12/10/2018
Have you recently had your home appraised, or perhaps you will be soon...
Below is a sample of the agreement and general order guidelines that I, and other appraisers, agree to every time we complete an appraisal report for a federally-backed mortgage (Fannie, Freddie, USDA, FHA). Each lender (bank) and client (Appraisal Management Co) have the order-specific requirements that get piled on top of this too as these are just the general guidelines.
So, why do appraisals cost as much as they do, and take more than just a couple hours to complete? Read on for a more complete understanding of the process.
Enjoy!
General Order Guidelines
Appraisal Order Requirements & Engagement Letter
Decline this order immediately if you are NOT a Certified Appraiser, or hold FHA approval for FHA loan types, or can’t meet the milestone time-lines and order requirements. By accepting an assignment, the appraiser consents to the stated fee and agrees to comply with the order requirements of this Appraisal Management Company, the Client, as well as the conditions and procedures cited therein.
Any breach of the Engagement Letter, inclusive of non-adherence to the Engagement Letter requirements, may result in a reduction or cancellation of payment, and/or termination of the appraisal order, in whole or in part, by determination of this Appraisal Management Company.
Table of Contents
Section (1) - Appraiser Milestone Requirements Time-Line
Section (2) – “STOP and CONTACT” Consolidated Analytics IF…
Section (3) - Appraisal Requirements Checklist
Section (4) - Requirements & Clarification
Section (5) - Engagement Letter Detail
Section (6) - CANCELLATION Policy
Assignments Now Incorporate Your Appraiser Score Card
The Appraiser Score Card evaluates appraisers and consists of a number of factors. Each factor is weighted differently, allowing a more accurate performance assessment. Future assignments will be given first priority to appraisers who achieve a higher score card rating based on following factors:
Communication / System Updates (The more updates to us the better, even if simply “On Track. Delivery Estimate Friday at 10 AM”)
Turn time (Please give yourself enough time for our review, before the due date to deliver, if your report needs revision the clock does not stop and it will be considered late.)
Quality (Update your appraisal report writing software and run E & O check before submitting.)
Reliability (We need to know we can count on you to meet turn-times as well as updates you provide us as we relay these updates to our client.)
Professionalism / Ease to work with (“We are all busy, we are a team, offering our clients a service knowing every order could be our last if not handled professionally.”)
1099 Contractor (Contractor is an independent contractor, and neither Contractor nor Contractor's employees or contract personnel are, or shall be deemed, Client's employees.
Section (1)
Appraiser Milestone Requirements Time-line
ACCEPT
1. 1) For manually assigned orders Accept within system no later than 4 hours, or order is automatically reassigned.
2. 2) Review Appraisal Requirements Checklist & Requirements Clarification.
3. 3) Review "STOP & CONTACT" issues in Section (2) of this engagement letter.
CONTACT
1. 1) Make sure you confirm with the borrower “BEFORE” inspection that they have CO, Smoke Detectors & the water heater is DOUBLE STRAPPED, or they will be charged for a re-inspection to have these installed. Please check with your local state guidelines on the requirements of CO Detectors.
2. 2) Contact property access the SAME DAY of acceptance.
3. 3) Update system with appointment time, attempts, or all other UPDATES EVERYDAY.
4. 4) IF appraisal APPOINTMENT can NOT be scheduled WITHIN 3 DAYS of Acceptance the order may be reassigned unless the delay is out of your hands, we will independently verify delays and mis-information is not acceptable.
APPOINTMENT
1. 1) Appointment must take place ON DATE INDICATED.
2. 2) Assure all required photos and inspection points are taken.
3. 3) Update system that appointment took place or order may be reassigned and vendor score will be affected.
DELIVERY
1. 1) Completed appraisal should be delivered WITHIN 48 HOURS of appointment.
2. 2) IF NO updates are RECEIVED, or completed appraisal is NOT delivered to us the order WILL be reassigned, reduction or no payment can be made, vendor score will be affected as well as future order assignment.
3. 3) Communication is key; we want you to be successful!
REVISIONS / CORRECTION REQUESTS
1) Revision request must be completed or responded to the SAME DAY.
2) The appraisal is not considered a complete product until all requirements have been met.
Section (2)
“STOP and CONTACT” Consolidated Analytics Immediately IF:
• Appraiser is denied access to any room or area within the subject property.
