Category: FNMA/FHLMC Related

 

Posted by: | on February 14, 2024

Updated Vs Remodeled

Updated: The area of the home has been modified to meet current market expectations. These modifications are limited in terms of both scope and cost

An updated area of the home should have an improved look and feel, or functional utility. Changes that constitute updates include refurbishment and/or replacing components to meet existing market expectations. Updates do not include significant alterations to the existing structure.

Remodeled: Significant finish and/or structural changes have been made that increase utility and appeal through complete replacement and/or expansion.

A remodeled area reflects fundamental changes that include multiple alterations. These alterations may include some or all of the following: replacement of a major component (cabinet(s), bathtub, or bathroom tile), relocation of plumbing/gas fixtures/appliances, significant structural alterations (relocating walls, and/or the addition of square footage). This would include a complete gutting and rebuild.

The descriptions above are from FNMA for use by appraisers and other professionals.

Here is an example of an updated bathroom. The main bathroom in a 25 year old home has had the ceiling and all walls repainted. Several items have been replaced including: underlayment & flooring, the vanity cabinet top, toilet, all plumbing fixtures, light fixtures, light switch, outlets & covers, ceiling fan, baseboard molding, towel bar & toilet paper holder. The original tub/shower still had modern appearance and was in good condition. It was polished up an re-caulked. The vanity was a dated color and had minor wear. It was sanded and resurfaced with a modern color.

Here is an example of a remodeled bathroom. The main bathroom in a 25 year old home was completely gutted, re-wired, re-plumbed & re-insulated. Can lights were added in the ceiling, the old wall light fixture box was removed, & the ceiling fan location was moved & rewired to accommodate a lighted fan. An additional outlet was added on the other side of the sink. All drywall was replaced, sanded and painted. A new vanity cabinet, vanity top faucet and plate glass mirror we installed. A new tub/shower kit and toilet were installed. New underlayment & flooring, shower fixtures, light fixtures, light switch, outlets and covers, ceiling fan, baseboard molding, towel bar & toilet paper holder were installed.

Both bathrooms are of similar quality and have been modernized to have greater appeal in their market. But the remodeled one was more thorough and took significantly more money & time to complete.

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Posted by: | on June 20, 2023

New FNMA Standard = Lower Values

FNMA & FHLMC’s recent decision to require the use of the ANSI residential measuring standard will result in lower (and less accurate) value estimates for many home owners and more delay and confusion in an industry already besot with scope of work increases and lender overlays. While I am generally a big fan of standardization I believe Fannie & Freddie have made the worst possible choice for a measuring standard for one simple reason.

None of the data sources we have available to us use the ANSI standard!

ANSI is the most conservative, overprecise and time consuming method they could possibly have chosen. It is designed by and for engineers and architects, did not exist prior to about 1997 and is not similar to the standard(s) used by local tax assessors, realtors or buyers & sellers in Illinois and the rest of the country. Its requirement for subject living area forces the appraiser to choose between using two incompatible standards (giving potentially lower value estimates) or trying to convert (guesstimate) assessor’s living area estimates to ANSI for each comparable sale used in every appraisal creating more less accuracy and more inconsistencies! The previous measurement standard used by Fannie & Freddie was already very similar to the one used in public records and therefore gave more consistent and accurate value estimates when used properly. It is astonishing to me that 2 quasi-government organizations, staffed with supposed experts could be so ignorant and put so little thought into this decision. I am glad to see that FHA, VA & USDA continue to use their more sensible measurement standards.

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Posted by: | on March 6, 2019

Living Area Calculations

Did you know there are more than a dozen common standards used to measure the gross living area of single family residences in Northern IL? IL tax assessors have over a half dozen ways alone.  Some of the standards such as those set by FNMA/FHLMC, FHA, ERC allow exceptions or alternate standards, but others do not.  Most of the standards are similar but some can result in very different square footage estimates.

If you ever have a situation where you suspect differing measurement standards may be an issue affecting value please give me a call.  I have years of study on this topic and a collection of published standards, articles, samples and illustrations. I can provide anything from a quick review and consultation to a detailed written deposition. 

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Posted by: | on February 18, 2019

Appraisal Photographs

A neighbor called recently and asked me if appraisers are required to take photos of the recent sales used their reports. 

The answer is YES. Many appraisals used for mortgage finance decisions and similar uses require the appraiser to both personally view and photograph the exterior of each comparable sale or listing used in their analysis.  When this is required by lending guidelines or specific clients the appraisers must stop along public streets, highways and sidewalks to photograph homes. In some cases this additional research and verification can be very beneficial to the appraiser, their clients, and ultimately the public.

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