Appraisal Engagement Instructions

Transcription

1 Appraisal Engagement Instructions OVERVIEW The appraisal report must be prepared by a state licensed or certified appraiser and must comply with the Appraiser Independence Requirements (AIR), Uniform Standards of Professional Appraisal Practice (USPAP) and applicable state law. Parkside Lending allows an unlicensed or uncertified appraiser, or trainee (or other similar classification) that works as an employee or subcontractor of a licensed or certified appraiser, to perform a significant amount of the appraisal (or the entire appraisal if he or she is qualified to do so), as long as the appraisal report is signed by a licensed or certified supervisory or review appraiser and is acceptable under state law. If a supervisory appraiser is used, the supervisory appraiser does not need to physically inspect the subject property or comparables, but must certify that he or she: Directly supervised the appraiser that prepared the appraisal report; Has reviewed the appraisal report; Agrees with the statements and conclusions of the appraiser; Agrees to be bound by certifications as set forth in the standard appraisal report forms; and Takes full responsibility for the appraisal report. A supervisory appraiser may not sign the left hand side of the appraisal report unless he or she has met the requirements of the appraiser as noted in the License and Certification section in this topic, including but not limited to, inspecting the property. The estimate of market value must represent the appraiser s professional conclusion, based on market data, logical analysis, and judgment. The property must be habitable and all appliances, plumbing, electrical, etc. must be functional and in good working condition. The kitchen must be functional, meaning that there must be kitchen cabinets, a working sink and a working stove area. If any health and/or safety issues are noted, make a subject to requirement to correct the deficiency. Please test the plumbing, electrical and kitchen appliances and certify to their condition and functionality in the Improvements section of the appraisal report. SCHEDULING Please make every effort to schedule the inspection with the appropriate party, within 24-hours of accepting the assignment. LENDER NAME / ADDRESS ALL assignments should have the lender/client and address indicated to be: Parkside Lending 1130 Howard Street, San Francisco, CA All appraisals must include a copy of the appraiser s current license and E&O insurance policy with a minimum coverage of $500, /2017 Appraisal Instructions

2 COMPARABLES / MARKET ANALYSIS Use the most recent and similar comparable sales, including at least 2 comparable sales that closed within the last 3 months of the appraisal date. If the relevant comparable sales are older than 3 months, the appraiser is to comment to that effect, apply time adjustments as appropriate and provide support for those adjustments. In some markets, compliance with this requirement may be difficult or not possible due to the lack of market data. In these cases, a detailed explanation is required. Include a minimum of 2 MLS active listings or MLS pending sales on the appraisal grid of the applicable appraisal reporting form in comparable 4-6 positions (or higher). These are in addition to at least 3 settled sales. The MLS listings or pending sales must also meet the following: Insure that the active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over-priced properties as comparables. Adjust active listings to reflect sales price ratios for the market. Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sale price ratios. Include the MLS number, Document number (closed sales), original list price, any revised list prices, and total days on market (DOM). Provide an explanation for extended DOM. In the reconciliation, identify which comparables were given most weight and why. If comparables are located within close proximity to the subject and are not utilized, an explanation is required. If comparables included in the total number of comparable sales (settled) for the last 3 months on the 1004MC are not utilized, an explanation is also required. If the subject property is in an Attached and/or Detached Condo or PUD Project, at least 2 closed sales must be used from within the same project. If 2 closed sales with recent closing dates are unavailable, provide at least 1 dated closed sale from within the project and state it as the most recent sale in the project. 2 comparables must be used from a competing project. In some projects with limited sales or units, compliance with this requirement may be difficult or not possible due to the lack of market data. In these cases, a detailed explanation is required. If the subject property is in a New Subdivision or Project, at least 1 closed sale must be used from the subject s development, 1 closed sale from outside the subject s development that are not influenced by the developer or builder, and 1 closed sale from inside or outside the subject project may be used to meet this requirement. Comparable sales or resales from within the subject subdivision or project are preferable to comparable sales from outside the subdivision or project provided the builder or developer of the subject property is not involved in the sale transaction. At least 2 comparable sales must be outside the influence of the builder or developer of the subject property. For a FNMA loan: In the event there are no closed sales inside a new subject project or subdivision because the subject property transaction is one of the first units to sell, the appraiser may use 2 pending sales in the subject project or subdivision in lieu of 1 closed sale. In this case, the appraiser must also use at least 3 closed comparable sales from projects or subdivisions outside of the subject property s project or subdivision. If the subject property is part of a Leasehold Estate, at least 2 comparable sales subject to leasehold are required. The appraiser must develop a thorough, clear, and detailed narrative that identifies the terms, restrictions, and conditions regarding lease agreements or ground leases; this information must be included as an addendum to the appraisal report. The appraiser must discuss the effect of the lease agreement or ground lease has on the value and marketability of the subject property. 2 02/2017 Appraisal Instructions

