CoesterVMS presents "Inside the Mind of the Appraiser"; an inside look into the appraisal process from a licensed appraiser.

2. What we will cover
•What Appraisers Look for in a Home
•How Lender’s Guidelines Effect Appraisals
•What They are required to report back
•How the Inspection Process takes place
•FHA Guidelines and Tips
•How to communicate with an appraiser
•What to do .
•What not to do.
•What to never, ever do.
•Valuing Green Improvements
•Q&A

3. What’s inside the mind of the
appraiser?

4. What clients may think….

5. To Become an Appraiser
•4 Year College Degree from Accredited University
•300 Hours of Tested Education Classes (an entire
month of 9 hours a day)
•3,000 “Logged Field Experience Hours”
•Pass a Criminal Background Check
•Become an apprentice for 2 years
•Take a 200 question test and score an 80% or
above
•Take an FHA test
….then you become an appraiser that doesn’t
know anything…

6. Communicating with the Appraisers
WHAT YOU CAN DO….
• You can talk with an appraiser
• You can have normal conversations about the property
• You can question the work completed as well as
provide information.
WHAT YOU CAN’T DO…..
• What you can not do is try to influence or change the value
• You can not select the specific appraiser you want for a
particular assignment.
• You can not threaten them or threaten to withhold
future work if they don’t hit a value.

7. What Appraisers Really Look for in a Home
• Appraisers look for similar "use" that would
appeal to a broader audience.
• The specifics aren't as important as the location the
market, location and other unchangeable factors.
Anything that can be changed with relative easy is not
as much of a factor.
• The biggest single factor is the neighborhood, style of
home, and the overall renovations.

8. Appraisal Guidelines vs. Lenders Guidelines

9. Map of US

10. How Lenders See the US
Guidelines are written to fit these
areas.

11. What Appraisers Really Look for in a Home
• Typical Home
• $273,900
• 2,700 sq ft
• Lot Size 14,680 sq ft
• 3 Bedrooms
• 2 Baths
• Heated by Gas

12. What Appraisers Really Look for in a Home

13. What Appraisers Really Look for in a Home

14. What Appraisers Really Look for in a Home

15. What Appraisers Really Look for in a Home

16. What Appraisers Really Look for in a Home

17. What Appraisers Really Look for in a Home

18. What Appraisers Really Look for in a Home

19. The forms
The Creation of the appraisal
form was to try and standardize
the way things are reported
back to the lender in an easily
understandable format.

20. URAR History
The Appraisal Form’s

21. URAR History
• Revised March 2005
• Grew from 2 pages to 6 pages
• Incorporated former addendum
1004B
• Assumptions and Limiting Conditions
– 10 to 6
• Appraiser Certifications - 9 to 25

22. URAR History
To report an appraisal of:
• One-unit property
• One-unit property
•with an accessory unit
• Unit in a PUD
• Requires interior inspection
• Requires 1004MC Addendum

23. What’s Required In the Report?
• Exterior building sketch with
dimensions
• Interior dimensions for condo or co-op
• Floor plan if atypical or functionally
obsolete
• Gross Living Area (GLA) calculations
• Street map – subject and comps

24. What’s Required In the Report?
• Photos
– Subject property front, rear and street
– Interior photos of certain areas (details
below)
• Operating Income Statement
– Form 216 for investment properties
• Single-Family Comparable Rent
Schedule
– Form 1007 Rent Schedule
– Form 216 when applicable

25. Determining Market Conditions

26. Determining Market Conditions

27. Reports
• Comps
• Adjustments
• Grids
• Addendums
• Reconciliation
• Value

28. Reports

29. Reports
ADJUSTMENTS:
• Match Pair Analysis

30. Street Map With Comps

31. Subject Photos

32. Subject Photos

33. Comparable Photos

34. Home Sketch

35. Condo Sketch

36. How Accurate?
• It’s not 100% accurate and not designed
to be 100% accurate, it’s designed to be
a reflection of the general layout of the
property.

37. Who’s going behind the bush?

38. GLA What?

39. Inspection and appraisal process
So what's the purpose of
the form?
To gather all the
information needed for
the lender in an organized
format, this is not the
appraisal.

40. Reports
The appraisal is the value
and certification by the
appraiser, anything else
is a lender requirement.

41. Fannie Mae Guidelines

42. FNMA Announcement 8-30
Provide Sales Contract to the Appraiser
• The lender must provide the appraiser will all financing data and
sales concessions for the subject
• The lender must provide the appraiser with the sale contract and
all addenda
• If the sales contract is amended, the amendments must be
provided to the appraiser

43. FNMA Announcement 8-30
Selection of Comparable Sales
• Appraiser to provide an explanation as to why specific
comparables were used in the appraisal report when…
• 4 Comparables total
• 2 Comparables within 90 Days
• 2 Listings or Contracts
• Urban – 1 mile
• Suburban – 2 miles
• Rural – 10 miles

44. FNMA Announcement 8-30
Repair Escrow – Existing Construction
• Appraisers reporting the existence of minor conditions or deferred
maintenance items NOT affecting livability, soundness, or structural
integrity of the property may complete the appraisal with an “as is”
status
• Minor conditions or deferred maintenance items to be remedied or
completed after closing may be escrowed by the lender
• Property must be appraised subject to completion of the specific
alterations or repairs when there are incomplete items or
conditions affecting livability, soundness, or structural integrity

45. FNMA Announcement 8-30
Appraising the Entire Site of a Property
Clarification – the appraisal must include the actual
size of the site and not a hypothetical portion of the site
Example: An
appraiser may not
appraise only 5 acres
40 acres
of an unsubdivided
40-acre parcel. The
appraised value must
5 acres
reflect the entire 40-
acre parcel.

