Welcome Appraisal Updates from Fannie Mae

A couple of weeks ago, Fannie Mae made a few updates to its appraisal guidelines that are worth noting. As I see it, all of them are positive for the appraisal industry. In SEL 2017-01, Fannie Mae made the following clarifications:

--Property Inspection by Appraiser Trainee

Fannie Mae clarified its existing policy that allows an unlicensed or uncertified appraiser, or an appraiser trainee to complete the property inspection. “When the unlicensed or uncertified appraiser or appraiser trainee completes the property inspection, the supervisory appraiser is not required to also inspect the property.”

This is good news for the industry for two reasons. The Fannie Mae clarification makes it more appealing for young professionals to become appraisers as they are allowed to complete property inspections and earn money earlier in the game. Also, there’s less of a disincentive for certified and licensed appraisers to take a trainee under their wing. Becoming an appraiser requires two years of training, and clarifying that trainees can perform property inspections and write reports helps provide more motivation for seasoned appraisers to take on a young appraiser in training.

Those who read my articles know that there’s a shortage of appraisers right now, with many set to retire and few younger people coming in to replace them. Fannie Mae took a big step in the right direction with this clarification.

There has been some talk about state laws superseding the Fannie Me clarification, and also that investor or lender rules are the ultimate guideline: if the lender requires a licensed or certified appraiser, the Fannie Mae clarification won’t make a difference.

However, I believe the Fannie Mae clarification will encourage more lenders to allow appraiser trainees to complete the property inspection and write the appraisal report. In fact, I already see this happening.  

--New subdivisions or projects

 Fannie said it will now accept two pending sales in lieu of one closed sale in the subject subdivision or project in the event closed sales are not yet available. “When this flexibility is used, the appraiser must also provide at least three closed comparable sales from outside the subject subdivision or project,” Fannie Mae said.

This is good news for people buying homes in new subdivisions, especially when one hasn’t closed yet. I’ve found this to be an issue in the New York metro area, which has many new condo and housing developments. What is the appraiser supposed to do if the property is the first to close in a particular subdivision? This news from Fannie Mae will makes valuating properties in new developments much easier.

-- Adjustments to an Appraisal for Sales Concessions

With this update, Fannie Mae has clarified that appraisers may use dollar for dollar adjustments for financing or sales concessions “when such an adjustment approximates the local market’s response to these types of concessions.”

For example, if the seller has made a $10,000 concession, Fannie Mae is saying that the appraiser can reduce the appraisal by $10,000.