Feature Article

Highlights: Harrison’s Complete UAD Guide
by Henry S Harrison

As of September 1st, 2011, appraisers will be required to make some significant changes in the way they prepare the URAR because Fannie Mae, Freddie Mac, FHA, and the VA are going to require all appraisal reports be transmitted electronically in a standardized format. All URAR appraisal reports with an effective date on or after the first of September submitted to Fannie Mae or Freddie Mac will have to meet the new Uniform Appraisal Dataset (UAD) standards (and shortly for FHA and VA too).

The UAD requirements have been designed to allow appraisers to make appraisals that comply with the USPAP, and include everything the appraiser believes is necessary to make a credible appraisal as required by the USPAP. Appraisers should start making appraisals that meet UAD standards as soon as possible. To meet these highly specific requirements, they will need a form-fill input program sold by an approved software vendor. The software dealers in the appraisal industry are gearing up to make their program output coincide with the UAD requirements, and have it available soon so that appraisers have sufficient time to learn how to use the new UAD format.

The UAD is highly specific about the style, format and presentation of all data entered on the URAR. The biggest change, in my opinion, is that appraisers will no longer be able to use qualifiers such as “poor”, “fair”, “good” or “very good” in their property quality and condition ratings. Under UAD, only six quality ratings are feasible: Q1, Q2, Q3, Q4, Q5 or Q6. Similarly, six precise condition ratings are provided: C1, C2, C3, C4, C5 or C6. Each of these ratings is defined by the UAD guidelines, and appraisers are not permitted to modify them with plus “+” or minus “-” signs, or any other modifier.

Ask Henry

Exterior-Only Appraisal of a Duplex

Good Afternoon Henry,

I am at a loss. I've been asked to do an exterior appraisal of two duplexes. My client has a second mortgage on the two properties and needs to know the value of each property. No rental information is required. Public data is rather sketchy. My problem is that my software provider has no form for such an assignment. Would it be possible to use the FNMA 2055? Or, how would you suggest I proceed? Thank you in advance for your help.

Best regards,
Bob (Bear) Klingensmith
Georgia Certified Residential Appraiser

Dear Bob,

Since this appraisal is not going to Fannie Mae or Freddie Mac you can use any form you and your client agree upon. You can use the 2055 but you must be careful to correctly modify it. In this type of situation, the form is really just a cover sheet and you should plan to use an addenda to present any information you need to explain what assumptions you will be making. These will have to be extensive as you will not inspect the interior of either property nor do you have any rental or expense information. Keep in mind that it is up to you to feel comfortable that you are making a "credible appraisal' as required by the USPAP.  Many appraisers would not be confident that they could make a credible appraisal under these conditions.



RE: China

Dear H2,

Thank you so much for sharing your trip to China! We were there also this October, visiting a son in Hong Kong and then taking about the same tour as you did with the exception of the River tour. We really enjoyed reading your trip itenerary and looking at the corresponding photos and have the same reactions you did. Some day if you ever get a chance, go to Hong Hong. It has soooo much to offer regarding architecture as well as culture. There are about 100 islands that make up what is known as Hong Kong! And if possible, stay at the " Upper House" (which is above the Marriot Hotel) with direct views of the harbor.

Thanks again for sharing.

Judith Lichty

Ask Henry

Indoor Pool

Dear Henry,

Would you include the GLA of an indoor heated pool within the GLA area if the pool is located on the lower walkout basement area?

Thank you.
Norma Nicholson

Dear Norma,

The Fannie Mae GLA specifications are only guidelines and can be adjusted to reflect what is most common in your market area.

One GLA guideline is that only areas of the dwelling that are 100% above ground and heated and finished like the main part of the house should be included. I doubt the drafters of the original guidelines were thinking about indoor heated pools.

The important thing to remember is that whatever you do, you need to explain in detail in the appraisal so that the users of the appraisal and reviewers who has access to some other source of the property GLA measurement will not confused by the difference. This will also help explain the basis of any adjustments to the comparable sales based on the difference in GLA.



