 |
>> See Past News Editions >> Click to Print 2015 Expert’s Guide to Defensible Workfile “I purchased the (ebook) and found it to be extremely valuable. Every appraiser should want this in their library.” -Lawrence J. Dellegrotto, Director of Pennsylvania Real Estate Academy Protect your license and your livelihood beginning today with the Expert’s Guide.Find quick tips from an expert on how to produce highly defensible reports that keep you safe and raise the quality of your product. Click now 2015 AMC Guide – Recently Updated |
Lies, Damn Lies… and FNMA ‘statistics’
by Dave Towne, AGA, MNAA
Appraisers… something has been gnawing at my craw ever since January when FNMA’s Collateral Underwriter (CU) was unleashed to the world. And before that, when FNMA’s Appraiser Quality Monitoring (AQM) process was introduced, and which is still in use to judge the work of appraisers.
It has to do with the word “Comp,” which is used liberally by Fannie Mae (FNMA).
What exactly is a “Comp?”
In FNMA’s world, it’s any property that they obtain, either by their vast automated valuation model (AVM), which examines millions of property transactions, or from properties that have been extracted from appraisal reports submitted by appraisers… yes, your work. In their fuzzy logic, it’s a “Comp” to be considered for your report if they say it is. It is not!
A true “Comp” is a property viewed and/or analyzed by a real living, breathing, mirror-fogging appraiser who compares that sold property against the subject property in terms of multiple features, characteristics and amenities. It is not determined by an AVM or algorithm within the vast bowels of FNMA. Until the property has such analysis done by an appraiser, it is merely a SALE… it is not a “Comp.”
This FNMA’s misguided perspective- intentional or not- became evident to me via a news release about how CU has been integrated into their on-line Desktop Underwriter software, that mortgage lenders use, and which you can read here: http://www.fanniemae.com/portal/about-us/media/corporate-news/2015/6239.html?p=Media&s=News+Releases&from=RSS.
Within that news release is this quotation from a VP at a mortgage lender: “The collateral information that CU provides is invaluable and simply staggering,” said Breck Tyler, Executive Vice President, Trustmark Mortgage Services. “CU has aided in providing important comparable data that was previously unavailable or very difficult to get. CU messages in DU will help streamline appraisal review and make the underwriting of an appraisal a much more informed process.”
(story continues below)
(story continues)
Then FNMA released additional information directed to Correspondent Lenders who intend to use the CU process in the Uniform Collateral Data Portal (UCDP) but don’t intend to sell the loan to FNMA: https://www.fanniemae.com/content/fact_sheet/collateral-underwriter-non-seller-implementation-guide.pdf That includes this statement: “Fannie Mae does not instruct or suggest to lenders that they ask appraisers to address all or any of the up to 20 comparables that are provided by CU for most appraisals.”
I want to repeat what I said above… in case you missed the point: a property is not a “comp” unless YOU determine it is and include it in an appraisal report. Otherwise it’s just a “sale.”
If you’re an appraiser who liberally uses the word “Comp” in place of a “property sale” I would ask that you be more careful. If you receive information from a lender, AMC or anyone else who asks you to look at the “Comp” that they have provided, correct them and use the words “sale property” until you have determined that it truly is a “Comp.”
I’m also asking members of appraisal organizations and associations to communicate your concern directly with FNMA about this misconception, that they seem to be perpetuating, and ask that they change the word “Comp” to “property sales” in their CU Reports, news releases, instructional materials, etc., so that there is no misunderstanding about the significance of this issue.
If we all won’t do that on behalf of all appraisers, then we might as well kiss the profession of residential real property appraising goodbye. Because if a list of “sales” is considered as “Comps” then an actual human appraiser won’t be needed to provide supportable property analysis and market value reports.