3 Analyze concessions or special financing on the subject (if applicable) and all comparable sales and include specific details in the report. Across the Board Adjustments Appraiser to provide a sale(s) to bracket the subject s amenities in order to show the FNMA required market data support for the adjustment factors indicated. If none are available and an across the grid adjustment in the same direction is applied, market data support is still a requirement in the addendum showing/explaining to the reader how the adjustment factors were determined. (i.e., provide the historical matched pairs that were considered or the regression analysis worksheet.) Dated or distant comparables are acceptable. CANNED STATEMENTS REFERENCING PROFESSIONAL EXPERIENCE, CONVERSATIONS WITH PEERS OR TO THE APPRAISER S WORK FILE ARE NOT ACCEPTABLE. Complete the 1004MC in its entirety. It is recognized that not all data sources will be able to provide data for the shaded areas; if it is available, the appraiser must include the data in the analysis. If this is not possible and there are blanks on the MC addendum, please provide an adequate explanation under the summary section. If the subject s value opinion is significantly different than the predominate values reported in the neighborhood section or the median comparable sale price reported on the 1004MC, an explanation is required. If the Cost Approach is not completed, a clear and detailed narrative must be provided as to why this approach to value was not developed. At a minimum, the site value and Remaining Economic Life should be provided. For appraisals completed on the FNMA 1073 condo form, the Remaining Economic Life for the subject property must be provided. Any significant discrepancy in GLA and bedroom/bath count between public records and appraiser s observations require an explanation. If the subject property includes Solar Panels that are leased from or owned by a third party under a power purchase agreement or other similar arrangement, they may not be included in the appraised value of the subject property. If the solar panels are found to be owned (with adequate evidence), then the appraiser would need to provide comps with similar owned solar equipment to extract a market reaction to this amenity in order to apply any adjustment(s). In these cases, the appraiser must also comment on the existence of traditional electric utilities that are accessible to the subject property along with the solar panels. NON-CONFORMING LAND USE If the subject property is of a legal non-conforming use based on zoning, a comment regarding whether the nonconforming use has any effect on the value and marketability of the property. Additionally, the appraiser must state whether the property may be rebuilt as its current use in the event of full or partial destruction, and the source of the information used to make this determination to include name, position and telephone number at the municipal agency. ACCESSORY DWELLING UNITS (ADUs) If the subject property includes an illegal accessory dwelling unit (ADU), state whether or not the illegal use conforms to the subject neighborhood and market area. State whether or not the improvements have been constructed in a workmanlike manner, is of similar quality and condition typical for the subject s market, and whether it creates any functional obsolescence. If the ADU is permissible per current zoning, demonstrate that the improvements are typical for the market through an analysis of at least 1 comparable that includes an ADU. 3 02/2017 Appraisal Instructions

