Here's how I addressed a recent one. The issues were to change the report to an FHA appraisal, and to address some underwriting concerns:
Hi, Robin. I've addressed some of your concerns within your message quoted below:
On Oct 17, 2007, at 15:05, XXXX, Robin wrote:
Hello Jim, I have reviewed your appraisal and because of the rural property we have to change our program to an FHA loan. I need Teresa to complete the changes and sign off on the appraisal. I looked into the FHA appraisal rooster; I did not see that you were FHA approved only her.
That is correct. Teresa is on the roster, and I am not. We both inspect all properties which we appraise, but an FHA inspection is not performed unless the assignment is FHA. Therefore, we will have to return to the property to complete the FHA-required inspection items, such as checking water pressure and proper plumbing function; assuring the HVAC works both for heating as well as cooling; checking that at least one window per room can be opened; and checking electrical outlets for safety issues (proper grounding, etc.)
There will be an additional fee incurred for this. Our normal fee for FHA appraisals is $450. There will be an additional $50 trip fee as well. Total fees due for this appraisal will be $500.
Also I need some items addressed in an addendum or etc.
1. On the appraisal you state “no Zoning”, is this typical for the area.
Yes. There's no county zoning. Only three municipalities within the county have city zoning.
2. I need one addt’l comparable; comps 1 and 3 have excessive line, net and gross adjustments that make the comparables not supportive.
I can include an additional sale, but it won't be as comparable as the three you have. Keep in mind that this area has very little conformity. This was explained in the report. The market is thin, slow, and has few sales from which to choose. The ages of any additional sales will be greater, the distances greater, or the line items, net, and gross adjustments will be greater. You may be accustomed to Olive Branch and South Memphis properties where there are model matches on the next block which sold last month. (Boy do I wish I had that kind of data!)
You say that Sales #1 and #3 are "not supportive." They're not as supportive as we would like, but they do provide support for the value opinion. Keep in mind that the 10%-15%-25% differences that Fannie likes is not a mandate. The selling guide plainly states that if we have to exceed those amounts, we must explain why. It does not state that Fannie won't buy a loan based on an appraisal which exceeds those guidelines.
But <your firm> may have more rigid criteria. If it is the bank's policy that these percentages cannot be exceeded, then you simply cannot make this loan. There aren't any more sales which will provide better conformity with the guidelines. We searched the entire county (population 25,000±), and selected the most proximate, similar and recent sales available.
Let me know whether you need additional explanations for these line items. Keep in mind that the site sizes are widely divergent, and are significantly larger than the subject's site. This will produce a horribly large percentage adjustment, but land values are pretty well supported. The GLA adjustments are made at $40/sqft, which is higher than we usually use for houses as old as the subject. We did that because of the subject's near-pristine condition, and relative newness of its appearance. (The owners are meticulous housekeepers. Looking at those interior photos, you'd never know they're raising three boys in that house.) Building materials and labor are expensive, and to bring a house to that kind of condition would take approximately the amount we've used for GLA adjustment. Lastly, rural properties diverge widely in their amenities. Some have a large 30 x 40 air-conditioned clear-span shop building for Dad to play in; some have a little tin building on skids to shelter garden tools. There's no zoning, so they can develop however they please. But as a result, you get lots of different amenities of differing values, and a lot of times we simply can't support the contributory value with the precision we'd like. In this appraisal, we've got differing amounts and qualities of car storage, largely supported by paired sales, but partially supported by judgement.
Again, more sales won't provide any better support, especially if we have to go any further outside the subject's area than the nearly 10 miles we used on sale #3. I think doing so will weaken, rather than strengthen, the value opinion. Call me and we can talk about it. You have to support your underwriting decision, and I'll help you all I can.
3. Also you state that this is a1 unit with accessory unit, (where is the accessory unit) is this an illegal use and typical for the area plus I need you to state that the property meets all FHA guidelines
Well, if I said that, then I've got to amend the report. It's a single-family unit, and does not have an accessory dwelling unit. We'd have to amend the report anyway, because that FHA statement is required anyway (I think. I'll have to check appendix D, but I believe that affirmative statement is required.) Rather than fool with addenda, we'll just re-do the report, and re-issue it with a new report date and a new effective date (got to re-inspect anyway.)
4. I received a phone call from the Title Company who is telling me that we have a private gravel road but your appraisal is showing public. I need clarification of driveway and who shares it. She stated that she has spoken with some of the people on the street and they are willing to sign a road maintenance agreement, but because your appraisal shows public, I need to clarify.
[Here's where I almost lost it. This paragraph got rewritten three times, and my wife still had to say, "Take that out of there."]
Highway 57 is a US highway. That's where the "public" came from. Look at the street scene photo. It's paved with asphalt. The subject's driveway is gravel, as stated in the report. The homeowner stated that there is an easement for ingress and egress over the driveway for the adjoining property to the east to access the small storage building on that property. It appears that a property to the rear of the subject may also be using this driveway, and may have done so from antiquity. If so, then an easement by prescription may exist. In the preprinted assumptions and limiting conditions on the 1004, you will find that we do not address matters of a legal nature in the report. According to the owner, the real estate agent was provided with a copy of a recent survey by Paul Henson of Selmer. We were not provided with a copy of that survey. It should address matters of easements. In our conversation with the owner, we discovered no facts which would lead us to a conclusion that the value or utility of the property might be in any way impaired should an easement over the driveway exist, whether by deed or prescription. This is not an unusual situation in our rural areas. Of course, the success of any such arrangement depends on the continual comity of the neighbors who make use of it. There was no indication of adversarial relationships between the homeowner and the neighbors. But I would (and will) caution the real estate agent to make sure this arrangement is fully disclosed to the Carrolls, and that their acknowledgment be obtained in writing.
If this is a serious concern, I can recommend a local attorney to look into it for you. Tracy and I are not qualified to give you advice about legal issues, but we know several lawyers who are good at real estate matters. Let me know if you need some contacts.
In order to correct the appraisal to an FHA appraisal, I have requested a case number with Teresa as the appraiser. I should get the case number back tomorrow and I will refax an appraisal request with the case number on there.
[No, I didn't lecture her that the appraisal didn't require correcting. But I sure wanted to.]
I believe that is it. If you have any questions please contact me by email or phone.
Thank you,
The end result was that we went back and reinspected, billing for the extra trip. Modified the existing appraisal to reflect new effective date and new report date, corrected that damned checkbox error, and provided a little more meat to the market conditions conclusions. She didn't want the extra comp.
This gal was used to underwriting the dense subdivisions of Olive Branch, MS, and south Memphis. So I had to cut her some slack because of her lack of geographic competency. Aside from some of my unedited comments nearly giving my wife a stroke, it worked out well for both of us.
But I lacked the moxy.
I forgot to include the estimated value (details...details).