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Dealing with a Negative Review. Instructors: Tom Munizzo , IFA Tim McCarthy, IFA. Who are those guys???. Tom Munizzo, IFA T J McCarthy, IFA Definitions.

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instructors tom munizzo ifa tim mccarthy ifa

Dealing with a

Negative Review

Instructors: Tom Munizzo, IFA

Tim McCarthy, IFA

who are those guys
Who are those guys???

Tom Munizzo, IFA

T J McCarthy, IFA

  • Appraisal Review: The act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal, appraisal review, or appraisal consulting assignment. (2012 USPAP).
  • Appraisal review is the practice of appraisal.

A review of valuation information is an essential component of sound credit administration and is mandated by the Dodd Frank Act.

Reviewing appraisals before engaging in a loan transaction ensures the value conclusion is reliable and enables the financial institutions to make informed credit decisions, manage credit risk and meet supervisory requirements.

administrative review vs appraisal review
Administrative Review vs. Appraisal Review
  • It is critical to understand that there are two types of Appraisal Reviews;
    • Administrative review which is a review for completeness. This is reading the appraisal to make sure that all the required elements are there such as the photographs, sketch, maps, certifications and signatures. Was the report that was submitted complete?
    • S.R 3 Appraisal review which is about the quality of the report; the adequacy of the information and a statement on the value.

Essentially what you have above is an appraisal of real estate and the other is an appraisal of an appraisal. There is NOdifference between an appraisal and an appraisal review when it comes to the quality, condition and opinion of value.

  • Desk Review: An appraisal review in which the reviewer’s scope of work does not include an inspection of the subject property. (Dict. Of Real Estate Appraisal, 5th Ed.)
  • Field Review: An appraisal review for which the scope of work includes inspection of the exterior and sometimes the interior of the subject property and possibly inspection of the comparable properties to conform the data provided in the report. (Dict. Of Real Estate Appraisal, 5th Ed.)
  • Quality Control Review: Common form of review being performed by AMC’s. In most cases it is a administrative review focusing on errors, omissions and compliance issues, but does not include comments on or reference to development issues, approaches to value, reconciliation and value conclusions.
  • Quality Assurance Review: Common form of review being performed by Banks and many of the large Lenders. In most cases it is a technical review focusing on the quality of the appraisal, the adequacy of the information and focuses on the development issues, approaches to value, reconciliation and value conclusions.
  • Forensic Review: A Forensic Review is an intensive real property appraisal review. It has a scope of work and definition of review problem that focus on investigation, verification. The scope of the review work will vary by jurisdictional rules, client conditions and/or property type. Some litigation reviews may be forensic. (American Society of Appraisers)
  • A forensic review requires data resources to validate or invalidate data back in time=retrospective
    • Researching and interviewing to confirm (forensic)
    • Physically inspecting in person when possible
  • Purpose – To evaluate the credibility of the appraisal report in order to determine:
    • Fraudulent actions
    • Misrepresentation for loan eligibility
    • Compliance to applicable state, federal guidelines
    • Developed in accordance to USPAP under Title XI
state licensing requirements
State Licensing Requirements
  • Do I have to hold a license in the state where the subject property is located when performing a review?
  • MAYBE. Always check with the Appraisal Statutes and Rules for a specific state.
state licensing requirements1
State Licensing Requirements

13 Jurisdictions do not require a license to review appraisals if the reviewer is not located in the jurisdiction where the licensing obligation arises.

California, Delaware, Hawaii, Massachusetts, Michigan, Mississippi, New Mexico, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania 

state licensing requirements2
State Licensing Requirements

9 states require a reviewer to be licensed in the state regardless whether the reviewer provides an opinion of value or not. Automated reviews are not applicable to this.