4 If it is determined that the subject property contains an ADU that does not comply with current zoning, demonstrate that the improvements are typical for the market through an analysis of at least 3 comparable properties with similar, non-compliant ADUs. If 3 comparables with similar illegal use cannot be provided, the appraiser must satisfactorily explain the lack of comparables in the subject market area with similar illegal use and analyze any effect on the marketability of the subject property. Additionally, the appraiser should not attribute value to the illegal area if it cannot be demonstrated in the market to be typical for the neighborhood. In some instances, compliance with this requirement may be difficult, or not possible due to the lack of current market data. In these cases, it is acceptable to search dated sales (12 months), and distant (still within same market area) to locate comparables. If this requirement cannot be satisfied with the aforementioned, a detailed explanation is required as to the steps taken to adhere to the requirements. PHOTOS Provide 3 clearly legible and labeled photographs of the subject property front, rear and street scene with the subject matter in full frame. Interior labeled photographs of the subject property, including the kitchen, ALL bathrooms, main living area, and examples of any physical deterioration, including items that are toward the end of their economic life and/or are made subject to repair or alteration, and property updates. Provide clearly legible and labeled photographs of any improvements made supporting an increase in value due to remodeling or renovation with the subject matter filing the full frame. Provide clearly legible and labeled photographs of each sale, listing and rental comparable, if applicable, used in the residential appraisal report. Front scene with the subject matter in full frame. If a comparable cannot be accessed due to; gate, privacy, or location, a photo of the gate, driveway, or at a distance is required, with the MLS photo included in a separate photo addendum. Interior and exterior photos of accessory dwelling units with the subject matter in full frame are required. Multifamily dwellings: Each unit s kitchen, ALL bathrooms, main living areas, exterior front and rear. Photos of ALL rental comps must be provided when completing forms 1025 or Any and all detached structure, outbuildings, storage, equestrian facilities, etc. are required. Photos of the basement and finished rooms in this area are required. Appraiser to ONLY include a MAXIMUM of 6 photos per page. If a comparable is not accessible due to being gated, on a private road or obstructed view, the appraiser should take a photo of the gate or road that leads to the property, and also include the front MLS photo in the photo addendum. ALL FHA APPRAISALS REQUIRE ORIGINAL PHOTOS. See FHA section below for details. SKETCH A diagram of the floor plan detailing room layout and ALL dimensions including any outbuildings. Must include interior walls if there is a functional issue. Diagram of the basement (if applicable) is required detailing room layout and dimensions in ALL instances. LOCATION / AERIAL MAP Location map must include the subject property and all comparable sales and listings used in the appraisal report. Explain the reason for use of any comparables that appear to cross major neighborhood boundaries, or are beyond 1 mile from the subject. Aerial map should be of sufficient scale to show the subject property, the immediate neighborhood/ market area, and any external obsolescence. 4 02/2017 Appraisal Instructions

5 USPAP ALL reports must include USPAP service statement and exposure time of the property being appraised. It is recommended that the USPAP Compliance Addendum be provided in ALL reports. If the subject has previously transferred/sold within the prior 3 years from the effective date of the report and the subject s current estimated value is significantly higher than its prior sale, a detailed explanation is required, including the market conditions of the prior sale and any improvements made since the prior sale. FHA ASSIGNMENTS FHA case number must be included in the upper right corner of each page of the report, including photo, map pages and all addendums. Comment stating the subject meets minimum property standards set forth in HUD Handbook and all applicable mortgagee letters must be provided. If the subject property includes an attic; enter the attic and observe the interior for insulation, ventilation (fan, vent, window), and condition of roof structure. Note any deficient materials, leaks or readily observable evidence of significant water damage, structural problems, previous fire damage, exposed and frayed wiring, or any other health and safety deficiencies. If any deficiencies exist, condition the appraisal on their repair or inspection and prepare the appraisal subject to repairs and/or subject to inspection. If the subject has a crawl space, please comment if the appraiser performed a head and shoulders inspection of the area and include photos. If no, please comment the crawl space was not accessible and make subject to access being made available. If utilities are not operational; the report should be made subject to. Appliances - The Appraiser must note appliances present in the house at the time of inspection and indicate if appliance(s) is considered Personal Property or Real Property. The appraiser must also operate all conveyed appliances, observe their performance, and make commentary. Per HUD handbook, if there is a swimming pool and it has been winterized, or the Appraiser cannot determine if the pool is in working order, report is to be completed with the extraordinary assumption that the pool and its equipment can be restored to full operating condition, at normal costs. In addition to your statement indicating the lender as the client; HUD/FHA should be included as well. For all FHA reports, clear, descriptive, original subject photos are required, including front and rear, at opposite angles, to show all sides of the dwelling. Street scene photo to include a portion of the subject site, and two clear, descriptive, original exterior street scene photos, one from each direction, are also required. When repairs are required, appraiser must give an estimated cost to cure for all items. Please see HUD handbooks and/or HUD.gov for additional requirements. Original comparable photo taken by the appraiser are required on all FHA/USDA assignments If property has Well Water and/or is on Septic System comments must include the following: o Does the subject's well and septic meet HUD minimum distance guidelines? o Is public well and/or septic available. If so is connection feasible o Are well and septic systems common to the area? Any adverse effect on marketability? For properties on a private street, state whether a formal maintenance agreement exists, if it is common for the area, is supported by comparable properties exhibiting the same characteristics, whether or not it is a detriment to marketability, accessibility, or the value of the property, condition of street and proximity of street from a main road. ALL FHA APPRAISALS REQUIRE ORIGINAL PHOTOS. Comp photos depicting the front view of each comparable utilized must be those taken by the appraiser. These photos are considered evidence of compliance to the Scope of Work, and confirm each comparable sale was inspected from the street. Use of MLS photos to exhibit comparable conditions at the time of sale may be acceptable; however, the appraiser has to provide detailed explanation as to why the original photos could not be obtained (i.e. 5 02/2017 Appraisal Instructions

