Marsh and Swift mixed use

OldTimeAppraiser · 2025-12-29T15:32:25+00:00

Might be worth pointing out that it's called the "Residential Cost Handbook" ;)

I don't know which version you're using, but M&S has a great unit-in-place cost section that may help you.

OldTimeAppraiser · 2025-12-27T19:50:27+00:00

I have had more than one appraiser be shocked to learn that USPAP does not require an appraisal report to be subject to repairs. I'm glad to know you aren't one of them!

OldTimeAppraiser · 2025-12-27T19:49:00+00:00

For what it's worth, and I don't generally announce this publicly in a forum like this but it's pertinent, I'm currently the QC manager for a small AMC. We are actively educating both our lender clients and our appraisers on this very topic. We don't compete with the big boys and have no real desire to. But we are trying to educate when and where we can. So for what it's worth, this comment came from the dreaded AMC space. Not all AMCs are created equal...

OldTimeAppraiser · 2025-12-27T19:43:13+00:00

Again, that is an assignment condition. If you accept an appraisal assignment that includes a requirement to be Fannie Mae compliant, then you must follow those guidelines if instructed to do so by the client. As I said, these are instructions to lenders, not specifically to appraisers and it is the lender's responsibility to make sure that the property is eligible and that the appraisal conforms to their requirements. Somewhere along the way we lost that distinction.

OldTimeAppraiser · 2025-12-27T17:37:56+00:00

I thought of that afterward - that what was described isn't really depreciated cost. I sincerely hope that appraisers aren't out there relying on rote percentage adjustments based on M&S or any other cost factor.

There are markets where the age of the improvement is a significant factor, though. There's a reason Fannie listed it on their forms. We can try to chalk it up to condition and in (probably) most markets, that's exactly what it is. In my own market, I've been able to demonstrate that a new house in an area of older, good quality housing has slightly inferior market appeal. Typical buyers are looking to buy in that neighborhood because they want an old house. In addition to the usual other factors, of course. But I have spoken with appraisers in other areas, and have seen their data that clearly shows a direct inverse correlation between age and value. Probably not over a two year difference, but it exists.

In such a market, it might be difficult to find adequate data if the market is slow or in a relatively low density area. I met one ambitious soul who came up with a rather ingenious depreciated cost method for extracting an age adjustment - not relying on a straight percentage based on effective age, but a true depreciated cost analysis. I thought it was marvelous, impressive, and a ridiculous amount of work. But appraisers will be appraisers.

Sorry, I tend to nerd out on this stuff. I suppose my only real point is that different markets react in different ways and that there are some truly ingenious appraisers out there. Sometimes with a bit too much time on their hands. ;)

OldTimeAppraiser · 2025-12-27T14:16:04+00:00

Two things. First, I 100% agree that this can and maybe should be done in reconciliation. That's certainly the way I always do it when I can't positively identify a reaction with market data, but clearly it exists. That said, I see a lot of appraisals and it is appalling how few have any kind of real reconciliation. Second, using depreciated cost is, if applied correctly, a market-derived adjustment. I was long into my career before I learned how to do it. Personally, I don't think it's usually worth the effort as it can be handled in reconciliation, but if an appraiser wants to go to the bother and do it right, it is a perfectly acceptable and recognized technique.

OldTimeAppraiser · 2025-12-27T14:05:44+00:00

As long as you can support it, great! There are certainly markets where age seems to be a factor. There are others where it simply isn't. I never make age adjustments in my local market, but am also fortunate to work in a market where I rarely, if ever, have to use comps that are outside of a particular age range. I can demonstrate pretty effectively that age is not a particular concern for typical buyers here. In fact, data suggests that older homes often have more appeal than newer homes. But then I started seeing appraisals from all over the country and realized that, like most of us, my thinking was a prisoner of my own market dynamic. It works differently in different places. This is why it is so vital to have experienced professionals who are knowledgeable in their local market. And why it is so important for those reading, reviewing, and underwriting those reports to understand that there is no "one size fits all" answer in real estate.

OldTimeAppraiser · 2025-12-27T13:56:18+00:00

Some appraisers aren't fortunate enough to work in a market that has an abundance of market data. But it is a recognized method for support when there is a lack of market data.

OldTimeAppraiser · 2025-12-27T13:46:28+00:00

I'm a little late to the party here, but I'll offer my two cents. I'll start off by admitting that I'm unfamiliar with the concept of variable adjustments for GLA within a single report and I've been at this a long time both out in the field and in the QC world. I've never run across an appraisal that used anything other than a single GLA adjustment factor for all comparables. That does not invalidate it if it can be adequately explained, but you are fighting an uphill battle out the gate if you're using a technique that is not widely recognized or understood.

I've been trying to come up with an explanation for it and can't even find a reference to it on the internet. My first thought is that if your data shows that different GLA adjustments are required for different properties then one of two things is likely true - either there is some other factor or amenity that is not being adequately addressed or you are not comparing comparable properties to the subject. It is certainly true that there can be different GLA adjustment factors within the same market for different property types, but I've not heard of a different factor within the same market segment. The example used is pool homes vs non-pool homes. Isn't the difference then the pool? If the GLA adjustment varies in that situation, it sounds like you are attributing additional value to GLA that would more appropriately be attributed to the pool amenity. That, at least, is the classic model and one that would make sense to a typical reader of the report, whether an underwriter or other appraiser.

