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Analyzing Appraisals: Focus on Sales Comparison (Take Away Manual)


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This credit-union specific webinar series covers key subjects designed to help you better serve your members and add value to your credit union. From underwriting and analyzing credit to appraisals and mortgage insurance, you’ll get a comprehensive introduction to the latest strategies and regulatory insights. Learn more at:

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Analyzing Appraisals: Focus on Sales Comparison (Take Away Manual)

  1. 1. Analyzing Appraisals: Focus on the Sales ComparisonTable of ContentsSession Overview ..................................................................................................................................... 2General Appraisal Review Reminders ............................................................................................... 3Analyzing Comparable Properties...................................................................................................... 5Accounting for Foreclosure or Short Sale Activity in Choosing Comps ................................... 8Size (GLA) and Bedroom Count ........................................................................................................ 11Declining Markets .................................................................................................................................. 11Analyzing the Sales Comparison Grid.............................................................................................. 13Sales Comparison Grid Basics ............................................................................................................ 14Non-Value Adjustment, or Identifier, Fields .................................................................................... 15Value Adjustment Fields – Adjustment Overview ......................................................................... 17Best Practice Adjustment Benchmarks ............................................................................................ 17Net Adjustment Calculation ............................................................................................................... 17Gross Adjustment Calculation ........................................................................................................... 18Across the Board, or Across the Line, Adjustments ...................................................................... 18Field Specific Adjustments and Guidelines .................................................................................... 19Previous Sale and Transfer History ..................................................................................................... 26Some Appraisal Red Flags Commonly Noted by Underwriters ................................................ 26Sales Comparison Considerations: Underwriting Loans for Genworth MI Coverage ........ 27Notes Pages ............................................................................................................................................ 28Resource Addendum ........................................................................................................................... 33 1
  2. 2. Analyzing Appraisals: Focus on the Sales ComparisonSession OverviewThis Session Covers the Sales Comparison Section Only.Specific Agenda: • The Genworth Appraisal Review Checklist • General Appraisal Review Reminders • Comparable Properties • Sales Comparison Grid o Adjustments o UAD Specific Data Requirements o Best Practice Recommendations • Reminders for Underwriting Loans for Genworth Mortgage Insurance Coverage • Common and Serious Sales Comparison Issues • Sales Comparison Resources and ToolsAdditional Genworth Appraisal Training Sessions • Appraisal Underwriting • Condominium Appraisal Review • Manufactured Housing • Calculating Rental Income • Rural Property Appraisals • 1004MC and Appraiser Independence • Uniform Appraisal Dataset (UAD)Participant Note • The session utilizes, and the manual references, the following two documents, which can be found in the Resources Addendum of this manual: o The Genworth Appraisal Review Checklist o The sample appraisal for “XXX Parliament Drive” 2
  3. 3. Analyzing Appraisals: Focus on the Sales ComparisonGeneral Appraisal Review RemindersGenworth Appraisal Review Checklist • The Genworth Appraisal Review Checklist can be found at: px o It can also be found in the Resource Addendum section at the end of this manual. o Reminders contained within the Checklist are also included within the information presented. o Additional appraisal analysis tools can also be found on that web page. • The information presented here includes UAD updates, as of 12/1/2011. REMINDER: Appraisers Choose Comps; Underwriters Review Appraisals.Appraiser ResponsibilitiesThe appraiser provides the lender with: • An accurate, adequately supported opinion of market value. • An objective analysis of quantifiable data to support housing trends. • All relevant information that supports the conclusions about market conditions, including: o Sales/financing concessions. o Down payment assistance. o Days on market, list-to-sales price ratios, and availability of financing.Lender (Underwriter) ResponsibilitiesThe appraisal reviewer, working on behalf of the lender, is charged with properlyreviewing the appraisal: • Verifying the appraisal is completed on appropriate form • Ensuring the opinion of market value is supported. (per GSE definitions) • Looking for consistency: Do the comments and data provided make sense? • Noting and dealing with any marketability issues. • Ensuring that all Uniform Appraisal Dataset (UAD) requirements have been met. • Ensuring that maps, the floor plan, photos and all other necessary appraisal addenda or exhibits have been provided. 3
  4. 4. Analyzing Appraisals: Focus on the Sales ComparisonInconsistent data: • The appraisal data needs to be consistent: o Within the appraisal. o Between the appraisal and other information in the loan file. o Between the appraisal/loan file and outside resources. • The appraiser should fully explain any differences. o Follow your lender and/or employer guidelines on how to contact the appraiser. • Investors may be apprehensive to purchase those loans containing inconsistent information.For additional information about appraiser and underwriter responsibilities: • See Fannie Mae® Selling Guide §B4-1.4-16 or Fannie Mae® Announcement 2010- 09. • See Freddie Mac Bulletins 2010-23 and 2009-18. 4
  5. 5. Analyzing Appraisals: Focus on the Sales ComparisonAnalyzing Comparable PropertiesThis section provides information about analyzing the comparable properties chosen bythe appraiser. • Guidelines and best practices for evaluating the selection of comparable properties. • Accounting for foreclosure and short sale activity in comparison selection. • Resources that can help evaluate comparison selection.At least three closed sales need to be provided as comparable properties. • More can be provided. • Pending Sales and Listings may offer additional support. o These can demonstrate the subject’s current competition. o These can evidence current market conditions. • Typically, comparable sales should have closed within the previous six months. o Check applicable guidelines. o Sales dated over six months may be acceptable with sufficient explanation. o The appraiser should explain, for older comps, why newer comps were not available and why that does not point towards a marketability issue, including:  The effort made to find newer comps.  Why the appraiser believes no newer comps are available.  Why this does not point towards a marketability issue.  The basis and summary support for the market condition adjustment. o Time or market condition adjustments may be warranted for older comps if the market has changed significantly between the date the comp went under contract and the present. o See the Value Adjustments section of this manual for additional information about time adjustments.When the appraiser indicates there is a shortage of comps: • The appraiser should explain: o The effort made to find comps. o What the shortage indicates about the market. 5
