Fannie Mae Tightens Up on Appraisals

By
Real Estate Agent with The Buyers' Counsel

House with flying moneyFannie Mae Tightens Up on Appraisals 

Since the new appraisal rules went into effect last year there has been a noticeable decline in the quality of some of the work that has been turned out by appraisers.  This has been largely due to the fact that local knowledge of the market has been put on the back burner and, in its place, has been the goal of getting the job done as cheaply as possible. 

The net effect has been third party companies hiring appraisers from up to 100 miles away.  This, of course, negates any chance of their being familiar with the neighborhood that the property is actually in. 

Now it appears as though Fannie Mae has taken notice and has not liked the looks of some of the appraisals on mortgage loans sold to it by lenders.  As a result, they have just issued some new, more stringent requirements. 

The new language specifies that appraisers must have the "requisite knowledge" along with experience and the correct data to perform an appraisal.  This, after much concern has been expressed by industry professionals as to exactly how appraisers are currently being selected.  More detail on this via the Chicago Tribune

Fannie has also said that appraisal reports must now include more photos, including interior shots of the kitchen, main living area, all baths and any examples of physical deterioration and or updating that have taken place in the home. 

The tightening up of standards is definitely a step in the right direction.  Appraisals should not be compromised in an attempt to get them done cheaply. 

We all know that far too much is riding on the accuracy of the residential appraisal.

 

Copyright 2010 "Fannie Mae Tightens Up on Appraisals"

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Re-Blogged 10 times:

Re-Blogged By Re-Blogged At
  1. Marygrace Liparoto 07/18/2010 03:18 PM
  2. Marilyn Boudreaux 07/18/2010 03:36 PM
  3. 1~Judi Barrett 07/19/2010 10:44 AM
  4. Missy Caulk 07/20/2010 02:16 PM
  5. Lizette Fitzpatrick 07/20/2010 02:23 PM
  6. William J. Archambault, Jr. 07/20/2010 03:00 PM
  7. Diane Williams 07/20/2010 04:59 PM
  8. Ally Wangsness - Seattle Real Estate Broker 07/20/2010 05:04 PM
  9. Rebecca Diamond 07/21/2010 08:56 AM
  10. Dan Edward Phillips 07/26/2010 01:35 AM
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Rainmaker
404,048
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Toula:

It is good news. Those appraisals need to be as accurate as possible, otherwise we are all in trouble.

Carla:

I think more photos will be a great improvement.  And, why not? It is more information and that can only help.

 

Jul 18, 2010 12:29 AM #10
Ambassador
545,374
Gerry Michaels
Glasswork Media Arts - Gettysburg, PA
GettysburgGerry Social Meida

Carla, I think that appraisals are one of the biggest issues in the industry today, it is really causing some problems, You are right on the money when talking about the focus being on cost and not a quality appraisal....

Jul 18, 2010 03:20 AM #11
Rainmaker
516,588
Russell Lewis
Realty Austin, Austin Texas Real Estate - Austin, TX
Broker,CLHMS,GRI

...must have the "requisite knowledge"

I certainly hope so because the changes earlier this unleashed a number of appraisers who did not have this vital component, at least in Austin, Texas. Many problems resulted from several who had only worked in outlying cookie cutter subdivisions and did not have the slightest idea how to value older upscale homes in established areas.

Jul 18, 2010 03:24 AM #12
Rainmaker
597,393
Jim Hale
ACTIONAGENTS.NET - Eugene, OR
Eugene Oregon's Best Home Search Website

Now if we can just get them to eliminate the 100-mile distance from allowing "requisite knowledge".

Jul 18, 2010 05:08 AM #13
Rainmaker
597,393
Jim Hale
ACTIONAGENTS.NET - Eugene, OR
Eugene Oregon's Best Home Search Website

As I read the Tribune article one of the more encouraging aspects of this new approach by FANNY is that they are directly appraisers to be careful how they use distressed sales as comps on regular sales.

Jul 18, 2010 05:15 AM #14
Ambassador
3,264,175
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Having just taken the Appraisal module of the Broker Pre-Licensing, I thought requisite knowledge was required via the certification/licensing process of the appraisers.  If they don't know enough about the assignment, they are supposed to turn down the job.  Guess that's not been happening.  Then again, it's not like the Realtor® Code of Ethics really keeps agents on the straight and narrow.

Jul 18, 2010 06:12 AM #15
Rainmaker
1,426,765
Bill Burchard
3B Realty: 951-347-3818, CA - Murrieta, CA
Broker, Realtor, Representing Buyers and Sellers

Hmmm...  So "... appraisers must have the ‘requisite knowledge' along with experience and the correct data to perform an appraisal."  What a concept! How many of us have had appraisals come in unreasonably low recently?  I have!  And I'm not blaming the appraisers. I think they're doing the best they can given the circumstances (i.e. current guidelines). Thanks for sharing, Claudette. The new language is encouraging.  

Jul 18, 2010 12:15 PM #16
Rainer
132,968
Roseanne Campagna
John L. Scott RE Maple Valley, WA - Maple Valley, WA
Kent/DesMoines/Blk Diamond/Renton/Maple Valley, WA

Yeah!!! - they should stop the drive by BPO's also.

