After September 1, all appraisals sold to Fannie Mae and other secondary lenders will need to be completed with the Uniform Appraisal Dataset. Once again, the lending institutions have taken over the appraisal process. For each blank on the appraisal 1004 report, a specific list of descriptions will be provided from which to choose the best description. While this appears to be a well-intentioned change, it will also be required for the appraiser to state how old certain features of the home are and when the last update took place. These are very difficult to estimate or determine exactly, and will also place more burden on the Realtors to provide more detailed listing information. And then there are REO properties in which no owner lived in for quite some time - how difficult will establishing the most recent bathroom renovation be?
But the key point of concern in my view, is the adjustment process in the Sales Comparison Market Approach. The subject and each comparable will need to have a specific description for each item selected from the provided dataset. Now, while attempting to streamline the process, any variance in description will require an adjustment or a statement as to why an adjustment was not made. Adjustments are derived from market analysis. In markets with limited sales volume or extremely diverse sales, match-pairs extracted from the market are unheard of. This will open a flood of new AMC Quality Control and lender underwriter requests for additional clarification and comment.
Once again, the lending institutions are trying to apply appraisal principles in a scientific manner to a very diverse housing market. I have always described appraising as a scientific art, wherein sound principles are applied through the interpretation of a trained professional. The last attempt at such uniformity was the introduction of the AVM (Automated Value Module) which has been heavily relied upon to "check" the validity of appraisal reports. Unfortunately, except in highly developed homogenous areas, AVMs become flawed due to their lack of a person to interpret the data from the market. The result has been increased costs for the consumer as variances between the appraisal report and the AVM are resolved by ordering a Review Appraisal with even a second full appraisal being required if concensus on value is not reached. The error in the process, is that neither the AVM nor the Review Appraiser physically inspected the interior of the property and each is relying on assumed data
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