As of Thursday, appraisers and realtors must now use a new universal grading rubric when it comes to their assessments for properties with government-backed mortgages. ""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home and ""Freddie Mac"":http://www.freddiemac.com/ recently revised their appraisal guidelines to streamline a sometimes unclear process, but some warn of the potential for fallout among appraisers, realtors, and homeowners unfamiliar with the new standards.[IMAGE]
Coordinating new standards with the ""Federal Housing Finance Agency"":http://www.fhfa.gov/ (FHFA), the GSEs created the Uniform Appraisal Dataset (UAD) form, which appraisers viewing properties with government-backed loans will need to submit to a national portal for evaluation.
Appraisers will need to weigh property values against a string of new alpha-numeric codes and abbreviations, which Fannie and Freddie personnel will approve or send back by notifying the number of national appraisal management organizations responsible for transmitting the information.
Some say that the industry lacks the know-how needed to assess property values under the new standards.
""The world is ill-prepared"" for the UAD form, says Stephen Sousa, EVP of the ""Massachusetts Board of Real Estate Appraisers"":http://www.mbrea.org/i4a/pages/index.cfm?pageid=1 (MBREA).
Sousa worries that too few appraisers, lenders, and realtors know about the new standards. With abbreviations set to replace widely accepted descriptors, he says, unaware lenders may send back appraisals to ill-informed realtors and homeowners, creating delays and opportunities for miscommunication.
He says the MBREA petitioned the FHFA to delay the new standards, underscoring the need for more preparation and a host of other potential problems, including a loss of communication and isolated towns in the wake of Hurricane Irene. He says the FHFA never responded to the request.
""The people who don't know anything about the form are the realtors and consumers,"" Sousa adds. He says he is also concerned that ""appraisal management companies are more focused on the profits that they make than they are on the quality of the appraisal,"" hiring appraisers with less local expertise.[COLUMN_BREAK]
Property appraisals play an important role in the home-sales process. Walter Molony, a spokesperson with the ""National Association of Realtors"":http://www.realtor.org/, credited lower-than-expected appraisals for a plunge in existing-home sales for a past story with _MReport_.
He concurs with Sousa in saying that appraisers continue to feel the pinch from appraisal management companies, which more recently have been signing off on appraisers from out-of-state and with less knowledge than others about local property values.
Molony attributes lost sales to suddenly low appraisals, which force buyers, sellers, and lenders to renegotiate prices for properties. He adds that these reports commonly also crimp homebuilders.
""How can a builder sell a home and make a profit if the property comes back with less value on an appraisal report?"" he asks.
Jennifer Creech, president and CEO of ""InHouse Inc."":http://www.inhouseusa.com/, one of 23 appraisal management technology companies tasked to handle the UAD forms, acknowledges the need for more appraisers and lenders to equip themselves with information about the new standards.
""I think it's going to be a learning curve"" for the industry, she says, adding that appraisers may be ""a little bit uncomfortable with the changes.""
Creech highlights confusion over when appraisers need to submit their UAD forms to the Uniform Collateral Data Portal (UCPD), the platform that Fannie and Freddie will use to pool standard appraisals from management companies like InHouse.
She says appraisers need only worry about submitting their UAD forms to the management companies starting Thursday, not the UCPD.
Notably, the UAD form will only affect appraisers with properties sold with loans backed by Fannie and Freddie, not those guaranteed by private lenders.
Nonetheless, Creech says the industry should sign on to the new changes.
""Appraisers should engage in or embrace the change and get up to speed as quickly as possible, because what we see from our appraisers is they are mandating the forms,"" she says. ""The longer it takes for an appraiser to accept this, the better off the whole real estate community will be.
""I don't see this going away,"" she adds.
Sousa has his hopes for the new standards.
""The more information realtors can put into their MLS systems, the better opportunity there will be for an appraiser to come out with a report that is accurate and based on good information,"" he says.