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Am I Being Paranoid, or Is There Another Reason?
by Richard Hagar, SRA
Think about all the information local appraisers have assembled that state and federal governments don’t have but would like to have. 98 percent of the required data on the outgoing forms would help describe the property and relate to its value. Things like zoning, highest and best use, location, square footage, quality, condition, etc. are needed to help determine what the subject property is, what it would cost to build, and in the sales comparison approach, how it compares against other homes. Based on this basic information and market interactions, appraisers determine how the market adjusted for differences. In the UAD 3.6 version of the URAR there are numerous new fields for information that appraisers wouldn’t use to determine value. Is there some reason the GSEs need this additional new information?
In the past, many appraisers failed to properly describe and classify properties. Their failures contributed to the losses lenders suffered in the 2007 wipeout and the reasons the Collateral Underwriter (CU) and the 1-6 classifications for quality and condition ratings exist today. The GSEs need more information than was previously supplied and as a result, on the URAR there are new fields for:
• Accessibility features (ADA).
• Type and width of the view.
• If a sale: the subject’s list price, original listing date, contract date, days on the market, and the MLS listing number.
• Special area for listing any personal property included in the price.
• Special area to list and describe concessions paid by anyone associated with the sale and its impact on value.
• Market data examples provided by Freddie Mac on the UAD 3.6 include graphs showing sales trends, median days on the market, absorption rates, and a breakdown of the year homes were built in the market area, etc.
• How many pending sales and listings in the market area include:
– Lowest list price
– Highest list price
– Median list price
• 21 new questions specific to accessory dwelling units including—Is the ADU legally rentable? (That’s a risky legal question.)
By my count there are at least 521 boxes for unique information on the SFR version of the URAR and more if it’s located in a PUD Plat, more if the subject is a manufactured home, and far more if it’s a condominium or cooperative. (Does the HOA have any ongoing lawsuits?)
They require this information because many appraisers have been skipping it in the past, resulting in incorrect descriptions and market values. So, get ready to start researching, listing and considering everything in your appraisals under the UAD 3.6 (you’re going to spend a lot of time doing this). While the GSEs indicate that you don’t have to fill out every box, you and I both know that if an AMC or bank reviewer sees an unanswered box, they will want it filled in, even if it’s meaningless to appraisers or value. The Collateral Underwriter will easily spot missing information and give the appraisal acceptance a HARD STOP. Gee, won’t that make lenders happy with your work despite what the GSEs state?
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Moving forward, there are information grabs that start to trigger paranoia but still must be included as part of the URAR:
• What is the height of the front door threshold above the ground?
• Is the primary heating system located below grade?
• Identify the ceiling type in every room. They have nine+ different types listed including flat, vaulted, tray, coffered, barrel, etc.
• Ceiling height and condition.
• When requested by the client, the total square footage of the windows for manufactured homes (Some lenders may also ask for this for site-built homes).
• When specifically requested by a client, the structure’s volume, including finished and unfinished space for outbuildings.
• Appraisers must now segregate the property’s square footage into 10 different categories including converted, “non-continuous finished” and “finished nonstandard” (These are listed and explained in my webinar titled FNMA, ANSI and UAD 3.6 available at WorkingRE.com. I strongly suggest taking it before you provide any UAD 3.6 appraisals).
• Photographs of every room and every component that impacts value in the cost, income, and sales comparison approaches (good and bad).
• Many clients will avoid appraisers and use Property Data Collectors (PDC). The PDCs use high quality scanning devices (including iPhone 14+) to scan every room in the house. These scans produce 4k images of EVERYTHING in the house which will then be sent to an overseas company, converted into a floor plan, with the results sent to the appraiser. Some software can determine the make, model, and age of the appliances. (Hey, nice gun-rack on the wall in your rec. room and is that large void space behind the wall a hidden saferoom or just a safe?) Of course, you know that the data will only be provided to the appraiser and deleted after delivery…cough…cough.
So, when was the last time an appraiser adjusted for the height of the front door above grade, the SF of windows, the heating system being in the basement or the volume, not square footage; VOLUME, of an outbuilding? And why would an appraiser need photographs of EVERY room? (Cute pink pony wallpaper in your child’s room.)
I know this is startling, however my examples are only part of the information they obtain or require.
The GSEs’ computers review 15,000–21,000 appraisals a day. (15,000 x 260 workdays a year x 5 years = a whole lota data) The GSEs have and will continue to add to the largest assemblage of house photos, including interiors, that has ever been assembled in the history of the world.
All the 521+ fields of information, plus photographs, will be delivered to the GSEs, you know the ones owned by the Federal Government. I wonder what they could do with that. Could the information be used to estimate your wealth, determine your political stance or tweak your taxes? Boy wouldn’t the local county tax assessor love that interior data? And why would there be a push to sell FNMA and Freddie Mac, with all that data, to a private company, of course after the government has that data about your house saved in a central database? Look up last year’s proposed law deceptively called the Appraisal Modernization Act S. 2322 and who sponsored it.
While I’m trying to keep you safe out there, maybe I’m being paranoid. Or is there just a chill running down my spine?
About the Author
Richard Hagar, SRA, is an educator, author and owner of a busy appraisal office in the state of Washington. Hagar now offers his legendary adjustments course for CE credit in 48 states through OREPEducation.org. The 7-hour online CE course “How to Support and Prove Your Adjustments” shows appraisers proven methods for supporting adjustments. OREP Members save on this approved coursework. Sign up today at OREPEducation.org. Reach Richard Hagar via email at rh@richardhagar.com.