Jul 18, 2010 02:57 PM #17
Rainmaker
1,998,934
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Does this mean they merely must be able to find the listing without the use of a GPS device ???

Jul 19, 2010 12:57 AM #18
Ambassador
921,006
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

This is excellent news, I am tired of appraisers coming to Ann Arbor from 2 hours away. Ridiculous.

Let' hope this works.

Jul 19, 2010 01:32 AM #19
Ambassador
2,306,898
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Claudette,

House under contract, appraisal ordered last week by the lender.  I've just been told that it will not be done until August 2nd. 

Jul 19, 2010 10:44 AM #20
Ambassador
2,759,191
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

This is a matter of supply and demand.

When the fee to the appraiser was reduced dramatically, suddenly, there was a shortage of qualified appraisers. 

Simple cure.  Pay the appraisers a decent fee and there will be no appraisal problems.

This is just another problem created by the government.  If you didn't know it before, you'll now know that EVERYTHING THE GOVERNMENT TOUCHES TURNS INTO CRAP.

Jul 19, 2010 11:28 AM #21
Rainmaker
45,810
Lori Cofer
Beasley Realty - Moscow, ID
REALTOR, Moscow Idaho Real Estate

Absolutely .... that is good news .... hopefully these problems will be solved......  Its unfair to sellers to have an appraiser coming in over 100 miles away who are completely unfamiliar with the local market and neighborhood. 

 

Lori Cofer

Jul 19, 2010 04:34 PM #22
Rainmaker
593,168
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Please don't get to encouraged.

"The new language specifies that appraisers must have the "requisite knowledge" along with experience and the correct data to perform an appraisal.  This, after much concern has been expressed by industry professionals as to exactly how appraisers are currently being selected."

It may sound good, but it doesn't say any thing! The Fed' mandated the states license appraisers about twenty years ago. They are all ready suppose to have "the "requisite knowledge" along with experience and the correct data to perform an appraisal."

It was the same people that switched how appraisers were selected, that replaced the rare crook with the common incompetent!

This is the second reform by the sane shysters that caused the problems.

Bill

Jul 20, 2010 02:59 PM #23
Rainmaker
404,048
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Loreena:

Thank you for pointing out that documentary.  I read the article - it is interesting.

Russell:

I think that has been a large problem that was brought on by some of the changes last year.  Hopefully, this will help.

Jim:

The "100 mile" distance is clearly too far away from a subject property.  That appraiser does not know the neighborhood.

Chris Ann:

If they do not know the area, they are supposed to turn the job down?  That hasn't been happening at all.

Bill:

Exactly, and the circumstances that they have been operating under have been "getting the cheapest appraiser possible." 

Roseanne:

It is not clear do me why they sometimes use driveby BPO's for residential sales.  I think they should be using full appraisals to get the correct value.

Michael:

Well, that would certainly be a qualifier; however, I think most of us have come to totally rely on our GPS systems.

 

Jul 20, 2010 04:38 PM #24
Rainmaker
404,048
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Missy:

Two hours away is unacceptable, really. I do hope this works.

Judi:

That's insane. I understand that they are backed up but couldn't that bank find a different appraiser? That seems unreasonable.

Lenn:

Exactly, you get what you pay for. A good appraiser is not going to want work cheaply. I take your observation about government involvement - it does seem to run true in so many cases.

Lori:

Absolutely - you cannot know the neighborhood well enough to do an accurate appraisal if you are coming from 200 miles away (or even 100.)

Bill:

Good point.  We are yet to see the actual interpretation of having the "requisite knowledge."  Sounds good though...

 

 

Jul 20, 2010 04:44 PM #25
Rainer
216,138
Diane Williams
Pell City, AL

Its about time Fannie Mae wised up, I never could understand how they would allow appraisers to come from out of the area and expect to get the correct value of a home.   Excellent post.

Jul 20, 2010 04:55 PM #26
Rainer
63,378
Ally Wangsness - Seattle Real Estate Broker
RE/MAX Metro Realty, Inc. - Seattle, WA

Hi Claudette. Thanks for the good news! I am curious about "requisite knowledge". The time will show, I guess. Great post.

Jul 20, 2010 05:03 PM #27
Rainmaker
745,612
Dan Edward Phillips
Dan Edward Phillips, Humboldt and Del Norte Counties, CA - Eureka, CA
Humboldt and Del Norte Counties, CA

Hi Claudette, The new rules will be interesting, we will see how it works out.  Nice post!

Jul 20, 2010 05:48 PM #28
Rainmaker
326,513
Jim Paulson
Progressive Realty (Boise Idaho) www.Progressive-Realty.info - Boise, ID
Owner,Broker

 

I have a friend that is a lender on a Fannie Mae sale.  Even though no appraisal is "required" if an HomePath loan is done, his buyer was going FHA and here in Idaho, it is customary to have the appraisal paid for by the seller.  That was noted in the original purchase sale and sale agreement and we don't see anything in the Fannie Mae addendum that changes this request.  However, the title company and Fannie Mae are saying Fannie won't pay for it.  Has anyone ran across this?  If so, please contact me. 

 

May 25, 2011 08:49 AM #29
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