• The appraiser or any associate within the appraiser’s firm has completed any prior appraisal products on the subject property within the past ninety (90) days.
• The address on the order is completely different from the subject property’s actual address. Continue if minor differences, however notify us with an update through the system.
• The appraisal form type on order is not the correct form for reporting the subject property.
• The appraiser does not have geographic competence to participate in the assignment and/or access to necessary data, such as Multiple Listing Service (MLS), public records, or other relevant data sources, to properly complete the assignment.
• The subject property has more than four (4) separate living units.
• The property is undergoing any construction or renovations, has any health or safety concerns, structural soundness issues, significant damage, is not habitable, or is in below average condition (C5 or C6 condition). Appraiser should continue with the inspection, take photos that demonstrate the extent of issues listed above, and contact this Appraisal Management Company, for direction on how to proceed.
• The subject is commercial, mixed use, condo-tel, agricultural, single wide manufactured home, manufactured homes within a condo project, a working farm or ranch, time shares, community land trusts, life estates, a boarding home, or if zoning is commercial, industrial, office or is an illegal non-conforming use.
• The property cannot be rebuilt to its current design and/or utility if destroyed or damaged more than fifty (50%) percent.
• The subject improvement is a factory-built dwelling produced prior to June 15, 1976. Only mobile homes were factory built prior to this date and are not eligible to be used for collateral.
• The subject property is 1-4 family dwelling within any non-residentially zoned district and the current Highest and Best use of the property is not a 1-4 family dwelling.
Section (3)
Appraisal Requirements Checklist
See “Requirements Clarification” for further detail and support.
(3) Comparable Sales & (2) Listings/Pendings (More comparables if needed for support)
Clear original photos for Subject and Comparables, NO MLS photos.
o Subject Photos:
o All interior rooms (Including bedrooms, bathrooms, kitchen, etc.)
o Front, Rear, Street, (Both Sides for FHA)
o Mechanicals (AC, Heating, Water Heater, Electric Panel)
o Interior of Garage, Sheds, Other buildings
Others that may influence value (pool, view, locational, amenities, condition, upgrades, remodeling, etc.)
Location Map (Shows all comparables and locational boundaries)
Aerial Map (Zoomed in view showing subjects immediate surroundings)
One-Line CMA / available comparable data list (Comparable used & not used should be seen)
Sketch (Clear and legible Including dimensions, calculations, porches, patios)
Plat map (or explain why one is not provided and where lot dimensions came from), (Indicate Subject on Map)
1004MC (Condo/Cooperative section completed if Condo/Cooperative project)
Cost Approach
Copy of Current E&O
Copy of Current Appraisal License
UAD Definitions Addendum
Limiting Conditions & Certifications
Client Specific Requirements
Any Appraisal Revisions are required to be corrected or addressed on a SEPARATE addendum page that is added as the FIRST page of the appraisal report, new sign date.
Section (4)
Requirements & Clarification
Comparables
(1) Comparable sales are required however if the Appraiser cannot demonstrate subject’s characteristics and support value with three (3) comparable sales additional sales Must be provided.
(2) Comparable listings/pending sales are required.
Provide a detailed explanation if comparables exceed FNMA/FHLMC guidelines.
If the property rights appraised are Leasehold, at least two (2) similar Leasehold comparable sales need to be utilized.
Modular houses must be identified as such in the Improvements Comment section of the appraisal form and the appraiser must use at least one (1) similar factory-built house for comparison; preferably, all comparable sales should be similar factory-built houses. “Doc #" relates to the requirement for a 2nd source of verification for the comparable sales. When the transfer deed (Grant Deed, Warranty Deed etc.) is recorded it is assigned a recording number or Doc #. In some areas, it is referred to as Book and Page. It should be noted that this information may not be readily available in some areas of the county during the appraiser's normal course of business. In this case, the appraiser should comment on the unavailability of the data or that the subject is located in a non-disclosure state if applicable. “
Comparable Adjustment Grids
Provide MLS source and #, as well as DOM for Data Source(s), and Document # for all close sales comparables for Verification Source(s).
If you indicate increasing values in your neighborhood section and increasing values in your 1004MC a sales date adjustment should be applied, provide a comment on the adjustment figure used and the source for support.
Below grade living areas must be segmented and not included in the above grade living area and must be adjusted for as a single line item in the Sales Comparison Analysis.
