UAD Rating Absolute vs. Relative
Where did those rating words come from?
Why is it so many appraisers have trouble with UAD and the CU (Collateral Underwriter), and how to apply the Quality and Condition rating between the Subject and Comps?
Not long after the UAD was implemented/mandated by FNMA (in 2011), and then the CU evaluation system came along, FNMA began discovering that many appraisers were improperly Rating the comps Quality and Condition AGAINST the Subject in the grid. And they began telling appraisers what they were finding. FNMA also discovered, and revealed, that many appraisers were using the same Comps over and over again in different reports, but were using DIFFERENT rating ‘numbers’ for those properties – depending on the Quality and Condition they applied to the SUBJECT.
Applying an ‘opinion’ of the difference for the Quality and Condition is not how we are supposed to do appraisals. Although many appraisers were taught to do that years ago by their mentors, who were also doing it wrong. Unfortunately, FNMA never really said much about it then, until the CU process started. So bad habits started, and were transferred from one appraiser to another, and down the line.
Everything on the grid pages is ABSOLUTE to those properties. The Address, the Site size, View, Design, Actual Age, GLA size, Garage & Carport spaces, etc. Everything. As I like to say – “It is what it is, where it is, when it is.”
Yet many appraisers still think the Rating for Quality and Condition for Comps should be applied Relative-to the Subject. Uh…NO! The Comps are rated what they are, based on the Quality and Condition Rating Definitions that apply with UAD. And so is the Subject.
Over the years, I’ve read countless laments by appraisers who say the ‘UAD definitions’ are hard to understand, and don’t have ‘steps’ between the numbers so appraisers can try to engineer precise differences in the ratings and resulting adjustments. That line of thinking is basically hogwash. If you think you need to make more precise adjustments, you can do so on the extra grid lines…such as ‘Add’l Qual Adj.’ or the same for Cond.
Why do I believe this is so? Let me ask those of you who believe UAD definitions are so difficult: before UAD came along, did you ever include definitions of the ‘rating words’ we used back in the dark ages – in your reports? That can be answered 100% no (except by some very elite appraisers). Another question: Where did those ‘rating words’ come from, and can you quickly pull out your reference guide to bring up the definitions for those? Again, probably 100% no. Before you whine, send me your definitions of Average(+) and Excellent(-), for both Quality and Condition, that you used prior to UAD.
So now we have UAD and the basically easy to use and understand definitions. These, by the way, should be included in every appraisal report. All the software vendors have definition pages to add into reports. Not including these in reports means you have produced a report that is NOT CREDIBLE per USPAP because without those, the reader(s) won’t know what the rating numbers and other codes mean.
Included with this is a PDF UAD Quick Reference Guide I produced in 2011. Look on page 3 of 6 for Rating definitions, which have not changed. These definitions are abbreviated from the UAD document to fit the page, but the key elements are included.