Alaska, Arizona, Florida, Georgia, Maine, Minnesota, Nevada, Rhode Island and Utah, Texas

state licensing requirements3
State Licensing Requirements

28 state licensing requirements are triggered  by providing an opinion of value

Alabama, Arkansas, Colorado, Connecticut, District of Columbia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Missouri, Montana, Nebraska,  New Hampshire North Dakota, Oregon, South Carolina, South Dakota, Tennessee, Texas, Vermont, West Virginia, Washington, Wisconsin, Wyoming

questions you need to ask yourself
Questions you need to ask yourself

Who reviewed your appraisal report? - The client, an AMC, the State licensing agency, FHA, GSE’s, FDIC, etc.

Why was my appraisal reviewed? - Lenders regulatory requirements, loan defaulted, complaint filed with the State licensing agency, etc.

Did you receive a copy of the review? - Simple yes or no. Sometimes appraisers just receive a letter citing the deficiencies found in the report and ask for a response. Very common with the GSE’s.

questions you need to ask yourself1
Questions you need to ask yourself

Are you being asked to comment on the review?

Is the entity asking you to comment your client or a stated intended user in your report? - If not you could be in violation of USPAP’s Ethics Rule under Confidentiality.

uspap ethics rule confidentiality
USPAP Ethics Rule; Confidentiality

An appraiser must protect the confidential nature of the appraiser-client relationship.

An appraiser must act in good faith with regard to the legitimate interests of the client in the use of confidential information and in the communication of assignment results.

uspap ethics rule confidentiality1
USPAP Ethics Rule; Confidentiality

An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyoneother than:

the client;

persons specifically authorized by the client;

state appraiser regulatory agencies;

third parties as may be authorized by due process of law; or

a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.

questions you need to ask yourself2
Questions you need to ask yourself

How should I respond? – By phone, email, letter, in the original appraisal report, or not at all.

If the review provided a different value conclusion, can I comment on that value in my response without performing a Standard 3 Review. - Yes. You have already performed an appraisal on the property as of an effective date, therefore your report in itself supports why you don’t agree with the reviewers opinion of value.

questions you need to ask yourself3
Questions you need to ask yourself

What if I completed the appraisal over 5 years ago?

USPAP Record Keeping Rule

NOTE: USPAP states that an appraiser must retain the workfile for a period of at least five years after preparation or at least two years after final disposition of any judicial proceeding in which the appraiser provided testimony relatedto the assignment, whichever period expires last.

questions you need to ask yourself4
Questions you need to ask yourself

Do I need an attorney?

Should I contact my E & O carrier?

preparing to rebut a negative review
Preparing to rebut a negative review!

What will I need?

- A copy of the review report

- A copy of your original appraisal report

- Access to public records, MLS, etc.

- Your workfile

- Strong writing skills

common errors made by a reviewer
Common errors made by a reviewer

Does the review comply with USPAP?

- Before you respond to a negative review you should familiarize yourself with Standard 3; Appraisal Review, Development and Reporting and Advisory Opinion 20; An appraisal review that includes the Reviewer’s own Opinion of Value. There are also several FAQ’s on this topic in USPAP.

appraisal reviews and uspap
Appraisal Reviews and USPAP

Standard 3 states that a review appraiser “must not render appraisal review services in a careless or negligent manner, such as making a series of errors that, although individually might not significantly affect the results of an appraisal review,in the aggregate affects the credibility of those results.”

Whenever possible, quote actual language from USPAP in your response to better support your position over that of the reviewer’s.

appraisal reviews and uspap1
Appraisal Reviews and USPAP

Has the reviewer…

…identified the client and other intended users?

…identified the intended use?

…identified the purpose of the review, including whether the assignment includes the development of the reviewer’s own opinion of value?

…determined the scope of work necessary to produce credible assignment results?

appraisal reviews and uspap2
Appraisal Reviews and USPAP

Consistent with the reviewer’s scope of work, the reviewer is required to develop an opinion as to the completeness, accuracy, adequacy, relevance, and reasonableness of the analysis in the work under review, given law, regulations, or intended user requirements applicable to the work under review.