6 unable to reach property because of documentable weather conditions, property located in a gated community, property view was obstructed, etc.). CO-OP ASSIGNMENTS The appraisal must meet the following requirements for co-op share assignments. Appraisers must develop an opinion of the market value of the co-op interest when evaluating co-op units. To determine the value of the coop interest, appraisers must consider and report, among other things, the following information: The number of shares attributable to the unit; The number of shares issued and outstanding for the co-op corporation; The name of the lienholder, the lien position, and the amount and repayment terms of all project blanket financing; The pro rata share of the blanket mortgage payments that are attributable to the unit, as determined by dividing the number of shares attributable to the unit by the total number of project shares; The pro rata share of each lien that is attributable to the unit; Any tax abatements or exemptions that are attributable to the unit; The remaining term for any tax abatements or exemptions and provisions for escalation of real estate taxes, which is the dollar amount by which the taxes will increase and the year in which the increase will occur; and Any monthly maintenance fees, including: o Utility charges, if they are part of these fees; o Monthly special assessments; o Ground rent; o Other fees for the use of the facilities that are attributable to the unit; and o the fee type, amount, and term (if applicable) of those other fees. Appraisers must use current and reliable sources to obtain data on the co-op project, the individual subject unit, and the comparable properties, and indicate the name of each source on the appraisal report or in an addendum to the appraisal report. Appraisers must address any factors that could result in an increase to the monthly debt service for the subject unit. Appraisers must indicate in the Sales Comparison Approach adjustment grid the dollar amount of the monthly assessments for each of the comparable sales. Appraisers must report the value of the co-op interest, excluding its pro rata share of the blanket mortgage(s). This value reflects the market value for the co-op interest of the unit. For example, when the indicated value of the unit encumbered by the blanket mortgage(s) is $100,000, and it s pro rata share of the blanket mortgage(s) is $25,000, the value estimate that the appraiser must report for the co-op interest of the unit is $75,000. Appraisers must include a certification in the appraisal report that the pro rata share of the blanket mortgage(s) on the real estate has not been included in the opinion of the market value of the co-op interest. Legal non-conforming use of the land: The improvements must be able to be rebuilt to current density in the event of partial or full destruction and a copy of the applicable zoning regulations or letter from the local zoning authority that authorizes reconstruction to current density must be provided and retained in the loan file. Comparable sales must be from similar types of projects that have similar common amenities and recreational facilities including, but not limited to, townhouses and mid-rise and high-rise buildings. When available, appraisers must use sales from co-op units as comparables. However, appraisers may use condo units as comparable sales if co-op units are not available, as long as the appraiser explains why those types of comparables were used and adjusts the condo comparables to reflect the reaction of the market to the co-op unit when there is a preference for condo ownership in the subject market area. 6 02/2017 Appraisal Instructions

7 UNDERWRITER CONDITIONS Appraisal conditions that require additional commentary, explanation or support, are to be addressed by the appraiser on a separate addendum page in the report (to be included at the beginning or end of the appraisal report). If you are unable to provide any of the required items, a detailed explanation is required. You must address why the requirement was not met, and if it resulted in an adjustment to the appraised value. All reports submitted must be UAD compliant (excluding the 1025 form). Properties with a C5 or C6 condition at the time of inspection should be appraised subject to all repairs and alterations necessary to bring the property into C4 (or better) condition. Properties with a Q6 quality rating should be appraised subject to all repairs and alterations necessary to bring the property to a Q5 (or better) quality rating. If appraiser is uncertain as to whether or not it will be possible to bring the property to a C4 (or better) and/or Q5 (or better) rating, contact the AMC immediately for further instruction. 7 02/2017 Appraisal Instructions