Upcoming Live Webinars:
Bulletproof Appraising: Fannie Mae, Due Diligence and Your State Board – (Two-Part Webinar)
Part 1: May 12th, 10 – 11:30 a.m. PST
Part 2: May 19th, 10 – 11:30 a.m. PST
Are you prepared to successfully defend your work against inquiries from Fannie Mae, your state board and your AMC/lender clients? Are you sure? This webinar is designed to share an expert’s knowledge of what it takes to protect yourself. Gained through years of defending appraisers before their state boards, over real-life reporting issues, USPAP expert Tim Andersen, MAI helps you fill in any experience or knowledge gaps in your practice so you can appraise confidently and successfully. Learn More / Sign Up Now
Special: Free Webinar Thursday
Background Checks—Understanding the Problem, Finding a Solution
Are you tired of paying for background checks? Do you ever wonder WHY AMCs want background checks even though your state board already cleared you? In this webinar, Comergence Executive Corey Prezenkop explains the laws involved, where the requests are coming from, and how to simplify the process, save time and money, and avoid paying for background checks for multiple clients no matter how many AMCs that you work with. Time will be set aside to answer questions. Comergence is a leading security and compliance firm. Sign Up Now!
>Click to Print
>New: Collateral Underwriter Blog: Find answers, offer solutions.
>Opt-In to Working RE Newsletters
Send your story submission/idea to the Editor: dbrauner@orep.org
by Garth
I see the point of the author. Any property can be a comp, but is not one until it is used by the appraiser/ No one else is allowed to label a sale as a comp on behalf of someone else.
In your example, if the home sold next door, then is most likely a “Potential” comp. Even if 50 other appraisers used it as a comp, a third party cannot tell you that it is your comp or that you must use it because they told you it was a comp. It is up to the appraiser to determine the comps.
-by Debbie Biehl
Just wait until the market is saturated with appraisal work.
-Fees will skyrocket and Lenders will wait 3-4 weeks to get the reports.
Appraisers will be the new Mafia!
by kevin
Whats amazing is how appraisers rant & rave about all the b/s that has gutted our Businesses & Livelihoods yet nothing is done! There still arent any Appraisal Unions, Appraisers are still being robbed of fees, AMC still dominated the market, Fee’s are still stagnant or lower than 10 yrs ago, appraiser boards are still “extorting” appraisers for money & the Appraisal Business is diminishing by the year. Ive been in the business for 11 yrs, seen my revenues drop from 100k+ to less than 30k, Im out of this game b/c its a no win situation! Appraisers write letters & emails=nothing getting done; appraisers testify before congress=nothing gets done; frank dodd=nothing gets done; conversations over customary fees=nothing gets done! The only thing that has changed is that appraisers are doing more work for less money and bullet proofing an appraisal report is a joke when every a-hole reading the report knows anything about appraisals but the appraiser is still having to prove his work to a bunch of idiots who doesn’t understand anything but the final value number. Forget this Gig, the Glory days are gone forevet!!!
-by Ray Willis
A comp is a comp. Period. If a property is identical to the subject in every way (obviously location can never be identical as 2 things cannot exist in the same space) except that it is ‘next door’ to the subject, and sold recently, and open market, etc, it is a comp. Whether anyone ever considers the property for an appraisal, or includes it in a report is irrelevant. It is comparable. If there are 20 comps but you only use the best 6, the other 14 are comps. Just because an appraiser didn’t put them in a report or didn’t ‘consider’ them is irrelevant. If a property hasn’t been ‘considered’ or used in a report, but would be a perfectly acceptable comp, it is a comp. I understand that a sale a computer selects based on limited parameters doesn’t make it a comp. It may or may not be. An appraiser may consider something that the computer didn’t (couldn’t) consider. A major typographical error in the sale price, GLA that is hugely different (an addition not showing up), etc, etc. Yes, just because a FNMA computer considers it as a comp does not make it a comp. Either it is comparable in appraisal terms, or it isn’t. Whether it is an acceptable ‘comp’ or not is another story. Using 2 4500 sqft and 2 7500 sqft homes as the only 4 ‘comps’ for a 6000 sqft home certainly isn’t ideal, but, if they are the best ‘comparables’, then they are the best ‘comparables’. If I have no intention of selling, refinancing or doing anything requiring an appraisal, and I am not an appraiser and I look at 2 identical recent sales on either side of me, those 2 homes are still comparable. If a home is comparable, it is a comparable. Period.