It is here that most reviewers make errors because of their lack of knowledge as it pertains to industry guidelines, requirements, assignment conditions and law.

Did this reviewer even have the skill set to complete the review?

uspap appraisal review faq s
USPAP Appraisal Review FAQ’s

The following are the FAQ’s that USPAP offers pertaining to the general topic of discussion in this seminar…dealing with a negative review. There are numerous other FAQ’s that give direction more to the appraiser performing the review as opposed to the appraiser whose work is the subject of the review.

fannie freddie field review forms
Fannie/Freddie Field Review Forms

Fannie and Freddie have developed two Field review forms. The One Unit Residential Appraisal Field Review Report and the 2-4 Unit Residential Appraisal Review Report.

Both forms have imbedded language to cover Intended Use, Intended Users, Purpose, Scope of Work, Limiting Conditions and Certifications.

But most reviewers never read or follow the Guidance Notes. You should familiarize yourself with these notes and refer directly to them if you determine that the reviewer has not complied with the recommended guidance.

reviewing the reviewer common errors
Reviewing the reviewer Common errors

Unfortunately, many reviewers believe they have to discredit your appraisal and therefore they are not performing an objective review of your work. It’s common for them to use secondary data sources to suggest your data is incorrect. A common example is using the GLA provided by the local assessor for the subject property when you actually measured the building. That’s an easy one to rebut.

Before you read the review you should re-familiarize yourself with your original report.

Next read the review completely through and make notes of any obvious errors and omissions.

reviewing the reviewer common errors1
Reviewing the reviewer Common errors

Verify any discrepancies the reviewer cites in your assignment. Don’t assume their data is correct. This includes items such as zoning, flood zones, property characteristics, MLS data, neighborhood boundaries, school district boundaries.

Does the negative review provide sufficient supporting data for its conclusions or was it subjective in nature…lacking substance!

what if the reviewer is correct
What if the reviewer is correct???

Maybe the review isn’t negative and you did make errors in your report, or there were better comparables that you missed. If that is the case, you must acknowledge the deficiencies and if necessary make corrections to you original report. Send the report to the client identifying any revisions (which is a better sounding word then corrections). This way you are approaching the review as a positive process.

As appraisers we get paid to provide our opinion. The process is very subjective in nature and try as hard as we may to be perfect, we will all make unintentional errors or omission from time to time. So, never respond in a hostile tone whether your right or wrong, always be professional.

We find that the best responses are short and concise to each of the key points or issues presented.

freddie mac repurchase demand sample
Freddie Mac Repurchase Demand Sample

The following is an actual letter sent to a lender from Freddie Mac regarding an appraisal that was performed almost five years ago. Freddie Mac has since taken back the property as an REO and states in their letter to the lender that the original appraisal was unacceptable because it didn’t meet their requirements. No actual review was performed by an appraiser…only by an employee at Freddie Mac.

appraiser s letter of response
Appraiser’s letter of response

We strongly disagree with the comments in the letter from Freddie Mac stating that the estimated market value for the subject was not properly supported by the comparable sales provided.

It does not appear that Freddie Mac utilized the services of a licensed Illinois appraiser to perform a review of the subject property. Further, they did not provide any additional market data, including additional sales data to support their claims or conclusions.

Instead, their letter references variances between the subject and the comparables, which would suggest that since the comparables are different and not identical to the subject then the opinion of value is not supported.

appraiser s letter of response1
Appraiser’s letter of response

As a practicing appraiser with over 35 years of experience I am greatly concerned that Freddie Mac would base their conclusions on the very reason lenders utilize appraisers; to recognize variances between the subject property and market data and adjust for these variances.

I understand the market is currently flooded with foreclosures as a result of the housing crisis, but blaming the appraiser and the appraisal for a borrower’s inability to pay their mortgage is unwarranted and in the case of the subject property unfounded. The letter from Freddie Mac would suggest that proper support isn’t present because the appraiser does not provide enough comments, but this is a summary appraisal report, not a self-contained assignment.

appraiser s letter of response2
Appraiser’s letter of response

We have broken down the comments in the letter from Freddie Mac as follows:

- The subject property is a single-family dwelling located in an urban market, which is more than 75% built up.

