As mentioned yesterday, the staff at the NC Appraisal Board was extremely helpful and stands ready to help any buyer that is concerned about their appraisal. All one has to do is request that it be reviewed and they then go to work. How quickly it is done depends upon their current workload, and I do not know what the typical turn-around time is.
But why would someone actually have them do an inquiry? Aren’t these appraisers actually doing us a favor by delivering values right at contract? Talk to some of the buyers, and the answer is certainly yes. They wanted to buy their Vue Charlotte unit; they needed the appraisal to come through at contract in order to do so; and if it had not they could not have done so. These folks have no doubt bought their appraiser a bottle of wine with a duly attached thank you note! This has got to be especially true for anyone that has been able to trade down. In a future post, we’ll look at a hypothetical situation trying to simulate what some of the recent buyers have done in their strategy of trading down and closing.
But today the subject is appraisals, and how the staff at the Appraisal Board responded to the blog letter of inquiry. Here you go!
We received your email and discussed it with our staff. Please note that the Appraisal Board enforces the Uniform Standards of Professional Appraisal Practice (USPAP). The Board does not specify the methodology for appraisers to follow on specific assignments. Lenders, however, often have appraisal guidelines for specific types of properties. Those guidelines become assignment conditions which must be considered in the appraiser’s Scope of Work determination. An appraiser would be expected to follow these conditions as long as it doesn’t preclude them from rendering credible assignment results.
Your first question pertained to a section on the Individual Condominium form. That form asks for data beyond what is required in USPAP; generally, this is considered a lender guideline. The form does not ask for the number of units that are currently under contract. An appraiser, would appear to have two choices; they could add the number sold and the number under contract and place that number in the “sold” box, or put in the number that actually closed with an explanation somewhere in the form of the number currently under contract. In the context of this form, “sold” may simply mean the number of units that are not currently for sale. Best practice would be to explain either answer, but given the limitations of the form either could be considered a correct answer.
Your second question asked whether units that are closed, pending or active can be used as comparable sales. USPAP Standards Rule 1-4 states: “In developing a real property appraisal, an appraiser must collect, verify and analyze all information necessary for credible assignment results.” Generally, an appraiser will use at least three closed sales, and then may add listings and/or pending sales as additional comps. Fannie Mae guidelines require that “the appraiser should select one comparable sale from the subject project, one comparable sale from outside the subject project, and one other comparable sale, which can be from inside or outside of the subject project, that the appraiser considers to be a good indicator of value for the subject property.” Here is a link to this guideline.
Obviously we cannot determine or comment as to whether the appraisers, on this project, are in compliance with USPAP or the appropriate assignment conditions without doing an investigation.
Please let us know if we can be of further assistance.
Given what you have read above, do you feel the current appraisers are following USPAP? I will certainly share my feedback on this sometime next week, but would love to hear yours in a comment or by writing firstname.lastname@example.org.