Requiring the Next Step for Appraisals
May 15, 2014
The appraisal report is an important factor in the underwriting decision because it concisely tells the story of the property. This is why we rely on appraisers to be the third set of eyes in any transaction. It’s also why we provide you with Chapter 12 of the Freddie Mac Multifamily Seller/Servicer Guide, which details our appraisal requirements.
The July Guide Bulletin will include a significant update to Chapter 12. These updates focus on improving the quality of the material within the appraisal.
Highlights of Appraisal Updates
Sometimes we find the appraisal report lacks an adequate discussion tying together the appraiser’s data with his/her conclusions. The new guidelines ask for an extra step in providing more description, discussion, and analyses from the appraiser. Below are some examples of the changes effective July 1, 2014.
- Specific sections for Affordable and Seniors Housing
- Tighter guidelines around the use of property condition assessments and environmental report drafts
- Additional discussion requirements concerning local market data in the capitalization rate analysis
- Elimination of net income multipliers or adjustments to net operating income in the Sales Comparison Approach
- Supplemental discussion of the risk of reassessment of property taxes including a quantifiable chance of a reassessment
- Documentation of the number and type of units the appraiser must inspect
- Detailed instructions for dating photos
Join the Conversation
To better prepare you for these appraisal methodology changes, we invite you to join the conversation on the Freddie Mac Multifamily Appraisal LinkedIn Group. Remember, this group is open to all employees of Freddie Mac Seller/Servicers, and to multifamily appraisers. We welcome your thoughtful comments to further explain our requirements and eliminate appraisal questions during the underwriting process. Appraisal reports that adequately and comprehensively discuss the issues surrounding the property’s valuation can contribute to a smoother and quicker process for you and your borrower.