- The appraisal report states that the market is over 75% built up in the neighborhood section on page 1.

appraiser s letter of response3
Appraiser’s letter of response

- The subject property was 15 years old as of the effective date of the appraisal, with three bedrooms, one bath and no garage (or onsite parking of any kind). All three sales were substantially newer than the subject property. All had two bedrooms and two baths, and all had two-car garages. Basement finish for all three sales is superior. These sales are not representative of the subject property.

appraiser s letter of response4
Appraiser’s letter of response

- We strongly disagree that the sales selected for this report are not representative of the subject. It is our experience that a buyer in this market would agree that these are similar and competing raised ranch style properties if the subject and the sales were listed at the same time. The subject property is a 15 year old Raised Ranch. All 3 sales included in the report were similar style homes located within .55 mile of the subject. Since there were no recent sales that identically mirrored the subject in the area, the appraiser utilized sales available in the closed sales inventory and adjusted for all variances. What the reviewer does not realize is that these sales do have a third bedroom in the basement.

appraiser s letter of response5
Appraiser’s letter of response

Knowing this additional information would disqualify the statement that the basement finish of the sales is superior and the bedroom count of the comparables are different. It is a function of the form to separate above and below grade room adjustments. This is not an error on the appraiser’s part but a function of the form. In other words, the subject and the comparables offer similar utilities and functionality in bedroom count. Actually, the subject and comparables main residence are almost identical with the exception of 1 additional bathroom. Using slightly younger aged homes due to a lack of similar aged residences would be a more acceptable alternative then using sales of homes that were closer to the predominant age in the area, which was 70 years old. Although onsite parking is not present for the subject, there is access to the site via the rear alley and room on the site to construct some form of onsite parking in the future, including a 2 car garage.

appraiser s letter of response6
Appraiser’s letter of response

- The predominant value in the subject neighborhood as of the effective date of the appraisal was $234,000. The estimated market value for the subject was $305,000.00. The appraisal does not provide sufficient justification for a property valued substantially above the predominant value in the subject neighborhood, yet substantially inferior to all the comparables sales provided.

appraiser s letter of response7
Appraiser’s letter of response

- The subject’s final opinion of value is above the stated one-unit housing predominant value; however it does fall within the indicated value range reported in the neighborhood section. The reviewer states that the opinion of value is substantially above the predominant value. This is not correct when you take the full range of marketable values into consideration. The final opinion of value is actually substantially below the High end of the indicated value which was $535,000.00. This places the final opinion of value well within the center of the housing price range for this market. At the time of this appraisal Freddie Mac only required the appraiser to comment if the final opinion of value falls outside of the reported one unit housing price range.

appraiser s letter of response8
Appraiser’s letter of response

There is no impact on the subject’s marketability because it did not appraise for the predominant value. The predominant value is simply a measure of central tendency, i.e. mean, median and/or mode. It is not intended to suggest every home in a specific market area should contract at this centralized value determination. The subject is not considered to be an over-improvement for the market area. We also disagree that the comparables are substantially superior to the subject. They are superior in some areas, but also inferior in others. Adjustments were made to reflect all of these variances and none were excessive.

appraiser s letter of response9
Appraiser’s letter of response

- The appraiser indicates on page one and also in the comments that the subject neighborhood is a declining market. However, Comparable sale #1 was 12 months old as of the appraisal effective date, and Comparable sale #2 was nine months old. No time adjustments were made to either sale. The appraiser’s comment that no time adjustment was warranted for the use of these sales is inconsistent with the description of the neighborhood as a declining market and in an oversupply situation.

