Appraisal requirements are changing and have changed

I'm sure you are aware about the FHA guideline ... but I closed on my first FHA that required two appraisals the other day. Two appraisal were needed for over 85% LTV cash-out. And the appraisals came in a little different, of course the lower being used. Thankfully this borrower had a little wiggle room 8-D. I udnerstand the concern, but realistically this could hurt as much as it helps.

So does this only apply to refi's or purchases as well?

Crickey! Things they are a changin', huh! Thanks for keeping us up to date!

This language actually looks older, we have been living with this for years. Some of the things that bother me are comps within three months, not available in some area in winter time. Underwriters defining a neighborhood for an appraier, Second appraisal requirements on FSBO homes.

Wow, this is going to be hard to do, in some areas, like the town I live in there hasn't been a sale in 3 months for comparison. 

This has been pretty standard lately with most lenders.  We have just made it 'the norm' for our appraisers to reduce the roadblocks in the future.  Even when explained, it still does not guarantee the value will hold.  Depends on the area, as you know.

I've been contacted by several lenders looking to update appraisals 60-90 days down the road. With values declining so rapidly in SoCal this is a significant issue and a reason that while apps are up, pull-through rates are way down.

But Fred! How many months do they go back? Is it 3 or 6?

Fred I have issues with a listing comp.  We are now having to do that for BPO's on foreclosures.  It makes no sense to me to use a listing price to help set a price.  Just because a house if on the market for X dollars doesn't mean it's worth X, it could only be worth Y.  Pending I certainly can see the value in that.  Even if it doesn't make it to close you can have a valuable idea of what someone was willing to pay for it, but what if the identical house 3 doors down is on the market but over priced by $50k.  What sense is there in using that as a comp?  Who makes these rules anyway?

Hi Fred -

I'm not sure if that's new to Countrywide or they are just now enforcing it. I don't find those requirements too harsh -

However, I don't think any rules are more clenched than Provident's:

Comparables must be within a reasonable distance (determined by the location of the property).

The following distances must be adhered to:

• 0.5 miles for Urban
• 1 mile for Suburban
• 5 miles for Rural locations

All comparables must have a date of sale within 3 months of the date the appraisal was completed.

Verification of comparable sales with a reliable party that is not associated with the subject property or the subject property's development and at least two comparables must be verifiable through MLS as Arms-Length Transactions. .......

In addition to the three comparables provided at least one current listing or pending sale must be provided DOM for subject if applicable and comparable sales must be provided. The average DOM for the comparable sales must not exceed the Marketing Time box marked by the appraiser.

Provident Funding does not allow an appraisal update of value in Declining Markets

Sometimes these guidelines simply will not produce an accurate appraisal.

And to Tammy's statement... I now add three active listings in each report when they are relevant to the appraisal.  They are added outside of the weighted area of the sales comparison approach and it is stated that they are only there to show the behavior of sellers in the current market.

Hey

I have been trained to use these guidelines  for the past few years. the trick is how to explain why it is neccisary to use comparable sales that are outside thos nifty "Requirements"

No Problema Dito Sara on the active listings

Jeff