Photos
For all interior inspections, appraiser must provide clear interior photos. Photos must include ALL rooms, including the kitchen(s), bathroom(s), and main living area(s); along with photos of any updating, remodeling, or renovations that contribute to value.
Photos of any physical, functional, or external obsolescence that detracts from value MUST be included in the appraisal.
Appraiser must provide additional photos of any amenity (i.e. view, pond, lake, storage building, accessory unit, etc.) that affects value.
Photos must include all angles of the dwelling, front, back, side. Street scene photo must include a portion of the site.
All photos must clearly depict the dwelling. Granular, blurred, pixilated, or obstructed view photos will not be accepted.
If the subject property is proposed construction and the improvements have not been started, the appraiser should take photographs that show various views of the subject site.
Location Map
At minimum a location map that displays the subject and all comparable sales utilized in the Sales Comparison Analysis must be included showing your neighborhood boundaries.
Plat Map
Plat maps required when available, always for Residential dwellings. Flood zone maps are always appreciated.
Identify the subjects parcel on the plat map.
Aerial Map
Showing a zoomed in view of the subject site and immediate surroundings from above.
Sketch
Include building sketch containing exterior building dimensions and room locations. Include detailed floor plan with interior walls on the sketch IF there is functional obsolescence associated with the floor plan. All garages, accessory buildings, and out buildings which contribute value, must be included in the sketch.
Basement must be included in sketch if applicable.
All aspects of the sketch must be legible and well sized.
1004MC
1004MC is required on all assignments. Please comment on search parameters used to complete this form. If any areas of the form (including shaded areas) cannot be completed, please provide detailed comments on why you are unable to complete.
Compliance
All appraisals must be USPAP and FIRREA compliant and meet FNMA, FHLMC, FHA/HUD, GRH and underwriting guidelines.
Market Condition
If in a declining market, supply the causes, rate, and data source used to identify the market decline, adjustments on
grid or comment why it’s not applied.
If in an appreciating market, supply the causes, rate, and data source used to identify the market appreciation, adjustments on grid or comment why it’s not applied.
FHA Appraisals
For FHA reports, the FHA case number must be shown in the case number field above the file number field in this exact format (3 characters, dash, 7 characters, and no spaces) ###-######x.
Legal Description
The complete legal description of the subject property must be demonstrated in the appraisal. Simply indicating the Book and Page where the legal description is recorded is not acceptable.
Manufactured Home
Manufactured house and “on frame modular house” appraisals must be completed on the 1004C form, include all required photos, as well as clear photos of the HUD tags, manufacturer’s data plate, and steel perimeter chassis (if accessible). Must use a minimum of two (2) similar manufactured house sales for comparison; preferably, all comparable sales should be similar factory-built houses.
Condominium
Comment and indicate the Estimated Remaining Economic Life of the subject.
Provide a comment regarding any pending litigation noted in the HOA and if there is comment on the effect on value.
Condominium appraisals may include all sales from the subject project if the project is no longer under builder/developer control and the sales did not involve the builder/developer. Condo Conversions and other projects under the developer’s control may include only one (1) builder/developer sale. All other sale comparables must be taken from competing projects.
The condo section of the 1004MC should be completed.
The project information should be completed, either by review of condo information or by requesting the HOA/Management Contact information from the property access contact.
AS-IS or SUBJECT TO
All existing home appraisals intended for conventional financing should be completed “as-is.” If the subject improvements require repair, an itemized cost to cure must be demonstrated. Any health, safety, structural soundness, habitability issues, required repairs, and accrued deferred maintenance must be disclosed, discussed, and included in the itemized cost to cure. Photos demonstrating any of the items listed above should also be included in the report. The estimated cost to cure the above items should be included in the Physical Depreciation section of the Cost Approach as well as the Condition section of the Sales Comparison Analysis. Loans for construction or rehabilitation programs may require “As-Repaired” and/or “Subject To” analysis.
Listing History
If property is currently listed or has been listed for sale in the past twelve (12) months, the appraiser must provide data sources used (i.e.: MLS, FSBO), dates listed, prices, and attach copies of the MLS listing or FSBO brochure.