appraiser s letter of response10
Appraiser’s letter of response

- The lender may not realize exactly when homes in the subject market area began to decline. It was determined as of 12-15-2007, the effective date of the appraisal, that the subject’s general market area was reporting declining values and an over-supply of homes, but we had no market evidence to prove that values were declining 9 to 12 months earlier. Making an adjustment that would be unsupported at the beginning of the housing crisis would be unethical. At the time of the appraisal, there was still new construction in the area and all 3 comparables indicate that the market was absorbing these homes well within a 6 month marketing time.

appraiser s letter of response11
Appraiser’s letter of response

Sale 2 sold for $275,000 on 1/24/2005 and then resold for $319,000 on 3/20/2007. Sale prices were still increasing for younger and newer residences in this market. However, the overall market had started to decline. We would refer you to the predominant age of homes in this area as reported on page one, which was 70 years old. This is an established older community in near south Chicago that was experiencing a growing trend of older tear downs replaced by newer homes in the past 20 years. This trend still exists today but to a much lesser extent because of the housing crisis.

appraiser s letter of response12
Appraiser’s letter of response

- Page one of the appraisal indicates that the subject view is toward commercial property. Freddie Mac verified via Google maps that the subject property is within one block of commercial influence. However, page two of the appraisal (grid) reflects that the subject view is “toward church”, and two of the three comparable sales are adjusted upward for inferior view (“toward school”). Freddie Mac viewed the comparable sales in Google maps. While the school is visible, the appraiser did not provide market support to evidence that the school view is more detrimental than the commercial view of the subject property. The appraiser’s comments also indicate that the location of sales #2 and #3 was inferior and an upward adjustment was applied, but no market support was provided.

appraiser s letter of response13
Appraiser’s letter of response

- Despite what the reviewer states above, all of these comments were made in the sales comparison comments in the report. The subject’s front view is toward a church, not commercial. Comparable #1 and #2 are located across street from Tilden High School. A school with a population over 3000 students. Even if the appraiser did not comment on this in the report, (but he did), an underwriter would understand that a view of an inner city high school would be inferior to that of a local church and present a higher level of external obsolescence. The view as well as the traffic and noise pattern of a property located across street from a school, (especially a high school), is impacted twice a day, 5 days a week, where the proximity to a church would perhaps impact the view, traffic and noise patterns one day a week.

appraiser s letter of response14
Appraiser’s letter of response

The appraiser gave a full explanation supported with average selling prices why a location adjustment was warranted for comparables #1 and #2 which were both located south of 47th street in the appraisal.

appraiser s letter of response15
Appraiser’s letter of response

This is a good appraisal and the appraiser utilized the best data available in the Canaryville market at the time of inspection. All three sales are within a .55 miles of the subject property and all are raised ranch style homes. None of the sales have line item adjustments in excess of 10%. Further, none of the sales exceed the standards 15% net adjustment guideline or the standard 25% gross adjustment guideline. Adjustments were made for all variances and none of the line item adjustments appear excessive. The sales prices of the comparables as well as the adjusted sales prices bracket the final opinion of value. Freddie Mac does not state if the final opinion of value is too high or too low in their letter. The final opinion of value does fall below the sales prices and adjusted sales prices of two of the three comparables and substantially below the sales price of the third comparable, which would suggest that the appraiser was not attempting to provide an inflated value conclusion.

appraiser s letter of response16
Appraiser’s letter of response

Our firm has been one of the largest appraisal companies in the Chicagoland area for over 30 years. We have over 40 appraisers and have never had a complaint against any of them with the State of Illinois. This statement takes on even greater meaning when you consider that the State has been receiving an average of 400 complaints a year against appraisers for the past 15 years. We pride ourselves as being the best and our primary focus has always been to provide high quality appraisal reports to our clients. ABC Bank is a prime example of a large area lender who has utilized our services for 25 years without incident, until now.

appraiser s letter of response17
Appraiser’s letter of response

I would ask the representatives at Freddie Mac to reconsider their decision to request ABC Bank to buy back this loan based solely on the statements in their letter. Hopefully, considering all of our comments in this response as well as the lack of any additional market data that would dispute our value, you will agree that this appraisal does support the final opinion of value. An appraisal performed today using the new UAD format and the additional scope of work issues, both of which didn’t exist at the time of the original appraisal, may have resulted in a report with more commentary because the industry today demands more. In all fairness to the appraiser, the reporting presented in this assignment was common for appraisals completed not only by our appraiser, but his peers as well.