  6. 6. Analyzing Appraisals: Focus on the Sales Comparison o Example 1: No houses have been listed or sold within five miles of the comp. Although there are many homes, they rarely go on the market, and there is no foreclosure or short sale activity: Stable o Example 2: Although 498 of the 500 homes within the subject’s subdivision have been on the market for two years or more, not a single home has sold: Market Issue • If there is a shortage of comps, the appraiser may have to go beyond six months or a year, or look to a nearby, competing market. o Similarities between the subject and comp should be highlighted. o Explaining why certain comps were not chosen can be insightful. • Use outside resources to confirm the information the appraiser reports. o o o practices in choosing comparable properties. • Misrepresentation of comp’s physical characteristics. • Selection or use of inappropriate comps. • Failure to use comps that are locationally and physically most similar to the subject property. • Use of comps even though the appraiser has not personally inspected the exterior of the comps by at least driving by them. • See Fannie Selling Guide §B4-1.1-01. • See Freddie Mac Single-Family Seller/Servicer Guide §44.15.General comparison selection requirements include: • Comps should come from an area within the neighborhood/market area impacted by the same market forces. • If there are adverse conditions noted on the first page of the appraisal form, at least one comp should be impacted by the same or similar condition. o If subject is on a busy street, or dump-adjacent, one or more comps should have a similar influence. o Look for both disadvantages in the subject’s location or advantages in the comps’ locations. 6
  7. 7. Analyzing Appraisals: Focus on the Sales ComparisonReview the map carefully. • Use a highlighter to draw the neighborhood boundaries. • Is the subject the center of attention? • Do the distances make sense? • Have natural boundaries been crossed? o Waterways, Highways, Large Parks, Railroad Tracks, etc. • Compare the map included with the appraisal to other maps. o Map Web Sites: Google Earth, Yahoo! Maps, or MapQuest. o School and municipality maps.Distance and Location • While there is no distance rule, the distance must make sense. o Urban Location  Highly, densely populated.  Comps should be close by, often within one mile, and within the same market area.  Areas with unique issues, such as rapid gentrification, may require “block by block” selection of comps. o Suburban Location  No set distance rule, but it needs to make sense.  Tract homes in subdivisions would likely not be compared to a free standing custom built home.  Look for subdivision boundaries (see below), school district lines and distance to shopping and employment. o Rural Location  Often there are not many nearby recent sales or home, so miles away may still be a similar market.  Genworth offers training specifically covering rural property appraisals, including a pre-recorded Webinar. • Regardless of where the property is located, there is no “set” distance rule. • The distance must make sense for where the subject property is located. • Be aware, on higher LTV loans where MI is needed, there may be additional scrutiny of the appraisal report. o MI companies typically want to see comps within one mile. 7
  8. 8. Analyzing Appraisals: Focus on the Sales Comparison • The appraiser’s explanation is key to understanding why the chosen comps are the best indicators of value for the subject. • If the subject is located in a subdivision, condominium or PUD project: o Established (resale market) – All comps should be from within the subject’s project. o New (builder/developer still selling) – At least one comp should be from within the subject’s project and one from a nearby, competing project.  The appraiser should note that the nearby project is not related to the subject’s builder/developer.Accounting for Foreclosure or Short Sale Activity in Choosing CompsSuppose the following situation: • Two houses, one green, one red, built by the same builder from the same blueprints at the same time right next to each other on similar lots. • Each is now on the market, for a non-negotiable $200,000. • Which would you purchase? • This illustrates that the market may be bifurcated between REO listings/sales and non-REO listings/sales. o Buyers for the REO properties would likely be different than buyers for the non-REO properties. 8
  9. 9. Analyzing Appraisals: Focus on the Sales ComparisonSuppose there is a blue house, nine blocks away, also virtually identical, except there isno foreclosure activity within six blocks of the blue house. • This may point towards three price points: o Foreclosed properties. (Green) o Properties impacted in price because the properties are in areas with foreclosure/short sale activity. (Red) o Properties not directly impacted by the foreclosure activity. (Blue) • Appraisers must explain: o Is there foreclosure/short sale activity in the subject’s market? o How does this impact the subject? o Do the selected comparables reflect this impact? • A lender must not require that appraiser to include or exclude REO sales or short sales as comps. • In neighborhoods with significant foreclosure and/or short sale activity, the appraiser is expected to: o Clearly and completely address the impact of the foreclosure/short sale activity, and o State how that has been taken into account within the appraisal. o The appraiser’s information should be consistent with:  All other information within the appraisal, and  Reliable public, published information. 9
  10. 10. Analyzing Appraisals: Focus on the Sales Comparison o It is helpful if the appraiser includes additional documentation that may support the explanation if such documentation is available.  For example, the appraiser might include lists of recent foreclosed properties to show there is significant foreclosure activity or a map printout to show there are none. (Example map site: • When foreclosures are the market: o If the only properties that have sold in the subject’s neighborhood within the allowable period of time were foreclosures or short sales, this may indicate:  Foreclosures/short sales have become the market.  In this case foreclosures/short sales would typically be used as comparable properties but the appraiser is required, regardless of the comparables used, to take the foreclosure/short sale activity into account in the appraisal report. o There may be a marketability issue within the neighborhood.  The appraiser needs to address why the particular subject property would be marketable despite what is happening within the market area.  The appraiser again needs to address how the foreclosure activity has been taken into account in the appraisal report.Bracketing • Bracketing means the subject is not the best or worst in any characteristic category. o At least one comp is superior, and one inferior, to the subject. • The comps should “bracket” the subject in as many features as possible, including: o Unadjusted Sales Price o Gross Living Area (GLA) o Lot Size o Adjusted Sales Price o Other Major Characteristics • While bracketing is not a guideline, it is a best practice. o It provides a more accurate picture of the value of the subject. o The range or spread between the properties is tightened, because there are both upward and downward adjustments in each field. 10
  11. 11. Analyzing Appraisals: Focus on the Sales Comparison o A subject compared to all more expensive properties can result in an inflated value conclusion. o Bracketing size and actual age helps support that the home conforms to the neighborhood and is marketable.Size (GLA) and Bedroom Count • The appraiser should provide comparables that are similar in size to the subject, preferably within 30% of the subject’s GLA. o Anything outside of that is not typically a similar home. o Differences in square footage of 100 sq ft or less typically do not warrant an adjustment. o An exception to the 30% preference may be appropriate when the subject is less than 1,200 square feet. • If the subject is a two bedroom home, the appraiser MUST provide at least or more comparables with two bedrooms. o There may be a significant difference in market appeal between two and three bedroom homes. o It is common to see appraisers compare three and four bedroom homes.  In many areas, there is no significant market reaction between three and four bedroom layout utility.Declining Markets • Detailed comments from the appraiser are required if the appraiser cannot provide recent closed sales for comparables. • Many lenders require a minimum of one, and preferably two, listing(s) and/or pending sales. • Days on market must be reported for the subject and all comparable sales, per the UAD requirements. • Downward market adjustments (time) adjustments may be necessary for the comparables if older comparables are provided and the market conditions have deteriorated. o See the Value Adjustments section of this manual for additional information about Time Adjustments. 11
