the guidelines.and not to mention the fact people wonder we have such a high foreclosure rate. the mortgage rates are to high.

  16. John Carlson

    I did an appraisal in California of an older home with a finished area on the lower level which was not reflected in the county records. The reviewer from Texas indicated that CitiBank wanted this included as a basement not GLA. It had legal ceiling height, central heating, and also the master bedroom and bath. The finish work was similar to the existing structure but a portion may have been below grade. I am not sure this is correct methodology when including this area is the norm and also was included in the prior mls listing a few years ago. Realtors typically include this in there listings. Any suggestions?

  17. David

    RE: Time adjustments must reflect the difference in market conditions between the date of sale of the comp and the date of the appraisal.
    This new process killed my refi with a 5 month old comp adjusted almost 25% to the date of the appraisal effectively knocking off 70K in property value. I’m in California and this process will kill the market.

  18. B Morgan

    I think some are confused on here. Fannie Mae does not dictate what appraisers can or cannot do, that is USPAP (Uniform Standards of Professional Appraisal Practice). There are no distance requirements for comparable sales as most non appraisers believe. Also, USPAP states that the contract should be obtained “in the normal course of business”. If it was not provided, explain why.

  19. c.short

    I have property that I would like to re-fi, but there are no comparables. These are rental units on 3/4 acre lot.
    1 three bedroom home w. adjoining efficiency, and 1 duplex at the rear of the property.
    Lenders won’t touch it because there are no comparable sales.
    Are there alternate ways to appraise that would be acceptable to the new guidelines?

  20. Trevor

    Fannie Mae’s guideline is that time adjustments need to be made from the contract date of the comparable sale to the date of appraisal (effective date). This is in contrast to making a time adjustment from the closing date (recording) to the date of appraisal, in effect to accurately portray the time the “meeting of the minds” between buyer and seller took place. I believe this may be good when you have a refinance because there is no sales contract involved. BUT when an appraisal of a subject Sale is taking place, would it not be more accurate to calculate time adjustments from the contract date to the subject contract date, instead of contract date to the date of appraisal ….. huh?