As a result of the following letter, Freddie Mac rescinded their request to repurchase the loan from the lender.

fnma repurchase demand sample
FNMA Repurchase Demand Sample

Fannie Mae’s letter to ABC Bank dated xxxxxcited the following remaining concerns with the comparables and adjustments used in the original appraisal for the above-captioned transaction, which Fannie Mae requested a third local expert appraiser to address in a retrospective field review or similar.

fnma repurchase demand sample1
FNMA Repurchase Demand Sample

Fannie Mae Remaining Concern #1: “However, we were not able to clear the other findings regarding the location of the sales, the differences in design and style, and the improper adjustment applied to one of the sales.” “Sales one, two, three, and four were located outside the defined neighborhood boundaries established within the origination appraisal.”

OPINION: The subject is definitely located in Jefferson Park according to both the City of Chicago neighborhood map as well as being part of Jefferson Township. With the exception of OA sale 3, I disagree with the Review Appraiser’s claim that origination sales 1, 2, 3, 4 and 7 should have been excluded because they were located outside the area. I agree that OA sale 3 was, in fact, located outside of Jefferson Park and therefore should not have been used.

fnma repurchase demand sample2
FNMA Repurchase Demand Sample

As to the location of the subject and OA sales 1, 2, 4, and 7, my review confirms OA comparables 1, 2 and 7 are also definitely located in Jefferson Park and have other identifiers that are the same as the subject in the Assessors records. Just because some sales are not within the one mile radius guideline to the subject property does not mean they are not in the same neighborhood or should be excluded as comparables. It should be understood by the reader that Realtors often delineate in the MLS system further smaller pockets of neighborhoods that are part of the overall neighborhood. I am a local appraiser who has appraised in the city of Chicago for over 25 years and I have appraised properties in this neighborhood many times over the years.

fnma repurchase demand sample3
FNMA Repurchase Demand Sample

It is not uncommon for appraisers to have to go into different pockets of a larger neighborhood when there are no suitable comparables available in the immediate section where the subject property is located. Additionally, besides the MLS and City of Chicago’s neighborhood breakdowns, the County Assessor also provides other comparison sources that need to be considered when making a final determination as to whether or not a property is in fact similar in location. Some of these identifiers are;

Township Jefferson Park

Township Range 40-13-5

Taxing area 71001

Tax billing location 6231

Census Tract 1001

School District 299

fnma repurchase demand sample4
FNMA Repurchase Demand Sample

As an example, both the subject and the comparable located on Melvina are both located in tax area 7001 and census tract 1001. However the subject has a 60646 zip code and a Edgewater Terrace identifier whereas the sale on Melvina has a zip code of 60630 and a tax billing of 1110. It is my opinion the Melvina sale, which was used by both the OA and the RA, is an excellent comparable, yet on the surface its inclusion could have been criticized. To discredit this or any comparable because it has a different zip code would be incorrect.

OA comparables 1, 2, 5 & 6 are also located in the same school district 299 as the subject with OA 1 having the same 60630 zip code as the subject but OA 2 & 6 having a zip code of 60645.

fnma repurchase demand sample5
FNMA Repurchase Demand Sample

The point is that defining specific neighborhoods and relying solely on a map is not always the correct way to either approve or discredit the use of comparables. One must look at all the factors and determine if there is any similarity to the immediate neighborhood, competing neighborhoods within a larger recognized MLS mapped area and the numerous governmental property and neighborhood identifiers as it relates to school districts, taxation and other government and social services.

