There are many changes within the Fannie Mae and Freddie Mac guidelines which are causing some confusion in the Real Estate and Finance Industry. Let’s see if this brief list will help clear up some common questions or concerns.
Appraisers have been appraising properties of late without reviewing the buy contract. This is now a new requirement for the appraisal companies. Any contracts and/or addendums associated with an offer on a home MUST be handed over to the appraisal company prior to completion of the appraiser. Any changes to these contract and/or addendums must also be provided to the appraiser prior to the final results of the comparative market analysis. Do you reckon this might place another delay on the timeline to close a transaction?
Appraisals that only value a part of a parcel are forbidden. The comparative market analysis by the appraiser has to include the entire parcel of the subject property or parcel of land. The key word here is “entire”.
Appraisers in the past were omitting comparable sales of foreclosed homes, REO properties and small sales. The new Fannie Mae and Freddie Mac guidelines require these types of properties MUST be included in the market value of the property. This could certainly have a negative impact on our housing market.
Third party appraisal companies who are at “arms-length” from a transaction must verify and approve any appraisal completed by someone that might have a financial interest in the subject property. It seems apparent this should have always been a guideline?
Any major repairs have to be considered in the appraisal. Now what a brilliant thought! The appraisal cannot be completed until these repairs are finished. Anyone ever heard of the FHA 203K loan?
A supervising or review appraiser may sign an appraisal that was completed by an employee but if they do, they must complete their own inspection of the property. They cannot rely solely on the word of the employee.
The main purpose of some of these new guidelines that are revised in the Home Valuation Code of Conduct, was to eliminate or stop any “influence” that may have been considered when determining the market value of a home. Although there are some valid and excellent changes, the parties to a transaction still need to be concerned if this will prolong transaction even more in the real estate market.