Association of Real Estate Appraisers

CAREA Meeting Minutes 1-19-11


George berry not here yet-FHA

Kevin Hart St.Aubin homes

Lonnie Buerholder Air Academy

Phil Getzman, Getzman building

Ty Olson Classic Homes

Marley Federal CBT Mortgage

Gary eisenbraun HUD FHA

Gerry Roybal

Mike Garrett

60 questions New construction appraisal.

1. Out of town appraisers. How can they know if they are not familiar with the market area? Lonnie-They try very hard to find and utilize appraisers that have market knowledge. Marley-opted for a panel in-house rather than an AMC. Gerry-The appraiser by accepting the appraisal order is saying that they have the competency. They need to be honest. Gary-they do not care about AMC’s they care weather an appraiser is qualified. It is still and always the lenders responsibility to make sure they have competent appraisers.

2. How use of AVMs impacts the appraisal process? Marley-run the appraisal through a risk assessment program which includes an AVM. With new construction there may not be any data that an avm can pull. With new construction the avms cannot find the comps. A field review is then the next step. Lonnie-they offer the avm to borrowers so the borrower is aware of what the comps look like.

3. Do the builders use the MLS? Kevin-MLS input is any homes that are not sold. Dirt sale, pre-sales do not get to the MLS. Anything not provided on the MLS can be obtained from the builder. Ty- spec homes are input. They try to send comps along with plans and specs to the appraiser. Gerry-Typically stop by the builder’s office and ask for info. Mike-It gets a little tough to decipher the builder info. MLS is good, builder records are not always consistent and complete and easy to read. You can request the HUD1.

4. How do you find the value in the upgrades and amenities in the new homes? George-they can provide any comp sale info, any price list. They send out the spec sheet. Phil- for custom homes where there is no builder’s office. The custom homes have upgrades beyond the average upgrades. For example a custom window-well will raise the price of the home by $2,000 but may not be recognized by the appraiser. Marley-her investors like to see one from the builder, one from a competing builder and a resale, all within a mile. Then include some that show the amenities have value. Gary-is the item a super-adequacy. You always need to take into account the reputation of the builder. Gerry-in a new subdivision, visit all the model homes, see what the base model quality is. Get the base price list.

5. Gerry from VA says one new build by subject builder, one from competing builder and one re-sale. These are the minimum requirements. If you can’t meet these requirements then you make sure to explain and back it up.

6. Concessions, incentives, discounts??? Kevin-concessions versus incentives. What is the fair value of the home, regardless of the incentives? Is debt reduction considered to be a concession? Ty- if a builder is paying cc or doing a debt reduction, that is considered to be a discount. Same as a resale taking a low offer instead of letting the home sit on the market. Marley- FHA concession is when the lender is paying the finance charges. Anything else is an incentive. VA looks at them differently. Gerry R- free finished basement or free 3 car are tangible concessions because they actually offer value to the property where paying closing costs does not add value to the property. George-VA does not tell you how to adjust. You adjust how you adjust. Be sure to support your position.

7. Foreclosures…appraising in an area with a high number of foreclosures. Builders in an area with lots of stressed sales are generally priced accordingly. Mike-Make yourself the buyer. Two identical homes one selling well below the other. Does that influence the market? If they are prevalent in the market area, they should be considered. Gerry VA- you should be using the most representative sales. If most are REO, you better use REO. YOU need to tell them what the market is doing. Gary-new FHA FAQ addresses what you do if you don’t have comps to support. Jo-if you are using a distressed sale, you need to tell why, per fannie-mae.

8. Do defaulting builders impact the market? Kevin-a builder might be able to purchase the lots and offer a home below the price that the previous builder was offering. Ty-the builders that went under took away some buyers from other builders because buyers were able to buy distressed new construction for less than the cost of building it. That only lasted as long as the inventory was available on the distressed homes.

9. Lot premiums and lot values, including how it appears in the cost approach. Kevin-The land prices are based on the purchase price and tap fees plus any other fees applied by the municipality. Phil-government entities are sticking fees on land for all sorts of things. It is listed on their cost breakout.

10. Landscaping…what is typical? Kevin-some have to be landscaped by the builder per covenants. Kevin does front yard. Phil-they do not do landscaping. If the buyer wants to include it in their mortgage they will try to work with the lender. Ty- some subdivisions require landscaping. If it is not required, they do not do it. Mike-lack of landscaping impacts value as it shows no curb-appeal. Marley-landscaping is included in escrow.

11. VA tidewater? George-tidewater was initiated on the east coast. Intended to eliminate some of the requests for reconsideration of value. Applies to purchases of new and re-sales. If you find that your value is not going to support the purchase price. If this happens you should contact the realtor or the builder and ask if they have anything that they would like you to consider. You take what they give you and analyze it. Do not tell them you are coming in low as that is considered to be an appraisal. Give the point-of-contact 48 hours to provide any additional info.

12. Can underwriters adjust your value? Lonnie-they had an employee that adjusted five appraisals in a year. They were reprimanded on all five and told they did not have enough info to change the numbers. Gary-FHA has a form and can change the value. Gary likes to call the form the “get on with life” form.

13. Who can do a final FHA? Depends on the status. If it is under construction it has to be final inspection by an FHA fee inspector. If subject to repair for carpet/paint etc, anyone can do the final-appraiser, inspector, underwriter. VA if the home has been completed up to the point of buyer preference items you can appraise subject to repair.

14. Appraiser needs the builder certification on FHA appraisals.

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