Therefore OA comparables 1, 4, 5, and 7 are all valid comparables and located within the subject’s market area.

fnma repurchase demand sample6
FNMA Repurchase Demand Sample

INSERT LOCATION MAP HERE with the following summary to follow to close out the FNMA remaining concern #1.

I concur that OA sales 2, 3 and 6 were different styles of homes and therefore should not have been included in the OA. Nonetheless, even after discrediting sales 2, 3 and 6, the Original Appraisal stills meets the standard Fannie Mae closed sale requirement (OA sales 1, 4, and 5 are all valid closed comparables) in addition to having the remaining active listing which was OA #7.

fnma repurchase demand sample7
FNMA Repurchase Demand Sample

Fannie Mae Concern #2: “The appraiser used an average of the seven sales to arrive at a revised value opinion of $486,201. Again, we remind the reader that sales six and seven were not closed sales and thus it would be inappropriate to give active listings equal weight as closed sales. Additionally, as previously reported, these sales never sold.”

OPINION: The Original appraiser reconciled the value conclusion using the weighted average technique. This is an acceptable technique to help arrive at a final value conclusion that is taught in all basic appraisal courses. The fact that neither listing comparable eventually sold is irrelevant since at the time of the appraisal, both were active listings and the appraiser discounted each listing to account for its likely sales price. Notwithstanding the fact that we agree OA sale 6 should not have been used in the OA, equally weighting a listing comparable such as OA sale 7 in averaging comparable values is an acceptable technique. Had the Original Appraiser failed to adjust for the list price to sales price ratio, then Fannie Mae’s criticism regarding weighting would have been valid. Therefore, because the Original Appraiser did make the LP:SP ratio adjustment, equal weighting of all comparables in the Original Appraiser’s value conclusion is reasonably justified.

fnma repurchase demand sample8
FNMA Repurchase Demand Sample

Fannie Mae Concern #3: “The appraiser did address sale three’s superior location through adjustment; however, the concern remains with its inclusion. It was evident that sale three was included due to its similar site size; however, the need to expand the search outside the subject’s neighborhood into a superior area would question whether the subject’s site size was typical for the market. Although the response included numerous land sales, please note that these sales did not provide evidence with respect to the market premium paid for the subject’s surplus land.”

OPINION: As previously stated, I agree sale three should not have been used in the Original appraisal. I will address the valuation of the subject’s surplus land in the next section of this letter.

fnma repurchase demand sample9
FNMA Repurchase Demand Sample

Fannie Mae Concern #4: “Thus it remains unknown how the appraisal arrived at the site adjustments used in the origination report. Our concern remains with the methodology employed to arrive at the site adjustments and the use of a sale in a superior area to bracket site size.”

OPINION: My research using paired sales detailed on the following page shows that the market was, in fact, willing to pay between $10 and $5 per square foot for surplus land, depending on the amount of surplus land. Properties with greater surplus land brought higher per square foot prices for the surplus land than properties with lesser surplus land. In other words, bigger was better. The original appraiser adjusted the subject’s excess land at $9.50 per square foot which at first may appear excessive. However the paired sales analysis below of N Ludham (3,125SF) and N Lind (6,250SF) clearly supports a $9.60 per sqft value for the excess land. Considering the subject is even larger than the N Lind property’s standard double lot of 6,250SF, with the subject having over 7,440SF, the adjustment at $9.50 per square foot made by the Original appraiser was appropriate and could even be considered conservative.

fnma repurchase demand sample10
FNMA Repurchase Demand Sample


I found three properties providing two paired sales in the subject’s general area. All three of these sales are in Jefferson Township. Keep in mind these Chicago neighborhoods have been fully built up for many years with only scattered site or splitting of lots occasionally seen over the years. Therefore, sales of properties with surplus land are rare. The properties in my paired sales analysis are relatively similar in all aspects with major differences being adjusted for.


As a result of the following letter, Fannie Mae rescinded their request to repurchase the loan from the lender.