FHFA logo
Update on Proposed Overhaul of Fannie and Freddie: Excerpts from a SPEECH by Edward J. DeMarco Acting Director,
FHFA Before the U.S. House of Representatives Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises

Chairman Garrett, Ranking Member Waters and members of the Subcommittee, thank you for inviting me to speak this morning on the Federal Housing Finance Agency’s (FHFA) role as conservator of Fannie Mae and Freddie Mac (the Enterprises) and on proposals regarding the future of the Enterprises...

It is critically important that Congress and the Administration begin the work to define the longterm structure of housing finance. While substantive disagreements about the features of that structure exist, there is near universal agreement that we should not follow the old paradigm. We appreciate the efforts that the Sub-committee has taken to start this process...

Ask Henry

Appraisal Changes

Dear Mr. Harrison,
If contract revisions occur after the date of the appraisal and the lender has furnished a new contract, should these modifications be made to the contract portion of the appraisal to reflect a change in seller contribution, etc.? Or must the appraisal be entirely based on information obtained as of or before the effective date of the appraisal?

Best Regards,
Todd Floyd

Dear Todd,

The requirement is that the lender supply you with their latest ratified version of the sales contract. This usually has no impact on your estimate of the market value in the appraisal. As part of your scope of work dialogue with the lender, you should agree on the effective date of the appraisal. There is no Fannie Mae or Freddie Mac regulation that I am aware of that prevents you from using information about things that happen after the effective date of the appraisal. However, when you incorporate this information, you should carefully explain in the appraisal what you have done so that there is no room for confusion or misinterpretation.



The NEW Vocabulary Test

Part I

The computer world is moving so swiftly that it's hard to keep up with all the esoteric terms, acronyms and short-names in use. Below is the first part of a new lexicon of words about computers, computing, and the Internet we will be publishing during the next few weeks and months that may help orient some of our readers to this "new world order." For those of us in the 5th, 6th, 7th (or 8th!) decades, these terms can be a challenge!  ...The Editor

Note: This lexicon was compiled using definitions acquired through Google, Wikipedia, and other internet search engines.

404 - an HTTP standard response code meaning that the requested Web page could not be located. Also: Clueless about technology. As in "Joe walked out of that meeting looking completely 404."

Bandwidth - is a bit rate measure of available or consumed data communications resources expressed in bits-per-second or multiples (kilobits-per-second, megabits-per-second, etc.). The rate by which data is transmitted or received dramatically affects the utility of the Internet for users. A "slow" connection can make working on the Internet nearly unendurable.

Bandwidth hog – a derogatory term for a user of an internet connection who uses more bandwith than other users on the network.

Broadband refers to a telecommunications signal of greater bandwidth, in some sense, than another standard or usual signal. The "broader"  the band, the greater the capacity for traffic. Different criteria for "broad" have been applied in different contexts and at different times. 
History: The term's origin is in radio systems engineering, but became popularized after MediaOne adopted it as part of a marketing campaign in 1996 to sell their high speed data access. The slogan was "This is Broadband. This is the Way”. The term has never been formally defined, even though it is widely used, and has been the subject of many policy debates, including in the FCC's  controversial "National Broadband Plan." 



Welcome to the Neighborhood!

Dear REV,
Sorry to learn that Fall 2010 was the last online issue because we really enjoyed your magazine all these years, but I'm sure the new blog will be a great replacement! We look forward to our peek into Henry's appraisal knowledge with the coming of each issue. And, we want to welcome you to the neighborhood! 

We're away off from Melbourne, here in Ocala, but a heck of lot closer than Connecticut. We hope you find the Florida lifestyle to be so great that you'll soon consider your Florida home as the main base, with the alternate home way up north!
Thanks for all you do.

Dan E. Daniels
Ocala, FL 34473-3167

Ask Henry

2055 VS Full Appraisal

Dear Henry,

I work at a community bank and am new to appraisal review. We are getting very unclear information from our examiners as to what we need for a residential appraisal. Up until recently, they accepted a BPO (Broker Price Opinion) for a routine (yearly) value update on loans under $500,000. Now a different examiner states that BPOs are not acceptable, and requires that we get a full appraisal for everything with a mortgage balance over $250,000.
One examiner told us that all residential appraisals must be made according to USPAP. In trying to reduce our ridiculous costs in having to order a brand new appraisal for every residential annual value update, a few appraisers have submitted their reports on Form 2055 (basic drive-by). This form cannot meet USPAP in its brevity. Do you know if the OCC will accept a Form 2055 for a residential valuation update? And do you have any recommended websites where I can search for additional information on the uses of the various residential appraisal forms? 

Thank you in advance for your help,
Mary F Miron

Dear Mary,

There is nothing in the USPAP that specifies what type of appraisal report the appraiser must use. Therefore, this is something your institution must determine based on their needs and requirements. They must comply with all their regulators' requirements.  I sympathize with their dilemma. As far as your statement that an appraisal report on the Form 2055 "cannot meet USPAP requirements in its brevity", that's just not the case. An appraisal reported on the 2055 still must meet all USPAP requirements. The choice of the form does not dictate the comprehensiveness of the appraisal itself.


Ask Henry

UAD: Proper CITY Identification

Dear Mr. Harrison,

I'm having problems defining the address for many properties I appraise. Here in New Jersey we have properties (typically within Townships) that utilize both (1.) "census-designated" areas (or districts) within the township or (2.) names of neighboring towns for use in their "Mailing Address".

For example:

125 Main Street, MORGANVILLE, NJ is in Marlboro Township
125 Main Street, BELLE MEAD, NJ could be in either Hillsborough or Montgomery Township 
125 Main Street, PRINCETON, NJ could actually be in South Brunswick Township (e.g., a different town and county)
I have always written my reports to identify the actual "CITY", "TOWNSHIP"  or "BORO" (as per TAX RECORDS) within the CITY FIELD on the appraisal report.
I have always identified within the ADDRESS FIELD on the appraisal report the "mailing address", which would read as noted above.

ADDRESS: 125 Main Street (Princeton)   CITY: South Brunswick Township

I always include language (in the notes section) as to where I obtained this data, an explanation about census-designated areas or districts within townships, or comments (as in the example above) that the mailing address may utilize the name of a neighboring town.
If an appraiser were to not identify the actual Township, I feel this could be misleading. Especially in the examples used above with both Belle Mead and Princeton: if an appraiser were to only identify "Belle Mead", what actual TOWNSHIP is it in -- Hillsborough or Montgomery?

If an appraiser were to only identify "Princeton", the reader might actually think the property is in Princeton (Mercer County) and not South Brunswick (Middlesex County). Both answers are therefore misleading and incomplete.
Now, AMCs inform me their lender clients want "Princeton" ONLY in the CITY Field. I cannot agree with that. So here comes the question: What is the proper way to do this, and handle my concerns and dilemma with the AMCs? Thanks in advance for your help.

Randy L. Cohen, SCRREA

Dear Randy,

I'm sure it is frustrating to be told to report something that makes no sense, given the complexity of place names in your area. You will no longer have this problem starting September 1st, 2011 when URAR appraisal reports will have to comply with the new UAD requirements. These requirements will become mandatory on that date for all appraisals to be sold to Fannie Mae and Freddie Mac. They will be computer checked and when the computer rejects the appraisal, it will be returned to the lender for corrections. How the corrections will be made and by whom will vary. 

Below is an excerpt from my new UAD book, regarding the UAD requirements on how to report Property Address. It is highly codified, as you will see, and does not permit any deviations from their format. You may have to add your notes about the actual property address versus the mailing address in your addenda, to avoid the problems you outline above. The UAD guide contains a condensation of USPS Regulation 28 which is all you need for most locations. However, in locations like yours, I suggest you contact the postmaster in the area where you are working and get their opinion of the correct address requirements for the location of the subject property.


For more information about my new book, to be published April 30th, and to pre-order a copy now (and get a $5 pre-publication discount), use Discount Code $5PPUAD and click this link:  HARRISON's COMPLETE UAD BOOK (PRE-ORDER) 
UAD URAR page 9

Ask Henry

Tax Appeals

Dear H2,

What type of license is needed to do County Assessor work? If we appraisers wanted to help homeowners reduce their property tax burden, by being consultants for them, do we need a license? E & O Insurance? What would be expected of us?

Timothy O'Brien

Dear Timothy,

The kind of license that is needed to do assessor work depends upon the state in which you are located. You should check with your Real Estate Appraisal Commission or an attorney who can look up the law for you. The same is true for what license is needed to do tax consulting work and if E & O insurance will be required. What would be expected of you is that you have the education and experience to do a "credible" job.



Happy Birthday

Dear Henry,

I would like to take this opportunity to wish you a happy 80th. I began my appraisal career in 1971. In March of 1972 I took my first Appraisal course offered by the Institute in Chicago. I believe it was one of the first courses that you taught. The other instructor was Arlen Mills. Your teaching set me on the right track to a successful professional career and I thank you for that. I hope you have many more birthdays and enjoy your time along the Florida coast.

Phil Gottfried, MAI
Ontario, CA

Ask Henry

Effective Age

Dear Mr. Harrison,

I recently did an exterior-only VA Liquidation Appraisal on a dwelling built in 1924. Normally we do a full appraisal on these properties, but the owner would not let me in. The dwelling had some obvious deferred maintenance, but it’s a brick dwelling and I anticipate that it will be around for many years yet. My estimated value was about $100,000. If the dwelling were nicely refurbished, it might command a value of about $150,000 in its neighborhood.

The VA review appraiser told me that since I did not gain entrance to the dwelling, I was required to use the actual age of 87 years as the effective age. (I used 12, which in looking back, I do think was too low.) Most appraisers I talk to seem to follow the old Marshall-Swift mindset of 60 years as the typical total economic life of a property. Would you give me your thoughts?

Gary Moyer

Dear Gary,

The effective age of a house depends mostly upon its design and condition. I have always believed that "benchmarks" are of little use in appraising, and this is a good example. I doubt the VA review appraiser has anything to back up his or her wrong opinion! If you render an opinion about a property you have not completely inspected you have to make some assumptions about what you did not see. The USPAP requires that you make a "credible" appraisal. In view of the circumstances, I suggest that you put this job behind you and move on.


Sound Off

UAD: Unintended Consequences

Dear H2,

UAD is another well meaning step to bring less judgment into an appraisal. The appraisal industry has been the victim of overzealous lending policy with sub-prime loans in excess of 100% of value.

Now the answer to every problem is a computer model. Again, the industry is being manipulated to satisfy a lending industry that is buried in a shadow inventory of bad loans. Lest we forget -- the Univac people were going to 'save NYC' with a computer model. This dismal failure nearly bankrupted the richest city in the country.

As the saying goes, "Numbers have a tendency to lie — and liars tend to number". There is no substitute for good judgment.

For many years we have relied upon reasonably truthful/accurate information from real estate brokers and salespeople, the very information these computer models use to decide upon a value. Years of experience are necessary to be able to read a broker's comments and separate the wheat from the chaff. Now the biggest players (i.e., the biggest
losers) are on the road to an AVM system.
The big AMCs are along for the ride. There will be no "reasonable" fee adjustments. As with most independent appraisers, you either "get on the bus and ride", or get off and starve.

The time, investment, and effort to produce a credible report are not conducive anymore to starting a career in this business. I have never been able to come to terms with the purported importance of an appraisal report that ends up being the least costly portion of a transaction. And then the appraiser is challenged on nearly every issue. Not so long ago, checking a box was supposed to eliminate pages of explanation. Now we are at the UAD with specific answers — of a specified length and format — so that the report can be more easily read or compared to the available AVM!

If you think I'm wrong, just take a look at all the new costly software you are going to need just to keep up. I think appraising has come to a sorry pass indeed.

Joe Johnson
Florida Certified Residential Appraiser

Ask Henry

UAD Requirements

Dear H2,

The UAD is scheduled to go into effect September 1st, 2011. What will happen to the UAD requirements if Fannie and Freddie are no longer around in September?

Brent Hodges

Dear Brent,

It's anyone's guess how long Fannie and Freddie will "be around". However, I'm a betting man and will accept reasonable wagers that both of these so-called Government Sponsored Enterprises (GSEs) will be around on September 1, 2011. I might even consider a bet on September 1, 2012.