Purchase Transaction Appraisal
If the assignment is for a purchase transaction, the appraiser must review a fully executed Contract for Sale prior to report submission. This will typically be provided by the Client at order assignment, but if NOT provided, the appraiser should attempt to obtain a signed contract from another party to the transaction and, in addition to the analysis, provide the following information: 1) The source of the contract 2) Statement verifying that it was signed by all parties 3) Total number of pages provided. If a ratified copy of the Contract for Sale cannot be obtained from any source and the appraisal is complete (except for the contract analysis), Stop and notify the AMC who will inform the lender.
Unique Features and or Amenities
Unique features such as accessory units, in-law suites, indoor pools, indoor sport courts, etc. must be segmented from the Gross Living Area (GLA) of the main dwelling and adjusted for as a single line item in the Sales Comparison Analysis. Including such areas in the Main GLA is not an acceptable appraisal practice unless your specific market area does not allow for this area to be separated or is typically combined by peer appraisers. If combined in GLA grid, you must separate the areas in the addendum and explain any differences.
Above and Below Grade Living Area (GLA)
Below grade living areas must be segmented and not included in the above grade living area and must be adjusted for as a single line item in the Sales Comparison Analysis, unless these areas must be combined for sake of consistency and is typically combined in your market area. If combined in GLA grid, you must separate the areas in the addendum and explain any differences.
Cost Approach
On interior inspection assignments appraiser must complete the Cost Approach to Value. When completing the cost approach, replacement cost must be used.
DOM (Days on Market) Information for ALL Sales
Provide complete days on market information for all sales, including recently expired listings of the subject property, or a detailed explanation as to why that information is not available.
Corrosive Imported Drywall (Chinese Drywall)
For all homes in Florida, Louisiana, and Virginia, and for any home in an area where corrosive imported (Chinese) drywall is known to be an environmental issue, constructed or with remodeling from 2005-present, appraiser should comment whether s/he readily observes any of the following:
• Corrosion on metal fixtures, wires, or plumbing.
• Sulfur odor in home.
• Drywall with Made in China or Knauf markings.
• Observations of corrosion or drywall markings must be documented with photos.
Zoning
All acreage and improvements within the boundaries of the subject property as defined by the parcel ID number must be disclosed and included in the valuation.
Do not artificially subdivide a parent parcel to create a hypothetical subject property, for example subdividing 100 acre parcel valued as a 5 acre parcel.
If site adjustments are applied, indicate if they are for anything other than size and provide commentary explaining the adjustment.
Appraisal must include the Zoning Classification (i.e.: R1, RM2, MF4, etc.) and Description (i.e.: Residential single family, Multifamily, Commercial, etc.). If there is no Zoning Classification available for the subject property, appraiser must identify where that information was obtained.
REO – Servicing
The subject property is an REO unit that is not under option or contract of sale. The assignment is to provide a "as is"
value using the following extraordinary assumptions if necessary:
Utilities (gas, electric, water, etc.), do not need to be connected to complete the assignment. Value the property assuming the plumbing and mechanical systems are in proper working condition. If obviously missing or non-working plumbing and mechanical systems are noted during the inspection, disclose the issues and provide a cost to cure those items, and adjust the comparables accordingly.
Since the property is a new REO, it most likely will not have been cleaned of debris and discarded personal property at the time of inspection. That process will be completed at a later date. Do not consider or adjust for the cost of "clean out" in analysis.
Requires the Supplemental Real Estate Owned Appraisal Addendum to be included with each REO appraisal. The Competing Listings included in the REO Addendum should be located in the subject neighborhood. If not possible, the appraiser should use listings in nearby competing neighborhoods within the subject's school district. Estimated Cost to cure Repair Items should include a modest cost multiplier for entrepreneurial endeavor to complete the Repair Items. When determining the "As Is" and "As Repaired" estimated market value based on a client-imposed restricted market exposure time, a 90-day marketing time should be used.
Guaranteed Rural Development (USDA)
USDA appraisals must be completed on the 1004 or 1073 form.
An FHA-approved appraiser from the FHA roster must be used. FHA roster status must be documented in the report.
FHA appraiser must certify that requirements of the FHA handbook 4000.1 have been met.
If the subject property is a manufactured home, stop and contact the, as these property types are ineligible for Rural Development.
Appraiser may include the State specific Guaranteed Single-Family Housing Existing Home Certificate.
All appraisals must include the Sales Comparison Approach and the Cost Approach to value. The Income Approach is only needed if the appraiser determines that it is necessary to develop credible assignment results.