-by Ken Smith
Very good article and the comments are right on
-by Mike Agnew
Re: FNMA -Whats a comp? — What happen to FNMA’s old guideline1985? ~ (+/- 20% sq ft, +/- 10 years age, within one mile, similar style, quality, acreage.
-FNMA distance guideline never made any sense – the Verex Guideline of 1-3-5 miles (urban, suburban, rural was more appropriate. I’m old school and still use it. I’ve seen AVM comp lists as used in underwriting reviews and much of the list is totally irrelevant.
by TD
I was saying this exact thing 2 months ago.
When I read this quote from FNMA, I posted on a blog the response below…..
” Fannie Mae does not instruct or suggest to lenders that they ask the appraiser to address all or any of the 20 comparables that are provided by CU for most appraisals. It is also not Fannie Mae’s expectation that appraisals should contain only CU’s top-ranked comparable sales. In the majority of cases, there may be no material difference between comparable sales utilized by the appraiser and those identified by CU. Before asking the appraiser to consider any alternative sales, it is imperative that the lender analyze the relevance of the sale and determine if the use of such sale would result in any material change to the appraisal report. If the lender determines that there would be no material change, then they should not ask the appraiser to make revisions. Fannie Mae expects CU to enable lenders to accept appraisals “as is” with greater confidence.”
What???
-✦How can “the lender analyze the relevance of the sale and determine if the use of such sale would result in any material change to the appraisal report” if they are NOT licensed appraisers?? Isn’t this EXACTLY what we as appraisers do when engaged by a client to perform a REVIEW of another appraisal report? Only an appraiser can analyze a SALE to determine if it is COMPARABLE to the subject.
by Edd Gillespie
Excellent observation Mr. Towne and thanks for sharing it. So much of our language has been corrupted by the real estate and lending industries and it is time we professionals all become far more careful with the words we use and the meanings we intend to convey. It is also past time that we define ourselves as separate from both the real estate industry and the lending industry. We are economic analysts and we do not work for Fannie, AMCs or lenders, but for ourselves and we have a calling above making a profit from real property transactions.
Beyond the point of the article, it is important that we always remember that Fannie does not have the back of the appraisal trade. It is essential if we are to survive that we learn our trade from a source other than Fannie.
-by Free Speech
I’ve been trying for years to get appraisers to not use the word “comps” at all and not to call all sales or listings “comps” or “comparables”. Well, of course, they’re all comparable to something, but that’s not the point, is it? The lending industry is simply trying to drive us out of existence. That should be apparent to everyone by now. They have their statistics that they can manipulate any way they want so I’m sure they’re very happy and excited. The good news is that there will probably be only one more crash they can blame on appraisers. They’re blame real estate agents/brokers after that and put them out of business. It’s an Orwellian, digital fantasy land out there. Just think, a loan officer who struggled long and hard to get his or her GED and a smart phone is all it takes to be an appraisal genius, huh?
-by Bill
The thing that irks me about lenders and others involved in the loan origination process is they don’t seem to want to just leave well enough alone, with regard to the valuation process. Hello! We already have the best thing going: value opinions developed by a living, breathing, expert appraisers. This IS and ALWAYS WILL BE the best way to obtain an accurate market value for residential real estate. Those “creative minds” seeking to create and sell their version of “the next best thing” in valuation software are simply feeding lenders desire to eliminate the appraiser from the equation. And don’t kid yourself, the lenders would love that – all those appraisal fees, if added up, would make up quite a tidy sum they could stash in their coffers. So we are up against some very primal forces here, mainly greed. If we appraisers are to survive, in the short and long-term, we need to keep the highest profile possible and shout our value from the rooftops.
-by Michael Fitzpatrick
Absolutely right! Well written (as usual). The only suggestion I have is to provide the email address or point-of-contact to send the message to FNMA as you suggest. Regards, Mike
-