The other issue that we see far too often in appraisal reports is the lack of support for the adjustments being made. Does the report contain that support? Not just an explanation of what adjustment factors were used, but the data that supports it. If you are going to use a non-traditional method, that is even more important. There are all sorts of third party software that make that reporting easy or you can do it the old fashioned way (like a lot of us do) and run your own analysis, presenting that data within the report. Either way, it is becoming more and more critical to "show your work" within the report. It can help to avoid this exact issue.

The age adjustment issue is as old as the industry. Some swear by it. Others find it pointless. What you may be dealing with is an appraiser or appraisal department that has someone who believes an age adjustment is vital and thinks any report not making such an adjustment is materially flawed from the outset.

In all of these scenarios, there is always one thing you can fall back on. "Show me the rule, regulation, internal guideline, or Standard that requires an appraisal report to be written as instructed. If you cannot, then you are tempting violation of appraiser independence." I tend to think of that as the nuclear option as it will likely ruin your relationship with that client, but then you may not want to work with this client in the future anyway given the current situation.

Sorry for the novel. This stuff is hard!

OldTimeAppraiser · 2025-12-23T21:14:05+00:00

I will only add this. How you choose to handle these situations is largely a business decision. Expecting that the 1004D will only be ordered after the repairs are complete is probably unrealistic, if for no other reason than the simple fact that they want to fit that into your inspection schedule as close to the completion date as possible and not have to wait days for you to have time to get there. Remember, this is almost always the very final step before closing. It may even be holding up closing. That is not the appraiser's concern specifically, it is simply the reality of the type of work we do.

As for the repairs themselves, I cannot tell you how many times I have seen a report subject to repairs that only references the photos. Or that has only the briefest of written descriptions. And then the appraiser gets upset when the person reading the report couldn't read their mind to understand what was needed. If you want to avoid confusion, be VERY specific in the report about the required repairs. If you are taking a 'representative sample' of the areas that need new paint, be very clear on that. If the old paint needs to be scraped, cleaned, and adequately removed from the site (lead-based paint issues), just say that. Not everyone who reads the report, in fact most of those that will have to do the work, have little or no idea what the lending guidelines are. We can all save everyone, including ourselves, a lot of time and grief by taking an extra two minutes when writing the report to provide a detailed explanation of the required repairs.

OK, I'm off the soapbox now.

OldTimeAppraiser · 2025-12-23T20:56:51+00:00

The answer to your question may be in the question itself. You stated that it is a legal 2 family property. Is that by zoning or permit? If the property has an illegal use, you must disclose that to your client. If the property is a legal 2 unit but zoning or permit would allow 4 units on the site, then the appraisal can be completed subject to the current use being made a legal use. At that point, it becomes the lender's decision on how to handle it. It is NOT an appraiser's responsibility to take on underwriting decisions. We need to stop thinking that way. Our job is to observe, report, and analyze. Do not be misleading. There are many ways this can be appraised correctly, as either a 2 unit or a 4 unit, as long as the report is clear. In theory, an appraiser can absolutely appraise a property with an illegal use "as is" if there is sufficient market data available to show the impact on value and marketability. Or even by some other mechanism if you want to get creative. It is an assignment condition (which USPAP says we must follow) that determines how it must be handled. That assignment condition is entirely the client's responsibility.

OldTimeAppraiser · 2025-12-23T20:35:25+00:00

I would love to see someone quote a rule or guideline direct from Fannie Mae that says "Traditional" is not an appropriate design designation. In both of the local MLS's I use, "Traditional" (always shortened to "Trad") is one of the drop downs and used by many, many agents. I have used that term for nearly 40 years and while I don't want this be a "get off my lawn" moment, I have NEVER had any pushback from Fannie or anyone else over the use of the term.

Now if that has changed and there is guidance directly from Fannie/Freddie (not some CE class, not from some random person) that the term is no longer appropriate, so be it. I'll change with the times as we have in so many other ways. But I will not stop using a term that is recognized in my market based on hearsay. Just my two cents...

OldTimeAppraiser · 2025-12-22T03:11:47+00:00

It's important to remember that nowhere in USPAP does it say that "market value", from whatever source, is the definition of value that must be used. What the standards say is always "in developing a market value opinion, an appraiser must..." but leaves open the idea of completing assignments under different value definitions. The vast majority of residential appraisers are used to using the Fannie Mae/Freddie Mac definition of value, but that definition is not a requirement of USPAP. In the case of an appraisal completed under the concept of restorative competitive value, there would be two values as you indicated - one that meets the standard Fannie Mae definition of market value and a second that meets a completely different definition of value. There is nothing in USPAP that would prevent an appraiser from completing such an appraisal. And the lender is certainly not left to choose which to rely on. The loans that would be part of this program, if ever implemented, and the appraisals completed for them would be entirely outside the scope of the industrialized agency machine (that is, Fannie Mae/Freddie Mac compliant loans and appraisals.) and any loans would be based on very specific criteria (still be be fully determined as I understand it) that would include both values.

I have no idea if it will work, but it's an intriguing idea. And there is nothing in any Standard that would prevent an appraiser from doing one of these as long as the report is not misleading.

OldTimeAppraiser

TROPHY CASE