Some builders have proposed to establish databases or books of new home sales in a format that could be shared with appraisers. Accordingly, NAHB has put together a simplified format of information about new home sales in a way that would match closely the home sale information an appraiser might retrieve from a multiple listing service. To view a possible format for new home sale information, click here.
BUILDER GUIDELINES
(To download information below as a PDF, click here.)
What should the builder expect from the appraiser and appraisal process?
o Appraisers should provide an opinion of market value.
o Full communication and acceptance of builder’s knowledge of the market.
o Builder must understand the relationship between the appraiser and the appraiser’s client.
Is the client a local, regional, national bank?
o The appraiser selection criteria are based solely on lender guidelines.
o Builder should demand lenders utilize qualified, designated appraisers.
o Your first concern should be the lender and their process of selecting appraisers.
o Most lenders require one sale from the builder, one from a competing builder, and/or a re-sale from the subject’s neighborhood.
o Lender could require having two to three sales within 90 days in addition to one pending sale and one listing.
o Appraisers should provide an opinion of market value.
o Full communication and acceptance of builder’s knowledge of the market.
o Builder must understand the relationship between the appraiser and the appraiser’s client.
Is the client a local, regional, national bank?
o The appraiser selection criteria are based solely on lender guidelines.
o Builder should demand lenders utilize qualified, designated appraisers.
o Your first concern should be the lender and their process of selecting appraisers.
o Most lenders require one sale from the builder, one from a competing builder, and/or a re-sale from the subject’s neighborhood.
o Lender could require having two to three sales within 90 days in addition to one pending sale and one listing.
Use of AMCs is not required.
o Many local/regional bankers are managing the appraisal function in-house.
o Be proactive and understand lender’s process in ordering appraisals and approving appraisers.
o Appraisers cannot be chosen by someone with a financial interest.
o No requirement that appraisers must be chosen randomly.
o The appraiser can be selected by the lender based on the appraiser’s experience qualification.
o Many local/regional bankers are managing the appraisal function in-house.
o Be proactive and understand lender’s process in ordering appraisals and approving appraisers.
o Appraisers cannot be chosen by someone with a financial interest.
o No requirement that appraisers must be chosen randomly.
o The appraiser can be selected by the lender based on the appraiser’s experience qualification.
Communication allowed (Lenders and Builders CAN communicate with appraisers)
o Information builders should provide.
- Market and absorption information.
o Information builders should provide.
- Market and absorption information.
- Sales Information.
- Builder’s biggest mistake is they hide data. Provide all relevant data.
- Provide appraiser with specifications of the property.
- Details or what and why material was chosen.
- Buyers’ reactions to products selected.
- Builder’s biggest mistake is they hide data. Provide all relevant data.
- Provide appraiser with specifications of the property.
- Details or what and why material was chosen.
- Buyers’ reactions to products selected.
Fannie Mae specific appraisal guidance regarding new homes.
o Updates to the seller guide on June 30th from Fannie Mae provided more specific guidance in the valuation process.
o New sources of comparable market data and comparable sales.
o Allowable and desired communication.
o Use of distressed sales.
o Appraiser selection criteria.
o Updates to the seller guide on June 30th from Fannie Mae provided more specific guidance in the valuation process.
o New sources of comparable market data and comparable sales.
o Allowable and desired communication.
o Use of distressed sales.
o Appraiser selection criteria.
What Can / Should a Builder Do?
o Start by helping the lender with candid discussions on project and market.
o Request the appropriate appraisers.
- Experienced in new construction and aware of green building values.
- Willing to meet the builder to obtain house/project information.
o Communicate with the appraiser
- Provide all appropriate comps.
- Be available for on-site face-to-face meetings.
- Develop a check list for builder staff on information to provide the appraiser.
o Start by helping the lender with candid discussions on project and market.
o Request the appropriate appraisers.
- Experienced in new construction and aware of green building values.
- Willing to meet the builder to obtain house/project information.
o Communicate with the appraiser
- Provide all appropriate comps.
- Be available for on-site face-to-face meetings.
- Develop a check list for builder staff on information to provide the appraiser.
Actions for Builders if the Appraisal was Conducted Improperly or Contains Errors?
o How should a builder challenge the use of an unqualified appraiser?
- Best defense is to encourage borrower to select a lender who follows best policies in appraiser selection.
- Nothing prohibits a lender from ordering a second appraisal if the first appraisal appears flawed.
o How should a builder challenge the use of inappropriate comps?
- Provide best and all relevant sales/data before appraisal is completed.
- Keep a record of data provided to appraiser. (email, notes in calendar)
- Communicate with appraiser first.
- Understand appraiser’s challenges so you can efficiently communicate.
- Build a relationship with the appraiser and appraisal community.
- Be willing to engage the appraiser to assist you in your efforts.
o How can the builder respond to unilateral adjustments of value by the lender?
- Fannie Mae’s new guidance states a lender cannot at its own discretion change an appraiser’s value.
o How can the builder obtain corrections in factual appraisal errors?
- Contact the lender with concerns.
- Notify lender you will contact the appraiser about errors.
- Appraiser is bound by their ethics to provide accurate information.
o Where should builder direct complaints on incompetent appraisers or inappropriate appraisal practices?
- Most efficient process is to provide complaints to the lender using incompetent appraisers.
- Communicate with the appraiser’s professional affiliations.
- All states are required to have an appraisal governing body and a complaint process. Expect the process to be slow.
o How should a builder challenge the use of an unqualified appraiser?
- Best defense is to encourage borrower to select a lender who follows best policies in appraiser selection.
- Nothing prohibits a lender from ordering a second appraisal if the first appraisal appears flawed.
o How should a builder challenge the use of inappropriate comps?
- Provide best and all relevant sales/data before appraisal is completed.
- Keep a record of data provided to appraiser. (email, notes in calendar)
- Communicate with appraiser first.
- Understand appraiser’s challenges so you can efficiently communicate.
- Build a relationship with the appraiser and appraisal community.
- Be willing to engage the appraiser to assist you in your efforts.
o How can the builder respond to unilateral adjustments of value by the lender?
- Fannie Mae’s new guidance states a lender cannot at its own discretion change an appraiser’s value.
o How can the builder obtain corrections in factual appraisal errors?
- Contact the lender with concerns.
- Notify lender you will contact the appraiser about errors.
- Appraiser is bound by their ethics to provide accurate information.
o Where should builder direct complaints on incompetent appraisers or inappropriate appraisal practices?
- Most efficient process is to provide complaints to the lender using incompetent appraisers.
- Communicate with the appraiser’s professional affiliations.
- All states are required to have an appraisal governing body and a complaint process. Expect the process to be slow.
NAHB Staff contact: Steve Linville slinville@nahb.org or 800 368-5242 x8597
No comments:
Post a Comment