My Appraisal Blog

In September 2006, Rels Valuation distributed an announcement that provided direction and clarification when appraising properties in declining markets. Several market areas are reflecting an increasing number of active listings, declining values, and foreclosures. Our client is concerned with the impacts to changing markets and has implemented more restrictive underwriting requirements for properties located in designated markets. Our client has not shared their list of “declining” markets; however, Wells Fargo economists are constantly evaluating national markets to mitigate risk in their lending practices. This market evaluation research is ongoing as real estate values are not static and the designation of a declining market can change quickly.

In areas identified with declining real estate values, lending guidelines require additional appraisal due diligence. It is important that appraisers use the most recent sales and listings data (most recent 3-6 months) and comment on any foreclosures or pending foreclosures in the subject’s neighborhood. In addition, Wells Fargo requires the following information in areas identified with declining real estate values. As a real estate appraisal professional Rels Valuation strongly encourages you to be proactive and provide the required information in all appraisals. This will eliminate unnecessary delays caused by underwriting requests and will provide further support for your opinion of value. Please note that if you do not provide this information in your appraisal reports, you may be contacted by Wells Fargo and requested to include it after completion.

Here are some things we seriously consider including in all our reports.

ü Three closed sales within the last six months, and

ü At least 1, preferably 2, comparable pending sales validating the market is a least stable

ü The appraisal must conform to policy on all other aspects of the market approach or valuation determination:

§ All comparable sales must include days on market, and

§ Adjustments must fall within policy guidelines for net (15%) and gross (25%) adjustments, and

§ Comparable sales must fall within policy guidelines for similarity in style and design, and

§ Comparable sales should be within the proximities listed below

- If located in an urban or suburban area, all sales are with 12 blocks or one mile of the subject

- If located in a rural area, all sales are within 10 miles of the subject

- If proximities are not met, the appraiser must provide supporting comments validating the use of comps with a greater distance

It is imperative that appraisers take the necessary time to review the local economic situation regarding housing and determine what recent changes may have occurred in the marketplace. Keep in mind that what was true only a few days ago may have changed and it is the appraiser’s responsibility to keep abreast of market trends and disclose this information in the appraisal report to reflect the current value, as opposed to values 4+ months ago.  

These are a few of the things we do as an appraisal company for you so you can make a better decision on your end!  Let us know if we can be of assistance with any of your appraisal needs.  FHA, Commercial, Manufactured or Condos.  We do them all.

This question is a common one here at our office.  We have 7 appraisers working out of this office and do FHA, and Commercial properties as well.  With this being said, we have seen a mix of SFR homes in the beach area dropping and a "wave" from the coast inward.  This has slowed the sales, increased the REO activity and increased monies going into the commercial areas.

Even though the market is dipping in some areas, some others have found a way to hold their own.  Some homes have increased not because the value of the houses has increase, but because they have made improvements to push the value up.