Appraisals play a huge role in obtaining financing for a property. Therefore, everyone in the Real Estate and Lending Industries needs to be informed, and have a basic understanding of What Are The Appraisal Requirements & Responsibilities especially for Conventional Loans. The last opportunity I had to attended a seminar on understanding appraisals and the appraisal process, was three to four years ago, and even though I had been a Loan Originator for several years, there was a lot I was not aware of. Even though this seminar was a three to four of years ago, the information I will share in this blog remains the same.
All the information presented at the seminar was important, but what stood out to me the most were the requirements and responsibilities Fannie Mae & Freddie Mac require from Lenders and Appraisers. Fannie Mae & Freddie Mac require Lenders be accountable for:
- The selection of an Appraiser qualified to perform an appraisal of the subject property, without attempting to influence the Appraiser's results.
- Provide the Appraiser with a Sales Contract and other information about the subject property and the transaction, including whether funds are paid on behalf of the Borrower come from a contribution from an interested-party and are within allowable contribution limits.
- Reviewing the appraisal to ensure the Appraiser's opinion of value meets all the Fannie Mae or Freddie Mac definition of "Market Value", the appraisal is accurate, and is fully supported, and in compliance with Secondary Market guidelines.
- Effective May 1, 2009 the Lender must also verify that the appraisal was ordered and completed in accordance with the Code of Conduct.
In sellecting the Appraiser the Lender MUST follow and meet the following criteria. The following is right out of a Fannie Mae Announcement 2010-09:
"Lenders are reminded that appraisers must have the requisite knowledge to perform a professional quality appraisal for the specific geographical location and particular property types. The use of an appraiser who has the appropriate knowledge of specific geographical markets, access to the appropriate data sources, and experience in appraising specific property types within those markets will help to ensure that valuations are accurate and that appraisal practices are appropriate. Although the Uniform Standards of Professional Appraisal Practices (USPAP) allows an appraiser who does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae requires that lenders only use appraisers who have the appropriate knowledge and experience, and does not allow the USPAP flexibility. Consequently, the Selling Guide has been updated to state that appraisers who lack the requiste knowledge, experience, and access to appropriate data must not be utilized.
Additional revisions have been made to clarify that the lender is responsible for the appraiser's qualifications and quality of the work, and to provide guidance for determining an appraisers's qualifications"
Besides the above requirements and responsibilities of the Lender, Apprasers are requrired to Certify and Attest to a number of things on the Appraiser's Certification Section of the appraisal. There are 25 statements the Appraiser Certifies and agrees to on the Appraiser's Certification Secection of the appraisal. I have seen the two pages which make up the Appraiser's Certification Section of the appraisal many times but never took the time to read them. I expect most Realtors and Loan Originators have also not read them as well. If you have never read what Appraisers have to attest and agree to on EVERY appraisal, I suggest you do so. All of the 25 statements are important, but there are two I think Realtors and Loan Originators will find very interesting. The two statements I am refering to are statements 11 & 12. They read as follows:
11) "I have knowledge and experience in appraising this type of property in this market area."
12) "I am aware of , and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records, and other such data sources for the area in which the property is located."
Prior to attending the Seminar I was not aware of any of the above, so this was very enlightening for me, as I am sure it will be to many others who read this blog. These requirements as well as other Appraisal Requirements & Responsibilities for Conventional Loans required by Fannie Mae & Freddie Mac are all available to the public. So if we educate ourselves and become aware of the required responsibilities, we will be better prepared to ask the questions on an appraisal we may have an issue with.
Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org