Appraiser must have experience with Rural Development loans.
Native American Land Appraisals
Regardless of Property Rights Appraised (i.e.: Fee Simple, Leasehold, Other), appraiser must utilize at least two (2) similar nearby Native American Land comparables that sold with the same Property Rights as the subject.
Appraiser must have experience with Native American Land loans.
It is considered acceptable to use Fee Simple comps for a Leasehold property, without adjustment as long as the marketability is the same.
If the market does show a preference between Fee Simple or Leasehold sales the appraiser must make the appropriate market tested adjustments.
203(k) appraisals
203(k) is an FHA program that requires an FHA appraisal by an FHA appraiser
Appraiser must have experience with 203(k) appraisals.
Requires two appraised values:
Provide the "As-Is": Value of property in current state. If the “as is” value is less than the contract sale price, the appraiser must provide sales data, and commentary supporting the “as is” value.
Also Provide the "As-Repaired": Value of what the property’s market value would be after planned repairs are completed. Customer must provide 203(k) plans and specs approved by HUD Consultant with the appraisal order.
Appraiser CANNOT be the 203(k) consultant for the property. If the appraiser is engaged as the 203(k) consultant, stop and contact Consolidated Analytics, Inc.
If the appraiser identifies health and safety repair conditions that were not noted in the work write-up, stop and contact Consolidated Analytics, Inc.
Appraiser must include statement on the report by the final value that the appraisal being performed is a 203(k) as improved per plans & specifications. A copy of the plans, specifications, work write-up and other conditions upon which the value was based must be part of the appraisal package.
Single Family Residences with Accessory Unit vs. Multifamily Properties
When determining whether a property is a single-family residence with an accessory unit or a multifamily property, appraisers must complete the following:
Appraiser must provide excerpt of local zoning ordinance identifying specific property use allowed (i.e.: singe family, multifamily, etc.).
Appraiser must provide excerpt of local zoning ordinance identifying if accessory units are allowed in the subject’s zoning district and if the accessory unit can be rented to a non-family member.
Appraiser must indicate if the utilities for the main house and the accessory unit are separate.
Appraiser must comment if the accessory unit can be rebuilt if destroyed.
If the accessory unit is detached or the result of an addition, the Appraiser must not include the accessory unit in the GLA of the main house and must reflect the accessory unit as an individual line item in the Sales Comparison Analysis, unless these areas must be combined for sake of consistency and is typically combined in your market area. If combined in GLA grid, you must separate the areas in the addendum and explain any differences.
If the subject’s zoning allows for multi-family use and the accessory unit can be legally rented to a non-family member, the Highest and Best use for the subject property would then be considered multi-family. If so, may require the subject property to be appraised as a multi-family property using the 1025/Small Residential Income Property Appraisal Report. If zoning does allow the accessory unit, and it cannot be legally rented to a non-family member, then will require the property to be valued as a single-family residence with an accessory unit using the 1004/URAR.
Section (5)
Engagement Letter Detail
By accepting an assignment, the appraiser consents to the stated fee and agrees to comply with the order requirements of this Appraisal Management Company, the Client, as well as the conditions and procedures cited therein.
This Engagement Letter also indicates the appraiser must comply with all relevant provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any subsequent changes as mandated by Fannie Mae, Freddie Mac, Federal Housing Finance Authority (FHFA), HUD, state and local laws, as well as USPAP.
Furthermore, by agreeing to the Engagement Letter, the appraiser acknowledges that he/she has geographic competency in the subject market, competency of the subject's property type and adequate access to sufficient data sources for assignment completion.
Any breach of the Engagement Letter, inclusive of non-adherence to the Engagement Letter requirements, may result in a reduction or cancellation of payment, and/or termination of the appraisal order, in whole or in part, by determination of this Appraisal Management Company.
Section (6)
CANCELLATION Policy
This Appraisal Management Company, reserves the right to cancel any appraisal/valuation, at any time. The AMC will provide a trip fee to the appraiser to accommodate them for travel time to and from the property. This will be called a TRIP Fee and photos of the property will be provided to the AMC as proof of visitation to the property and will be delivered to the client for such reason.
If the appraiser has completed the report and has submitted it to the AMC, the appraiser will be compensated for the original amount agreed upon in the acceptance letter of this order.
By accepting this order, the appraiser agrees there will be no other compensation for any cancelled orders.