  12. 12. Analyzing Appraisals: Focus on the Sales ComparisonPhotographs and Resources • Review the subject and comp pictures looking for similarities. • Use outside resources to confirm information. o provides information about listings (subject) and recent sales (comps) for most of the country. o Most map sites allow access to aerial pictures. (MapQuest, Google Earth) o provides neighborhood characteristics information. o Local real estate tax records and school district maps help you understand neighborhoods. 12
  13. 13. Analyzing Appraisals: Focus on the Sales ComparisonAnalyzing the Sales Comparison GridThis section provides information about reading the Sales Comparison grid; evaluatingvalue adjustments and Uniform Appraisal Dataset (UAD) impacted fields. • Sales Comparison Grid Reading Basics o Including How and Why Adjustments are Made • Field-by-Field review of the grid o Non-Value Adjustment Fields o Value Adjustment Fields o Including Best Practices for Analyzing Adjustments and UAD Requirements for this Section  Genworth offers training specifically covering UAD requirements, including a pre-recorded Webinar.  This training only includes UAD requirements impacting the Sales Comparison section of the appraisal. 13
  14. 14. Analyzing Appraisals: Focus on the Sales ComparisonSales Comparison Grid Basics • Adjustments are based on the value a feature contributes to property. o Not on building cost. o These can differ by market area. o All adjustments must be supported, justified and explained. o The adjustments must make sense. • The appraiser adjusts at least three comps and analyzes the Adjusted Sales Prices in the Summary of Sales Comparison. o The appraiser provides written rational for arriving at the Indicated Value for the subject property. o The written rational must be make sense and be justified. o The Indicated Value is not calculated by taking the average of the Adjusted Sales Prices. 14
  15. 15. Analyzing Appraisals: Focus on the Sales ComparisonNon-Value Adjustment, or Identifier, Fields  Address o Ensure the subject’s address matches the application. o Addresses of existing homes can be confirmed using the Zip Code Finder at  Proximity to Subject o The distance, in miles, per two decimal points, and direction are reported. o Distances are measured “as the crow flies.” o Directions are measured from the subject to the comparable.  Sale Price o For purchase transaction, the subject’s contract price is reported. o For refinances, the subject’s field is left blank. o For closed sale comparables, the sales price is reported. o For listing and pending sale comps, the offering or contract price is reported. o Whole number dollar amounts are used.  Price per Gross Living Area (P/GLA) o Also called Price per Square Foot. o This can help a reviewer gauge whether the subject and comparables are similar properties.  When the subject and a comp differ by more than 10%, it can be an indicator that the properties are dissimilar.  Unexplained differences (in other words, differences that cannot easily be discerned by looking at the sales comparison grid and make sense) likely indicate superior building supplies and quality. 15
  16. 16. Analyzing Appraisals: Focus on the Sales Comparison   Data and Verification Sources o The Data Source reports where the appraiser obtained the data used for the appraisal. o The Verification Source is where the appraiser verified the data is correct. o Examples of acceptable data sources include Multiple Listings Service (MLS), deed records, tax records, Realtors®, builders, appraisers, appraiser’s files and the Internet.  The appraiser must specifically state the data source.  Broad categories, such as “public records” are not acceptable.  The data source must be reliable for the area in which the property is located. o Acceptable “Verification Sources” include the buyer, seller, listing agent, selling agent and closing documents in certain situations. o When comparable sales data is provided by parties that have a financial interest in either the sale or financing of the subject property, the appraiser must verify the data with a party that has no financial interest in the subject transaction.  Example: If the data comes from the real estate agent, the Verification Source should not be the seller. o The Days on Market (DOM) must be provided for each comp, no matter the source of the data. o If an MLS is used for the data or verification source, the specific MLS needs to be identified and the listing number reported. 16
  17. 17. Analyzing Appraisals: Focus on the Sales ComparisonValue Adjustment Fields – Adjustment OverviewBest Practice Adjustment Benchmarks  10-15-25  These are “guidelines” that underwriters use to determine if the comparables are truly similar. o The Single Adjustment recommendation, 10%, is no longer a GSE guideline, but is a helpful rule of thumb.  Any exceptions, at minimum, require appraiser comment.  Severity and frequency of exceeding these guidelines might require new comparables or make the appraised value unsupported.  Appraisers frequently exceed these benchmarks, but it must make sense. o Read appraiser’s comments.  It helps the reviewer determine if we are comparing apples to apples.Net Adjustment Calculation  (Actaul Sales Price – Adjusted Sales Price)/(Original Sales Price)  Expressed as a percentage. 17
  18. 18. Analyzing Appraisals: Focus on the Sales ComparisonGross Adjustment Calculation  (Sum of all the Whole Number Adjustments)/(Original Sales Price)  Expressed as a percentage.Across the Board, or Across the Line, Adjustments  The subject has a feature and the comps do NOT or vice versa!  Typically these are seen with swimming pools, basements, outbuildings or storage sheds. o Just a few examples but keep in mind, each market is different.  These types of adjustments are problematic because you don’t know if the market really will pay for this feature without a comparable that has it.  You also don’t know how much value this feature adds, if any.  Request the appraiser provide an older or distant comparable that has the feature. o This helps demonstrate the market will pay and accepts this amenity. 18
  19. 19. Analyzing Appraisals: Focus on the Sales ComparisonField Specific Adjustments and GuidelinesSales and Financing Concessions  See the following additional resources: o Fannie Mae® Selling Guide §B4-1.4, Appraisal Report Assessment. o Freddie Mac® Single-Family Seller/Servicer Guide §44-15. o See Fannie Mae and Freddie Mac Uniform Appraisal Dataset Specification, Field-Specific Standardization Requirements (Appendix D), Sales Comparison Approach Section.  For each comp, the first line reports the sales type. o Sales types are REO Sale, Short Sale, Court Ordered Sale, Estate Sale, Relocation Sale, Non-Arms Length Sale, Arms Length Sale and Listing. o If more than one applies, the appraiser reports the type that appears first on the list. o Different sale types may impact sales price and market value differently.  For each comp, the second line reports the financing type and amount of any concessions. o Possible financing types are FHA, VA, Conventional, Seller, Cash, USDA- Rural Housing or Other. o If” Other” financing is reported, the appraiser must explain. o Be on the lookout for below-market financing, which can have an impact on the sales price and market value. 19
  20. 20. Analyzing Appraisals: Focus on the Sales ComparisonFinancing Concessions, Sales Concessions and Interested Party Contributions  When Concessions are present within the transaction, evaluate the concessions and determine the type.  Financing Concessions o Are they within the limits based on LTV & Occupancy Type? o Is an adjustment required or at a minimum is a narrative included? o Has the sales price been inflated by the inclusion of concessions?  Sales Concessions o Have the non-realty items been deducted from the sale price & the LTV recalculated? o Have the excessive financing concessions been deducted from the sale price?  Interested Party Contributions (IPC) o Fannie Mae considers the following financing or sales concessions to be IPC’s:  Funds that are paid directly from the interested party to the borrower;  Funds that flow from an interested party through a third-party organization, including nonprofit entities, to the borrower;  Funds that flow to the transaction on the borrower’s behalf from an interested party, including a third-party organization or nonprofit agency; and  Funds are donated to a third party, which then provides the money to pay some or all of the closing costs for a specific transaction.  The Fannie Mae® Selling Guide, §B3-4.1-02 provides a Lender Checklist that can assist ensuring all requirements for an IPC are satisfied.  If the subject property or any comps are located in new projects, a simple Internet search (Yahoo!, Google, etc.) can help identify concessions being offered to purchasers.Date of Sale/Time  The status of each comp is reported. o Possible status types are Active, Contract, Expired, Withdrawn or Settled Sale.  The settlement date should be reported, followed by the contract date, if known. o Otherwise, the date of listing withdrawal or expiration should be reported. 20
  21. 21. Analyzing Appraisals: Focus on the Sales Comparison o If contract date unknown, “Unk” reported. o See Appendix D for specific reporting format.  Market condition adjustments may be warranted if the market has changes significantly since the contract date of the comparable sale. o Appraiser explanation is required. o The adjustment is measured from the date of the comp’s contract, not sale.Location • The appraisal reports the impact on value for the location (rating), and identifies the one or two most influential location characteristics (factors). o The location’s impact can be Neutral (N), Beneficial (B) or Adverse (A). o The factors explain what influences the value impact. o See Appendix D for location factor abbreviations. • Value adjustments may be warranted when otherwise similar properties have different types of locations. • Any necessary location adjustment would appear on the blank “Other” lines farther down the grid, as per UAD Appendix D. • Always check the location, view and site value adjustments to ensure that the same influence is not adjusted twice. o Example: An oceanfront property has additional value for location. Would an additional adjustment for the oceanfront view be warranted, if the oceanfront location has already been adjusted? o Example: Two properties each located one block from the ocean might have additional value for being so close to the ocean, but one has a view of the ocean while the other has a blocked view. Might a view adjustment more likely be warranted here?Site • The site/parcel size is reported. o Less than one acre is reported in square feet. o One acre and above is reported in acreage, to two decimal points. • The entire site must be appraised; partial sites are unacceptable. • The subject and comps should have similarly sized lots. • Any adjustments for lot value differences should be: 21
  22. 22. Analyzing Appraisals: Focus on the Sales Comparison o Consistent with the lot’s value shown in the Cost Approach Section of the appraisal. o Supported with market data.View • The appraisal reports the impact on value for the view (rating), and identifies the one or two most influential view characteristics (factors). o The view’s impact can be Neutral (N), Beneficial (B) or Adverse (A). o The factors explain what influences the value impact. o See Appendix D for view factor abbreviations. • Value adjustments may be warranted when otherwise similar properties have different types of locations. • Always check to be sure that the appraiser has not doubled up on adjustments by giving credit for both location and view. • See the Location section of this manual for addition explanation.Design (Style) • The architectural design/style descriptor is reported. o Mid-Century Modern, Craftsman Bungalow, Ranch, Cape Cod, etc. • Non-architectural descriptors, such as “average” or “brick” are unacceptable. o An appraisal which includes an adjustment for design/style should also contain sufficient explanation regarding the basis for the adjustment.Quality of Construction • A quality rating is reported for the subject and each comp. • See Appendix D for more complete definitions. o Q1: Unique, architecturally significant structures. o Q2: Custom design for individual properties. o Q3: Higher quality, above-standard tract developments. o Q4: Meet or exceed applicable building codes. o Q5: Economy of construction, basic functionality. o Q6: Basic quality, lower cost. • The quality rankings should be reviewed to ensure they make sense. o Compare the rating to the photos provided. o Read any comments provided. 22
  23. 23. Analyzing Appraisals: Focus on the Sales Comparison o Do any value adjustments made for quality make sense? o If there is no adjustment for a subject and comp of different quality, has the appraiser provided reasoning for the lack of adjustment?Actual Age • Reported for the subject and comps, to three digits. • If the actual age is unknown, the estimated age is reported with the tilde (~) sign. • Look for the comps ages to bracket the subject. o An unbracketed subject may be a unique home for that market. o Any adjustments should be fully explained. o Be sure, if there are adjustments here, that the same characteristic is not being adjusted in the condition field, too.Condition • A quality ranking is reported for the subject and each comp. • See Appendix D for more complete definitions. o C1: New properties. o C2: No deferred maintenance, little or no physical depreciation and recent updates. o C3: Well maintained, with normal wear and tear and, perhaps, some updated features. o C4: Minor deferred maintenance requiring only minimal repairs. o C5: In need of significant repairs. o C6: Substantial damages or significant need for major repairs.  This rating includes properties with conditions affecting safety, soundness or structural integrity.  Properties with these issues must be appraised “subject-to” needed repairs.  Those repairs must be completed prior to delivery to the GSE. • Important Note: The subject’s condition rating is reported on the first page of the appraisal and auto-populates into the sales comparison section. o Look to see if the condition rating is subject to repair or the present condition. 23
  24. 24. Analyzing Appraisals: Focus on the Sales ComparisonAbove Grade Room Count (Bedrooms, Bathrooms) and Gross Living Area • Total Rooms and Bedrooms are reported as whole numbers. • Bath(s) are reported with two numbers to the left and two to the right of a decimal point. o The first two numbers are full and three-quarter baths. o The second two numbers are half baths. o Example: 02.01 are two full or three-quarter baths and one half bath. • Gross Living Area (GLA) o Look for similar square foot adjustments on all comps. o It is common for an appraisal not to include an adjustment for gross living area when the difference in size is less than 100 square feet.  An exception to this statement might be when the subject dwelling is less than 1.200 square feet.Basement • The first line of the basement field reports the total square footage, the finished square footage and the access. o Example: The sample appraisal subject shows “1200sf600sfwo” meaning there is a total of 1,200 sq/ft of basement, of which 600 sq/ft are finished, and there is walk-out access to the outside. o Possible basement access types are walk-out (wo), walk-up (wu) and interior only (in). • The second line of the basement field reports the number of rooms by type of finished rooms. o Example: The sample appraisal shows “3rr1br1.1ba0o” meaning there are three recreation rooms, one bedroom, one full bath, one half bath, and no other rooms. • Areas that are fully or partially below grade (finished or unfinished) should not be included in the above grade living are calculations. o Although there is an exception to this guideline, which is explained in the Fannie Mae Selling guide, the analysis of finished areas should be consistent between the subject and comparable sales. o See Fannie Mae® Selling Guide §§B4-1.4-14 and 18 for additional information. • Be sure value given to basement space and finished versus unfinished basement makes sense and that any value adjustments for basement room count make sense. 24
  25. 25. Analyzing Appraisals: Focus on the Sales ComparisonOther Value Adjustment Fields • Functional Utility o If adjusted, the appraiser must explain. • Heating/Cooling, Energy Efficient Items, Garage/Carport, Porch/Patio/Deck and Fireplace o Review any adjustments to be sure they make sense and are consistently applied within each comp. o Check the subject and comp pictures to ensure features that should be observable are there. • Other o If there are features or characteristics not reportable in the pre-printed fields, the appraisal may show them in the blank boxes below the “Fireplace” field. o Examples: Swimming Pools, Barns, Accessory Units. o Look for at least one comp that shares the “Other” item to ensure it is acceptable and marketable in the subject’s area. o Any adjustments on these lines must make sense and should be explained. 25
  26. 26. Analyzing Appraisals: Focus on the Sales ComparisonPrevious Sale and Transfer History • The appraisal reports the previous sale and transfer history for the subject and each comp. o Three years for the subject. o One year for each comp. • The previous sale and transfer history can help the reviewer determine: o If the property is possibly in a declining market. o If any repairs or improvements must be documented to explain increases in value. o If the subject may have been purchased a t below market value.  Foreclosures, non-arms length transactions or divorce situations. • The Uniform Standards of Professional Appraisal Practice (USPAP) and the GSEs require the analysis and reporting of a three year sale history for the subject. • In addition, the GSEs specifically require the analysis and reporting of a one year sale history for each comparable property.Some Appraisal Red Flags Commonly Noted by Underwriters • Choosing dated comps, in the absence of sufficient explanation, particularly when there are more recent comps available. • Not relying upon the indicated value from the most similar comparable property. o Closest. o Most recent sale. o Most similar property. • Indicated value outside the predominant range for the neighborhood. • High land to value percentage without explanation. (Over 30%) • Photos show a feature/situation not reflected in the appraisal. o Major Farm structures or livestock may evidence farm use. o Appraisers should explain unusual circumstances and confirm that the land is used solely residentially. • Gross adjustments in excess of 25% of the original sales price on several comps without sufficient explanation and justification. • Not identifying an area as declining when credible evidence suggests a decline 26
  27. 27. Analyzing Appraisals: Focus on the Sales ComparisonSales Comparison Considerations: Underwriting Loans for Genworth MI Coverage • Genworth Appraisal Guidelines can be found online, at, under the “Rates and Guidelines” tab. • “Value Not Supported by Comparables” is cited on Genworth’s “Top MI Decision Errors” as a common underwriting issue. • Genworth follows Agency Appraisal Standards and Uniform Standards of Professional Appraisal Practice (USPAP) guidelines. • When Genworth’s underwriting manual is “silent” and does not address a guideline, the lender must follow Agency Standard guidelines. o See the “Top MI Decision Errors” flier for additional information.Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these trainingmaterials. While we strive for accuracy, we also know that any discussion of laws andtheir application to particular facts is subject to individual interpretation, change andother uncertainties. Our training is not intended as legal advice, and is not a substitutefor advice of counsel. You should always check with your own legal advisors forinterpretations of legal and compliance principles applicable to your business. GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS ORIMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABLILITY ANDFITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THERELATED TRAINING. IN NO EVENT SHALL GENWORTH BE LIABLE FOR ANY DIRECT,INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND,WHATSOVER, WITH RESPECT TO THE TRAINING AND MATERIALS. 27
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  32. 32. Analyzing Appraisals: Focus on the Sales ComparisonNotes Pages 32
  33. 33. Analyzing Appraisals: Focus on the Sales ComparisonResource Addendum • Genworth’s Appraisal Review Checklist • Sample Appraisal for “xxx Parliament Drive” 33
  34. 34. APPRAISAL REVIEW CHECKLIST Revised 10/2011Property Identified as __________________________Subject (purchase only): Yes No n/a 1. Do the property address and legal description match the sales contract?    2. Is there a valid USPS address provided?    3. Does the name of the seller match the current owner of public record?   Subject (REFI only): Yes No n/a 4. Do the property address and legal description match the application and USPS format?    5. Does the name of the borrower match the current owner of public record?    6. Is the property currently listed for sale or has it been listed for sale in the past 12 months?    7. Is occupancy status noted (compare to 1003) and does it make sense?   Subject (all transactions): Yes No n/a 8. Are property rights appraised as fee simple?   9. Is the current owner the owner of public record for the most recent six months?  Contract (purchase only): Yes No n/a10. Did appraiser analyze the contract for sale and all addendums and address any financial assistance to be paid by   any party on behalf of the borrower? If yes, the amount and contributing party must be disclosed.11. Did appraiser provide type of sale (REO, Arms Length?) as well as Days on Market (DOM)?  Neighborhood: Yes No n/a12. Is location type consistent with the location map and neighborhood description?  13. Does the appraiser mark the built up % >25%? (If not, review the appraisal for a sufficient explanation).  14. Is value between low and high ranges? If value >10% of predominant value, appraiser should have addressed.  15. Does present land use add up to 100%?  SITE: Yes No n/a16. Are dimensions reported (Square feet for less than one acre, number of acres if larger)?   17. Are both Zoning Classification and Description indicated (i.e. R1-Residential SF or Residential 1 to 4 family)?   18. If zoning is “legal/non-conforming” has appraiser addressed whether subject can be rebuilt if destroyed? ,   19. If the appraisal indicates that the subject’s zoning compliance is legal non-conforming or illegal, are the specific    conditions, verification sources and impact on value/marketability adequately addressed and analyzed?20. Is the current use of the property the highest and best use?  21. If the well is shared, has the appraiser validated the shared well agreement?   22. Does appraiser address non-public utilities and off-site improvements?   23. If off-site access is private, does appraiser provide road condition? Must be at least average condition.   24. Does the appraiser indicate the location of the tank (above ground / underground)?   25. Does appraiser provide flood zone information? Cannot be left blank.  26. Is property free of any adverse site conditions, external factors or land use changes? If No, appraiser must explain.   Page 1 of 3
  35. 35. APPRAISAL REVIEW CHECKLIST (continued)Description of Improvements: Yes No n/a27. Is general description consistent with property photographs?  28. Did appraiser use appropriate UAD (Uniform Appraisal Dataset) condition ratings (C1-C6)?  29. Did appraiser indicate any material work done to kitchen/bathrooms, when it occured and the level of work   (not updated; updated; remodeled)?30. Are interior photos provided if an interior inspection was completed or required?   31. If manufactured home, is appraisal done on Fannie Mae Form 1004C or Freddie Mac Form 70C?    Note: Modular homes can be compared to “similar quality” stick-built homes.32. If appraiser indicated evidence of infestation, dampness or settlement, is a full description provided in the   “Condition of the Property”? Note: Underwriter may need to condition for an inspection.33. Is there a permanent heat source?  34. If collateral includes amenities such as a pool or pier/dock access, is a photo included with appraisal? Do    comps also have these amenities?35. Does room count/square footage agree with room count/square footage in sales comparison   and cost approach, if completed?36. There are no deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of   the property as reported by appraiser? Answering “yes” means there were none noted.37. Does property conform to the neighborhood? If no, did appraiser properly describe?  Sales Comparison Approach: Yes No n/a38. Did appraiser provide # comparable listings & # of closed sales in subject neighborhood, along with a price   range?39. Did appraiser provide address, city and proximity of each comparable, including data verification source &   DOM?40. Did appraiser provide “sale type” and “financing type” along with the amount of any concessions, as   applicable?41. Are sales within the required time frames or addressed with support? Six months in most cases would be   typical42. Do comparables have similar quality ratings (Q1-Q6)? If no, is an explanation/adjustment provided?  43. If time adjustments made, did appraiser provide commentary / proper support?   44. Is it consistent with Neighborhood section / Demand & Supply?   45. Are site sizes for subject / comps provided? Has to be actual size, not “typical” .  46. Do at least 2 comps have same bedroom count as the subject? If no, is subject bedroom count bracketed?  47. Do the adjustments appear to be supported, justified and explained by the appraiser?  48. Are Gross (25%)/Net (15%) adjustments within guidelines and/or addressed?  49. Are adjustments done in “proper direction” (+/-) ?  50. Are adjustments being made consistently for the same item descriptions?  51. Are the UAD location factors and overall rating codes provided? Are they similar to the subject?  52. Are at least three closed comparable sales provided?  53. Are additional listings/pending sales provided as per any investor overlays?   54. If comp is a listing, are the list date and original list price and any changes to list price provided?   55. Are the distances between comps reasonable for the neighborhood / location?  56. Did appraiser use the same per square foot adjustment for each comparable sale?  57. Did appraiser research the sale or transfer history of the subject and comparable sales?  58. Did appraiser’s research reveal any prior sales or transfers for the subject in the past three years from the   effective date of the appraisal? Unacceptable to leave blank, research must have been completed.59. Did appraiser’s research reveal any prior sales or transfers for the comparables in the past year from the   effective date of the appraisal? Unacceptable to leave blank, research must have been completed.60. Did appraiser provide a summary of the sales comparison approach?   Page 2 of 3
  36. 36. APPRAISAL REVIEW CHECKLIST (continued) Reconciliation: Yes No n/a 61. Is a value indicated by the Sales Comparison Approach? Cost and Income approach are optional in most   cases. 62. Is appraisal marked appropriately “as is” or “subject to repairs, completion or an inspection”?   63. If appraiser marked “subject to”repairs or inspections, are the “subject to” conditions adequately explained?    64. If “subject to” are the conditions/inspection reports attached? If missing, underwriter must obtain and review.    65. Is appraisal properly signed and dated? If older than 4 months, does it have required Appraisal Update?    Additional Items: Yes No n/a 66. Are there sufficient comments regarding items such as second kitchens, in-law suites, commercial influence    and condition adjustments and do they make sense? 67. Does subject sketch include dimensions and room layout?   68. Does the subject layout appear functional or if there appears to be functional deficiencies, are they   addressed? 69. Do maps identify subject and comparables?   70. When examining the appraiser’s location map, do comps appear sufficiently distant from obvious negative   external factors? 71. Are subject and comparable photos included and legible? Interior photos provided if an interior appraisal   report? 72. When reviewing the appraiser’s photographs and descriptions, do they appear consistent?   73. Are all addendums referenced present?    74. For rural or large acreage properties, do the improvements, use and outbuildings appear residential in nature?    75. Has the appraiser indicated that the subject and ALL of comparables have NOT been sold multiple times in the   past year? 76. If no similar or good comparables available, did appraiser state to what extent the market was researched?    Cost Approach (not required, but if completed): Yes No n/a 77. If the site value opinion exceeds 30% of the appraised value, has the appraiser addressed?    78. Does appraiser provide support for the site value opinion by citing methodology used or providing a summary    of land sales? 79. Does the site value opinion make sense when compared to the site value adjustments in the cost approach?    Income Approach (not required unless property is for investment purposes): PUD Information (only required if project is under builder control AND is an attached property): Yes No n/a 80. Appraiser provide HOA fees on page one?    81. Is the legal name of the project provided and does it match the sales contract or title commitment?    82. Are all questions regarding the project phase completed? If not, a project questionnaire will be required.    83. Does the association own or lease the common elements? If leased, did appraiser provide rental terms?    84. Did appraiser provide a description of the common elements and recreational facilities, if any?    Market Condition Addendum 1004MC: Yes No n/a 85. If foreclosures are a factor, did appraiser address trends and impact on value?    86. Is the form fully completed, or if not, did the appraiser provide details or comments why information was not   completed? Condominium Market Condition Information: Yes No n/a 87. Did appraiser address any trends for the project?    Additional Certifications: Yes No n/a 88. Did the appraiser indicate that they have NOT performed prior services on the subject property in the past   three years?©2011 Genworth Financial, Inc. All Rights Reserved.7788951.1011 Page 3 of 3
  37. 37. Genworth Mortgage Insurance Main File No. 0904001 Page #3 Uniform Residential Appraisal Report File # 0904001 The purpose of this summary appraisal report is to provide the lender/client with an accurate, and adequately supported, opinion of the market value of the subject property. Property Address XXX Parliament Drive City Anytown State OH Zip Code 44XXX-3561 Borrower Joe and Jill Borrower Owner of Public Record Joe and Jill Seller County Portage Legal Description ANNEVAR ESTATES X LOT XX Assessors Parcel # 31-304-XXX-XX-XXXX Tax Year 2008 R.E. Taxes $ 2,358 Neighborhood Name Annevar Estates Map Reference 23-C2 Census Tract 6009.02SUBJECT Occupant Owner Tenant Vacant Special Assessments $ 0 PUD HOA $ 25 per year per month Property Rights Appraised Fee Simple Leasehold Other (describe) Assignment Type Purchase Transaction Refinance Transaction Other (describe) Lender/Client XYZ Home Loans Address XXX Dale Road, Anytown, OH 44XXX Is the subject property currently offered for sale or has it been offered for sale in the twelve months prior to the effective date of this appraisal? Yes No Report data source(s) used, offering price(s), and date(s). DOM 83;The subject is currently listed in the NEOHREX MLS for $156,900. It has been on the market for a total of 83 days. It is current listed in the MLS as a pending listing. I did did not analyze the contract for sale for the subject purchase transaction. Explain the results of the analysis of the contract for sale or why the analysis was not performed. Arms length sale;The purchase agreement was signed on 9/27/2011 for $153,500. The seller agrees to pay $5,000 in closing costs. There were no otherCONTRACT seller concessions or unusual conditions reported in the purchase agreement. Contract Price $ 153,500 Date of Contract 09/27/2011 Is the property seller the owner of public record? Yes No Data Source(s) County Auditor Is there any financial assistance (loan charges, sale concessions, gift or downpayment assistance, etc.) to be paid by any party on behalf of the borrower? Yes No If Yes, report the total dollar amount and describe the items to be paid. $5,000;;The seller agrees to pay up $5,000 of the buyers closing costs. This is not uncommon in this market. Note: Race and the racial composition of the neighborhood are not appraisal factors. Neighborhood Characteristics One-Unit Housing Trends One-Unit Housing Present Land Use % Location Urban Suburban Rural Property Values Increasing Stable Declining PRICE AGE One-Unit 100 % Built-Up Over 75% 25-75% Under 25% Demand/Supply Shortage In Balance Over Supply $ (000) (yrs) 2-4 Unit %NEIGHBORHOOD Growth Rapid Stable Slow Marketing Time Under 3 mths 3-6 mths Over 6 mths 140 Low 0 Multi-Family % Neighborhood Boundaries The subjects immediate neighborhood is defined as Annevar Estates south of W Main St, 195 High 11 Commercial % north of Summit Rd., west of S Prospect St. and east of Lakewood Rd. 155 Pred. 5 Other % Neighborhood Description See page 3 of the URAR for neighborhood comments. Market Conditions (including support for the above conclusions) Marketing and exposure times are typically 40-240 days. It appears that there is a 6 month supply of available housing inventory which represents an oversupply condition. A study of repeat sales and prior sales to current list prices indicates a moderate decline in residential property values. Conventional and government financing are common for the area. Seller concessions are typical in this neighborhood. See page 3 of the Dimensions 85.11x169.77x85.24x167.66 Area 14,355 sf Shape Rectangular View N;CtyStr; Specific Zoning Classification R-2 Zoning Description Low Density Single Family Residential Zoning Compliance Legal Legal Nonconforming (Grandfathered Use) No Zoning Illegal (describe) Is the highest and best use of subject property as improved (or as proposed per plans and specifications) the present use? Yes No If No, describe The highest and best use of the subject is deemed to be the current improved use as single-family residential. See attached narrative addendum for a summary of the highest and Utilities Public Other (describe) Public Other (describe) Off-site Improvements - Type Public Private Electricity Water Street AsphaltSITE Gas Sanitary Sewer Alley None FEMA Special Flood Hazard Area Yes No FEMA Flood Zone C FEMA Map # 390458 0003A FEMA Map Date 09/04/1987 Are the utilities and off-site improvements typical for the market area? Yes No If No, describe Are there any adverse site conditions or external factors (easements, encroachments, environmental conditions, land uses, etc.)? Yes No If Yes, describe Normal utility easements would be common for the area. The appraiser did not research for easements or encroachments, other than obvious items that would be noted from a cursory on-site observation. The subject has a wood picket fence in the rear yard. General Description Foundation Exterior Description materials/condition Interior materials/condition Units One One with Accessory Unit Concrete Slab Crawl Space Foundation Walls ConcBlock/Average Floors Vinyl&Carpet/Good # of Stories 2 Full Basement Partial Basement Exterior Walls Vinyl/Average+ Walls Drywall/Good Type Det. Att. S-Det./End Unit Basement Area 1,200 sq.ft. Roof Surface Fbergls Shngl/Avg Trim/Finish Stained Oak/Avg Existing Proposed Under Const. Basement Finish 50 % Gutters & Downspouts Aluminum/Average Bath Floor Vinyl/Good Design (Style) Colonial Outside Entry/Exit Sump Pump Window Type Vinyl DH/Avg Bath Wainscot Fiberglass/Good Year Built 2000 Evidence of Infestation Storm Sash/Insulated None Car Storage None Effective Age (Yrs) 11 Dampness Settlement Screens Screens/Average Driveway # of Cars 2 Attic None Heating FWA HWBB Radiant Amenities Woodstove(s) # Driveway Surface Concrete Drop Stair Stairs Other Fuel Natural Gas Fireplace(s) # 1 Fence Wood Garage # of Cars 2 Floor Scuttle Cooling Central Air Conditioning Patio/Deck Porch Covered Carport # of Cars Finished Heated Individual Other Pool Other Att. Det. Built-inIMPROVEMENTS Appliances Refrigerator Range/Oven Dishwasher Disposal Microwave Washer/Dryer Other (describe) P=Personal Finished area above grade contains: 6 Rooms 3 Bedrooms 2.1 Bath(s) 1,728 Square Feet of Gross Living Area Above Grade Additional features (special energy efficient items, etc.). None noted Describe the condition of the property (including needed repairs, deterioration, renovations, remodeling, etc.). C4;No updates in the prior 15 years;See condition comments on page 3 of the URAR. Are there any physical deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of the property? Yes No If Yes, describe There were no physical deficiencies noted that would affect the livability, soundness, or structural integrity of the property. Does the property generally conform to the neighborhood (functional utility, style, condition, use, construction, etc.)? Yes No If No, describe The property generally conforms to the neighborhood. Freddie Mac Form 70 March 2005 UAD Version 9/2011 Page 1 of 6 Fannie Mae Form 1004 March 2005 Form 1004UAD — "WinTOTAL" appraisal software by a la mode, inc. — 1-800-ALAMODE
  38. 38. Main File No. 0904001 Page #4 Uniform Residential Appraisal Report File # 0904001 There are 6 comparable properties currently offered for sale in the subject neighborhood ranging in price from $ 152,000 to $ 190,000 . There are 4 comparable sales in the subject neighborhood within the past twelve months ranging in sale price from $ 150,000 to $ 189,900 . FEATURE SUBJECT COMPARABLE SALE # 1 COMPARABLE SALE # 2 COMPARABLE SALE # 3 Address XXX Parliament Drive XXX Aspen Drive 1XXX Canterbury Way Drive 1068 Glenrich Circle Anytown, OH 44XXX-3561 Anytown, OH 44XXX-3561 Anytown, OH 44XXX-3561 Anytown, OH 44XXX-3561 Proximity to Subject 0.16 miles E 0.09 miles S 0.24 miles W Sale Price $ 153,500 $ 155,000 $ 151,000 $ 189,900 Sale Price/Gross Liv. Area $ 88.83 sq.ft. $ 89.70 sq.ft. $ 100.94 sq.ft. $ 102.65 sq.ft. Data Source(s) 1234567;DOM 83 1542300;DOM 95 1532076;DOM 100 Verification Source(s) County Records & Drive-By County Records & Drive-By County Records & Drive-By VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION +(-) $ Adjustment DESCRIPTION +(-) $ Adjustment DESCRIPTION +(-) $ Adjustment Sales or Financing ArmLth ArmLth ArmLth Concessions Conv;5000 -5,000 FHA;2000 -2,000 VA;4000 -4,000 Date of Sale/Time s09/11;c08/11 0 s07/11;Unk 0 s08/11;Unk 0 Location N;Res; N;Res; N;Res; B;AdjPrk; -3,000 Leasehold/Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Site 14,355 sf 14,355 sf 12,500 sf 0 13000 sf 0 View N;CtyStr; N;CtyStr; N;Res; 0 B;Prk; -5,000 Design (Style) Colonial Colonial Colonial Colonial Quality of Construction Q3 Q3 Q3 Q2 -8,000 Actual Age 11 11 10 0 11 Condition C4 C4 C4 C4 Above Grade Total Bdrms. Baths Total Bdrms. Baths Total Bdrms. Baths Total Bdrms. Baths 0 Room Count 6 3 2.1 6 3 2.1 6 3 2.00 +3,000 7 3 2.1 0 Gross Living Area 1,728 sq.ft. 1,728 sq.ft. 0 1,496 sq.ft. +5,800 1,850 sq.ft. -3,100 Basement & Finished 1200sf600sfwo 1200sf600sfwo 1100sf600sfin 0 1300sf0sfwo +5,000 Rooms Below Grade 3rr1br1.1ba0o 1rr0br0.0ba0o +3,000 3rr1br1.1ba1o 0 0 Functional Utility Average Average Average AverageSALES COMPARISON APPROACH Heating/Cooling FWA/Central Air FWA/Central Air FWA/Central Air FWA/Central Air Energy Efficient Items Average Average Average Average Garage/Carport Attached/2-car Attached/2-car Attached/2-car Attached/3-car -8,000 Porch/Patio/Deck Covered Porch Covered Porch Covered Porch Covered Porch Fireplaces 1 Fireplace 1 Fireplace 1 Fireplace 1 Fireplace Net Adjustment (Total) + - $ -2,000 + - $ 6,800 + - $ -26,100 Adjusted Sale Price Net Adj. 1.3 % Net Adj. 4.5 % Net Adj. 13.7 % of Comparables Gross Adj. 5.2 % $ 153,000 Gross Adj. 7.2 % $ 157,800 Gross Adj. 19.0 % $ 163,800 I did did not research the sale or transfer history of the subject property and comparable sales. If not, explain I researched the sales and transfer history of the subject and the comparables for a three year period. My research did did not reveal any prior sales or transfers of the subject property for the three years prior to the effective date of this appraisal. Data Source(s) NEOHREX MLS, Summit County Auditors website, Realist My research did did not reveal any prior sales or transfers of the comparable sales for the year prior to the date of sale of the comparable sale. Data Source(s) NEOHREX MLS, Summit County Auditors website, Realist Report the results of the research and analysis of the prior sale or transfer history of the subject property and comparable sales (report additional prior sales on page 3). ITEM SUBJECT COMPARABLE SALE #1 COMPARABLE SALE #2 COMPARABLE SALE #3 Date of Prior Sale/Transfer 04/24/2003 04/20/2001 10/17/2002 Price of Prior Sale/Transfer $100,000 $105,000 $0 Data Source(s) Realist & County records Realist & County records Realist & County records Realist & County records Effective Date of Data Source(s) 04/01/2009 04/01/2009 04/01/2009 04/01/2009 Analysis of prior sale or transfer history of the subject property and comparable sales There are no reported prior sales or transfers of the subject in the past three years or the comps in within one year of the most recent sale reported in this appraisal. The subject last transfered from Secretary of HUD to Dawson on 4/24/03 with no reported sale price. The next most recent sale was from the Sheriff of Portage County to HUD on 11/15/2002 for $115,000. Summary of Sales Comparison Approach All sales and listings offer a good value measure for market alternatives to a typical buyer in this market. Sale 1 is a similar sized home and with similar overall age and condition appeal. An adjustment was made for finacing concessions. Sale 2 is a smaller home with similar condition and quality. It had less bath appeal. An adjustment was made for finacing concessions. Sale 3 is a larger home that is located adjacent to a park and has a more appealing park view. For this reason, both a location adjustment and view adjustment were made for this amenity. Sale 3 has superior quality of construction. It has an unfinished basement. An adjustment was made for finacing concessions. The most overall weight was given to comp 1 due to its similarity and recent sale date. Sale 2 was given the next greatest weight and Sale 3 was given the least overall weight due to the frequency of adjustments. Indicated Value by Sales Comparison Approach $ 154,000 Indicated Value by: Sales Comparison Approach $ 154,000 Cost Approach (if developed) $ 161,944 Income Approach (if developed) $ The sales comparison approach is given the most overall weight in the analysis because it reflects the actions of buyer and sellers in this market. The cost approachRECONCILIATION was considered but is given minimal weight in the reconciliation due to the difficulty accurately estimating accrued depreciation for older homes. The income approach is not necessary for a credible appraisal and was not developed in this analysis. This appraisal is made "as is", subject to completion per plans and specifications on the basis of a hypothetical condition that the improvements have been completed, subject to the following repairs or alterations on the basis of a hypothetical condition that the repairs or alterations have been completed, or subject to the following required inspection based on the extraordinary assumption that the condition or deficiency does not require alteration or repair: See supplementary scope of work comments. Based on a complete visual inspection of the interior and exterior areas of the subject property, defined scope of work, statement of assumptions and limiting conditions, and appraisers certification, my (our) opinion of the market value, as defined, of the real property that is the subject of this report is $ 154,000 , as of 10/10/2011 , which is the date of inspection and the effective date of this appraisal. Freddie Mac Form 70 March 2005 UAD Version 9/2011 Page 2 of 6 Fannie Mae Form 1004 March 2005 Form 1004UAD — "WinTOTAL" appraisal software by a la mode, inc. — 1-800-ALAMODE
  39. 39. Main File No. 0904001 Page #5 Uniform Residential Appraisal Report File # 0904001 Neighborhood Comments The subject is located in Portage County in the City of Anytown. The City of Anytown offers local shopping, employment and commercial activity. It is the county seat of Portage county. The City of Akron is approximately 30 minutes west of the subject offering major employment and commercial activity. The homes on the subject neighborhood are average quality construction and are generally well maintained.. There is a mixture of ranches and colonial style homes on the subject street and adjacent streets. Homes in the neighborhood are predominantly 1400-2900 square feet in size with most homes in the 1600-1800 square foot range. The subjects immediate neighborhood is defined as Annevar Estates south of XXXX St, north of XXXX Rd., west of S XXXX St. and east of XXXX Rd. The subject is in close proximity to the local schools and the Diamond Park baseball fields. Deterioration in the availability of mortgage financing and area job losses have resulted in a general decline in market values for many residential properties in the area. Because of the widespread reduction in the availability of many previously common financing programs, there are significantly fewer buyers in the market. In addition, declines in value have further discouraged market activity. A study of repeat sales activity and current listing prices versus prior sales indicates moderate declines in value currently taking place in the market. Condition Comments The subject is colonial style home that is considered to be in average overall condition. The kitchen has raised oak cabinets, a kitchen island and a vinyl floor covering. The living room has a gas fireplace. The subject has a first floor laundry room. The master bedroom has a walk-in closet. The basement has three finished rooms andADDITIONAL COMMENTS one full bath and one half bath. The finished rooms have carpet flooring and drywall walls. The first room has a drywall ceiling and the second room has an open joist ceiling. COST APPROACH TO VALUE (not required by Fannie Mae) Provide adequate information for the lender/client to replicate the below cost figures and calculations. Support for the opinion of site value (summary of comparable land sales or other methods for estimating site value) Land value obtained by sales comparison and the extraction method. There are six listings in the subjects neighborhood in the MLS ranging rom $29,000-$35,000. There was a sale in 2011 for $31,500 and a sale in 2007 for $32,000. The extraction method indicated a range from $25,000-$30,000.COST APPROACH ESTIMATED REPRODUCTION OR REPLACEMENT COST NEW OPINION OF SITE VALUE =$ 28,000 Source of cost data Marshall&Swift DWELLING 1,728 Sq.Ft. @ $ 75.00 =$ 129,600 Quality rating from cost service Average Effective date of cost data 09/11 Bsmt. 1,200 Sq.Ft. @ $ 20.00 =$ 24,000 Comments on Cost Approach (gross living area calculations, depreciation, etc.) =$ The site value is estimated as-vacant. The cost approach was considered but is Garage/Carport 480 Sq.Ft. @ $ 21.00 =$ 10,080 given little weight due to the difficulty accurately estimating accrued depreciation in Total Estimate of Cost-New =$ 163,680 older homes. Cost figures obtained from the Marshall & Swift Residential Cost Less Physical Functional External Handbook combined with the appraisers knowledge of the local construction Depreciation 32,736 =$( 32,736) market. Physical depreciation is calculated using the economic age/life method. Depreciated Cost of Improvements =$ 130,944 External obsolescence is due to the declining market conditions resulting in "As-is" Value of Site Improvements =$ 3,000 economic depreciation. Estimated Remaining Economic Life (HUD and VA only) 44 Years INDICATED VALUE BY COST APPROACH =$ 161,944 INCOME APPROACH TO VALUE (not required by Fannie Mae)INCOME Estimated Monthly Market Rent $ X Gross Rent Multiplier =$ Indicated Value by Income Approach Summary of Income Approach (including support for market rent and GRM) The income approach is not necessary for a credible appraisal and was not developed. There are no known rentals in this neighborhood. Thus, the income approach would not be reliable nor applicable to this assignment. PROJECT INFORMATION FOR PUDs (if applicable) Is the developer/builder in control of the Homeowners Association (HOA)? Yes No Unit type(s) Detached Attached Provide the following information for PUDs ONLY if the developer/builder is in control of the HOA and the subject property is an attached dwelling unit. Legal Name of Project Total number of phases Total number of units Total number of units soldPUD INFORMATION Total number of units rented Total number of units for sale Data source(s) Was the project created by the conversion of existing building(s) into a PUD? Yes No If Yes, date of conversion. Does the project contain any multi-dwelling units? Yes No Data Source Are the units, common elements, and recreation facilities complete? Yes No If No, describe the status of completion. Are the common elements leased to or by the Homeowners Association? Yes No If Yes, describe the rental terms and options. Describe common elements and recreational facilities. Freddie Mac Form 70 March 2005 UAD Version 9/2011 Page 3 of 6 Fannie Mae Form 1004 March 2005 Form 1004UAD — "WinTOTAL" appraisal software by a la mode, inc. — 1-800-ALAMODE