46. FNMA Announcement 8-30
Neighborhood Boundaries
• Preferable for the appraiser to provide comparables from the
subject’s neighborhood
• Fannie Mae does allow for the use of comparable sales that are
located in competing neighborhoods
– Best comparables available and the most appropriate for the appraiser’s
analysis
• The appraiser must indicate the comparables are from a competing
neighborhood and address any differences that exist

47. Understanding FHA and What the
appraiser is looking for

48. What FHA will lend on….
Eligible Properties
• Detached 1-4 units
• Semi-detached 1-4 units
• Townhouses
• Rowhouses
• Condominiums
• Approved Projects
• Spot Unit Approvals
Ineligible Properties
• Commercial Enterprises
• Boarding Houses
• Hotels/Motels
• Tourist Houses
• Private Clubs
• Bed and Breakfast Establishments
• Fraternity/Sorority Houses
• Condotels

51. Mixed Use Properties
FHA will finance
properties with
minimal
nonresidential use…

52. Mixed Use Properties
•Must be self-sufficient
•Net rental > monthly
payment
•Net rental income is the
appraiser’s estimate for
vacancies OR the vacancy
factor used by the
jurisdictional HOC or
whichever is greater

53. Unacceptable Locations
Hazaqds
Enviqonmental
contaminants
Noxious odoqs
Offensive sights and
excessive noises to the
point of endangering the
physical improvements

54. Private Water and Sewer Systems
Appraiser to report if public water and sewer are
available.
Lender is to determine feasibility
Usually connection Is considered feasible if the
cost is less than 3% of appraised value.
If home has been vacant from 30 days or several
months inspection and dye test will be required.

55. Private Water and Sewer Systems

56. Private Roads
 Pqivate stqeets and shaqed
driveways
 Each pqopeqty must have
vehicular or pedestrian access
 Road suqface oveq which
emergency vehicles can pass
 The absence of these items
must be noted

57. Accessory Units
 Habitable living unit add
to, created within, or
detached from a single-
family dwelling
 Accessoqy units may not
be subdivided or
segregated

60. Unacceptable Locations
Below 100 year flood level
Flood Insurance
not available
Unacceptable area near airport

61. Unacceptable Locations
Not approved
Instability
Easement

62. Unacceptable Locations
• Three noise zones
• Clear zones
• Accidental potential
zones

63. Unacceptable Locations
• Appraisers who work
in CBRS areas must
obtain the appropriate
maps from the U.S.
Fish and Wildlife
Service
• Prohibited areas on
the maps are those
inside the red areas

64. The Best Way to Deal with the appraiser

65. The Best Way to Deal with the appraiser

66. What if your value comes in low
• Submit an Appraisal Rebuttal
• Provide supplemental comparables that are
similar to the subject that would meet the
lender requirements for standard appraisal
practice.
• Generally speaking pointing out minor errors
will not get the value changed.

67. It is to…
“Address legitimate concerns with the
appraisal in which there is tangible
evidence the appraisal is flawed and the
property is being misrepresented.”
- Brian C. Coester.

68. Concerns on the appraisal
Could be:
1.Better comparables sales are available that support a different
value that are not in the report.
2.Misrepresentation of the property. “I didn’t know the homeowner
owned the waterfront lot next to the house”
3.Overlooking key features such as acreage, view, updates, features.
4.Lack of appraiser competency apparent in the report.
5.Over conservative appraisal.
6.Lack of attention to detail and multiple errors

69. What Not to do
“This appraisal is horrible, we need an extra 10k to make this work. Call
the appraiser and tell him to change it or never use him again!”
“Appraiser missed a ton of stuff, borrower paid 90k more two years ago
and he know its worth at least that we need to order a new appraisal”
“Need more value to close please adjust”
All of these get us nowhere……..

70. What TO do
“Noticed that the garage adjustment was only 2k and the deals very tight.
Can you see if the appraiser can re-look at the garage adjustment.”
“Borrower indicated the appraiser didn’t give appropriate adjustments
for upgraded kitchen and bathrooms as you can see from the photos its
in great shape, can you have him look again?”
“Local realtor was able to find 3 additional closed sales that support a
20k higher value. Can you send these to the appraiser have them take a
look?

71. Your Appraisal Inspection Package
• Copy of Fully Executed Contract
• List of all renovations and improvements done within 5 years
• Any notable features that are not obvious during the inspection
• Copy of Sketch
• Copy of PlatMap
• Copy of Old Appraisal
• If purchase supply appraiser with comparables the agent used
for listing the property.
Anything that may be helpful for them to spend more time on the
report and not in research.

72. What appraisers are dealing with in the
mortgage industry…

73. How appraisers are looking at Green
• Very Difficult to Value
• No Clear Structure in place
• The best is the AI ready energy efficient
Appraisal form that adds some data points.
• Biggest issue is lack of Data on comps
• About 2 – 3 years from a real solution.

74. Thank you
Laura Hite
Market Trainer
Coester Valuation Management Services
Lhite@coestervms.com