Fannie and Freddie Issue UAD Update

Fannie Mae and Freddie Mac have issued an update to the Uniform Appraisal Dataset (UAD) to provide additional guidance for appraisers and lenders regarding the UAD.

This update is intended to provide clarification on condition and quality ratings, as well as some other lesser points.

When selecting quality (Q1 through Q6) and condition (C1 through C6) ratings, appraisers are reminded that these are overall ratings, and should be made on an “absolute basis,” not a “relative basis.”  In other words, the quality and condition ratings for the subject and comparables are each based on the property’s own merits, and are not based on how the property relates or compares to other properties in the market area.

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ASB Issues New USPAP Q&As

On March 22, the Appraisal Standards Board (ASB) of The Appraisal Foundation (TAF) has issued three new USPAP Q&As.

The topics addressed include:

• Appraisal Fees for “Assessment Appeal” Assignments

• Alternative Valuation Products

• Appraising a Property More Than Once in Three Years

Regarding “assessment appeal” appraisal assignments, appraisers are reminded that they may not base their appraisal fees upon the attainment of a stipulated result (e.g., a reduction in taxes).

When providing alternative valuation products, an appraiser must still comply with USPAP requirements for development and reporting of such assignments.

Appraisers are reminded that USPAP does not prohibit an appraiser from accepting an assignment to appraise a property if the appraiser has appraised the property within the prior three years. If an appraiser agrees with a client not to appraise a property again within three years, this is a contractual issue, and is not a USPAP requirement.

The complete text of the new USPAP Q&A document can be found here:
https://appraisalfoundation.sharefile.com/download.aspx?id=sbab38ce2e5d45299.

FHA Releases New Valuation FAQ

FHA has added a new valuation FAQ to its online FAQ document.  The new question addresses the acceptability of heating systems that burn wood pellets.

Q: How should I categorize a heating system that burns wood pellets?

A: FHA requires a permanently installed back up conventional heating system that maintains a temperature of at least 50 degrees Fahrenheit in areas containing plumbing when the primary heat source is from a solar system or a wood burning stove.

An acceptable conventional heating system would include one that burns wood pellets provided that the system:

• heats the living areas of the home to a minimum of 50 degrees Fahrenheit;
• is permanently installed, safe to operate and provides healthful and comfortable heat;
• relies upon a fuel source which is readily obtainable within the subject’s geographic area;
• has market acceptance in the subject’s marketplace;
• operates without human intervention for extended periods of time; and
• is in compliance with any local codes and regulations governing such.

Note: Appraisers must adequately describe the system; its location within the home; its adequacy in maintaining healthful heat; and demonstrate market acceptance of the system within the appraisal report.

FHA does not specifically state that one or more of the comparable sales must also have a pellet stove as a heat source; however it does state that the appraiser must demonstrate market acceptance of such a system.  Normally, market acceptance would be demonstrated by showing sales of other homes with the same type of heat system.

The link to the entire valuation FAQ document can be found on this page: http://portal.hud.gov/hudportal/HUD?src=/groups/appraisers

The Appraisal Foundation Issues USPAP Q&A and Exposure Drafts

Within the last several days, two boards of The Appraisal Foundation (TAF) have issued items of interest to appraisers.

On February 13th, the Appraisal Standards Board (ASB) issued two USPAP Q&As. One addresses the issue of appraisers accepting compensation that is contingent upon a reduction in property taxes, when the appraiser states that he/she is not “acting as an appraiser”. The other relates to personal property appraisal consulting. A link to these new Q&As can be found here: https://appraisalfoundation.sharefile.com/d/s4c5faddfe7b4bf5b

USPAP Q&As do not establish new standards or interpret existing standards. These are provided by the ASB to offer advice and illustrate the applicability of USPAP to specific situations.

Not to be outdone, the Appraisal Practices Board (APB) has issued two new exposure drafts within the last three weeks.

The first was issued on January 26th; this is the second exposure draft on “Adjusting Comparable Sales for Seller Concessions”. The comment deadline for this exposure draft is February 29, 2012.

Then on February 15th, the APB issued a second exposure draft on “Residential Appraising in a Declining Market”, with a comment deadline of March 23, 2012.

The APB is responsible for issuing voluntary guidance to appraisers on recognized methods and techniques. The APB selects topics that are timely and relevant to practicing appraisers, so it is important that appraisers read and provide commentary on these exposure drafts. All comments are read by all members of the APB. Links to both current APB exposure drafts can be found here: https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=TAF&WebCode=ExposureDrafts

Pennsylvania Enacts AMC Registration Law

On February 2, 2012, Pennsylvania Governor Tom Corbett signed the Appraisal Management Company Registration Act (AMCRA), which had recently been passed by the state legislature. Thus Pennsylvania becomes the 30th state to enact a law regulating AMCs.

The new law was formerly known as House Bill 398, and its primary sponsor was Representative Richard R. Stevenson (R-Mercer County) who is also a certified general appraiser in the Commonwealth.

Some of the provisions of this new law include:

• An AMC that is applying for registration must provide name and contact information for any person who owns more than 10% of the company

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ASK DAN: Answering the Exposure Time Question

By Dan Bradley, SRA, CDEI

Question: Dear Dan, can you please shed some light on the concept of exposure time, and the USPAP requirements that relate to it?

Answer: A lot of appraisers have questions about exposure time. You are certainly not alone. Exposure time is defined in USPAP as:

EXPOSURE TIME: estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. Comment: Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market.

Exposure time is an opinion, developed by the appraiser. How do we develop this opinion? Statement on Appraisal Standards Number 6 (SMT-6) in USPAP provides guidance on exposure time.

SMT-6 states:

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