You Better Price Your Listings Right----Appraisal Changes

This week FHA issued a mortgagee letter to respond to declining markets. These changes go into effect for all FHA appraisals beginning April 1, 2009. This aligns the FHA appraisal requirements with FNMA which also requires new reporting as of April 1.

Appraisers are currently expected to note the trend of property values. Are property values increasing, stable of declining? They are to provide conclusions as to the supply of properties in the subject neighborhood. Is there a shortage, in-balance or over supply of homes for sale? Additionally appraisers are to provide data of the marketing time for properties for sale. Is it taking under three months, three to six months or over six months to sell the property?

All appraisals performed beginning April 1 must include the Fannie Mae for 1004/MC, the market conditions Addendum. This form addresses the following data points to determine the current market conditions:

• At least 2 comparable sales must be within 90 days of the appraisal date
• A minimum of 2 active listings or pending sales in addition to the three closed comparables
• Bracketed listing using both dwelling size and sales price when possible
• Adjust active listings to reflect the list to sales price ratio
• Adjust pending sales to reflect contract sales price when possible
• Include original list price and any revised list prices
• Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales
• Absorption Rate Analysis
• Known or reported sales concessions on active and pending sales

As a real estate professional let me encourage you to learn about the market conditions addendum. I am including a link to Fannie Mae’s training for this.

Also included is another link to a video presentation for the explanation and training for this addendum. Click here to view the video presentation.

It strikes me that pricing your listings correctly may be more important than ever. Part of this analysis includes (a) the ratio of list price to sales price and (b) the tracking of include the original list price, any revised list prices, and total days on the market (DOM).

My opinion is this, do not contribute to you market area being deemed a declining market by allowing your sellers to over price their property to today’s market. This will have the effect of decreasing the ratio of list price to sales price as well as increasing the number of days on the market.

An additional opinion, if you are working with low ball buyers, let them know this is having a detrimental effect on the market. Paying a fair price is appropriate, but taking advantage of sellers is hurting everyone and is contributing to the housing difficulties. Maybe you should think of not representing those that continue to make low ball offer after low ball offer.

Real estate agents, I welcome your thoughts and comments on the impact this additional analysis by appraisers may have in your market.

Appraisers, please weigh in on this topic. I am interested in what you know and think.

Jay Williams

www.myhomeloanwithjay.com