EXPECT CONSERVATIVE APPRAISALS

EXPECT CONSERVATIVE APPRAISALS

Mortgage lenders are advising real estate agents and home sellers to expect more conservative appraisals with the new FHA Appraisal Guidelines.  The information below was provided by Peggie Shiei at SunTrust Mortgage. Appraisers are under greater pressure to provide valuations that very closely reflect the current market conditions.

For example, #8 below provides "Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales."  In the Maryland suburbs, the statistics for many areas show that the average sales price in in the range of 90% of the average list price.

Time will show the impact on the market. Listing agents need to be even more careful to property price the properties they are marketing. The guidelines will definitely provide greater protection for home buyers and great protection for the investors that are purchasing securities backed by mortgage loans.

Revised FHA Appraisal Guidelines in Effect
for Appraisals Done after April 1, 2009

Revised federal guidelines that outline 10 things that appraisers must do or provide for all FHA appraisals done after April 1, 2009:

Revised FHA Appraisal Guidelines

1. The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71).

2. At least 2 comparable sales within 90 days of appraisal date.

3. A minimum of 2 active listings or pending sales in addition to the 3 closed comparables.

4. Bracketed listings using both dwelling size and sales price when possible.

5. Adjust active listings to reflect the List To Sales Price Ratio.

6. Adjust pending sales to reflect contract sales price when possible.

7. Include original list price and any revised list prices.

8. Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales.

9. Absorption Rate Analysis.

10. Known or reported sales concessions on active and pending sales.

FHA also is restating its warning that..."Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA."