Major changes to residential appraisals may cause closing delays this fall

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Major changes to residential appraisals may cause closing delays this fall

By Mark Maschger, SRA

AppraisalBridge, LLC

REALTORS® should be aware of major changes in the reporting and delivery requirements for every mortgage lending appraisal beginning Sept. 1.

Fannie Mae and Freddie Mac (the GSEs) have developed the Uniform Appraisal Dataset (UAD) to ensure that reporting by appraisers becomes more consistent. The UAD affects conventional, FHA and VA appraisals and requires every appraiser to make significant changes to their daily practice. These changes affect the appraiser’s inspection, research, analysis and reporting processes – and range from intellectual to technical in scope.

The GSEs have worked with all appraisal software companies for many months to allow time for the necessary programming changes. These software companies have been working feverishly to meet the Sept. 1 deadline and to train their users nationwide. These programming changes will allow the GSEs to leverage information in appraisals, for a variety of purposes we can only imagine at this point. As a practicing appraiser, I see many positive outcomes from UAD, while maintaining a degree of caution for where this is heading.

To make matters more challenging, all appraisals written to the UAD standard must now be delivered to lenders in XML format. Without getting technical, appraisers must also adapt to new report delivery processes, which may vary from client to client. In most cases, appraisers will deliver their appraisals using two formats – XML and PDF.

So how does this become a bottleneck that will slow loan closing cycles this fall? While most appraisers are now well aware of the UAD, and well prepared to meet this new standard, unquestionably some are not. And just as appraisers vary in their readiness, many lenders have not prepared for the strain UAD will place on underwriting.

An appraisal written to the UAD standard looks very different than a traditional appraisal. Underwriters must master a complex set of new ratings for quality and condition, and learn to interpret computer-friendly characters placed where narrative descriptions were previously allowed (ex.: ‘1rr0br0.0ba0o’ is included to report basement finish as follows - 1 rec room, 0 bedrooms, 0 bathrooms, and 0 other rooms). All of this to say the property had a rec room. The GSEs have done a masterful job of managing this industry-changing project; however, it may be that only the computers will understand how to read appraisals for the foreseeable future.

REALTORS® should welcome calls from appraisers trying to ascertain the year of updating for kitchens and bathrooms, as well as more specific detail on basement finish. They will need this information to complete appraisals under the UAD, so please return those calls as you may be the only source for this information in some cases. These changes will cause stress and subsequently overreaction; however, we will get through this together.

Mark has been an active real estate appraiser and broker for over 15 years. The SRA appraisal designation is achieved by fewer than 1% of all appraisers nationwide. Mark delivers from a wide range of experience, including appraisal practice, forensic review, appraisal management and compliance consulting.

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