There are many changes within the Fannie Mae and Freddie Mac guidelines which are causing some confusion in the Real Estate and Finance Industry. Let’s see if this brief list will help clear up some common questions or concerns.
Appraisers have been appraising properties of late without reviewing the purchase contract. This is now a new requirement for the appraisal companies. Any contracts and/or addendums associated with an offer on a home MUST be handed over to the appraisal company prior to completion of the appraiser. Any changes to these contract and/or addendums must also be provided to the appraiser prior to the final results of the comparative market analysis. Do you think this might put another delay on the timeline to close a transaction?
Multiple appraisals can no longer be provided on a single parcel. In other words, the appraisal company cannot appraisal part of a parcel. They have to appraise the “entire” parcel.
REO and foreclosed properties MUST be included as comparable properties. Previous guidelines allowed the appraiser to exclude these numbers.
You would think “common sense” would be considered in any new rules or guidelines. Here is another new guideline that is mandatory. If the appraiser has any financial interest in the transaction, the appraisal has to be verified by a third party who is “arms-length” from the transaction.
Any major repairs have to be considered in the appraisal. Now what a brilliant idea! The appraisal cannot be completed until these repairs are finished. Anyone ever heard of the FHA 203K loan?
If management in the appraisal company has an “employee” complete an appraisal, before management or a review appraiser can sign off on the appraisal, they must complete their own inspection on the property. Management cannot depend solely on the “employees” expertise.
Since this downturn in the real estate market, the Home Valuation Code was amended to cease “favoritism” or the “influence” of market values. Protecting the consumer was also taken into consideration. These are positive changes but I still foresee this putting a damper on the timeline that it takes to close a transaction.