By Guest Contributor, Philip Spool (3rd in a 4 part series on Appraisal Concerns)
Reason # 2:
The AMCs and/or banks have their own set of guidelines besides the guidelines set forth for every appraiser performing an appraisal, called the
Uniform Standards of Professional Appraisal Practice (USPAP) and if the loan is going to be sold through FannieMae, then the appraiser has to abide by Fannie Mae’s guidelines.
But it is the AMCs and banks guidelines that worry me. Some guidelines restrict the appraiser into using only sales within the past three
months and either within the neighborhood or within a one mile radius.
This is fine when there are an abundance of qualified sales. Qualified sales are those that are not a sale of a foreclosed property or a short sale, not to say that they should be ignored. They should be considered but if there are enough sales of qualified transactions, then
those are the ones to use. In some instances, like in Homestead or Florida City, the appraiser has no choice but
to use sales of a foreclosed property or a short sale.
But the appraiser must consider the property’s physical condition when using a foreclosed property as a comparable.
Going back to the AMC’s or bank’s guidelines, the appraiser must follow their requirements but at the same time they might be overlooking sales that occurred within the past year, beyond six months but less than a year ago, whereby the sale property could be very similar to the subject. The appraiser might be overlooking a sale that is just outside one mile in a similar, substitute neighborhood that is very similar to the subject.
Being very restrictive in choosing sales based on too narrow guidelines can result in a value that does not support the contract price of a property.
Appraisers should also be aware that if the area they are appraising in has a shortage ofsupply and a pent-up demand, such as Pinecrest and Coral Gables, people are willing to pay more to buy that house or condominium unit, as choices are limited.
What is most interesting is that the banks want to make loans and the AMC appraisers
are coming in lower than the contract price and the banks are now pressuring
the AMCs to get appraisers to make the loan go through.
Phil Spool has been appraising in Miami-Dade County since 1973, is a state-certified general appraiser, is vice president of the Greater Miami Chapter of the American Society of Appraisers and has published numerous articles in MiamiRealEstateCafe.com as well as in Working
RE Magazine, a national appraisal journal. He can be reached at firstname.lastname@example.org.
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