Dreaded FNMA Letter RE Condition Ratings
Certified Letter From Fannie Mae Regarding Condition Ratings
And then it happens, the moment we all know is coming – the dreaded certified letter from Fannie Mae. My door bell rings and the mailman is standing on my porch with pen in hand. Now don’t get me wrong, we have all been warned. They have the super computer comparing all of us and if you are the outlier you’re getting notified! If a majority of Appraisers give a specific house a certain rating and you disagree, you must be wrong – BOOM – letter. I assume this is the case as I take the letter opener and slice through the very thick “Certified Mail” label. I remove and open the letter. Much to my dismay it does not say I have disagreed with my peers. Instead of attaching the entire letter to this article I will give you the highlights and a few quotes. It went something like this:
Dear Appraiser: (real personal right)
Fannie Mae reviews appraisals it receives for data quality… We recently performed a review of appraisals performed by you… That review revealed certain inadequacies in the data. (I’m choking up at this point thinking OMG what the heck happened! I try my very best to do A+++ work every time. How can this be? Inadequate!!) You’re going to love this part…
“In every appraisal outlined in the following addendum you rated the subject and all of the sales comparables C3. This seems highly unlikely as most neighborhoods consist of properties that vary in condition. The C3 rating is VERY SPECIFIC to the following:”
Here they give me the verbatim definition of C3 with the newer note for clarity.
I seriously got a letter from Fannie Mae for selecting the comparables that best represent my subject property!!!! Did I miss a memo? Are we supposed to go find transactions that involved improvements that were in substantially better or worse condition than the subject? Is it now necessary to make substantial adjustments for condition on every report?
First and foremost, rating all of them C3 does NOT mean they are in the same condition; it only means the very ambiguous definitions provided best fit the subject or comparables. There may have been condition adjustments made on these properties but that is not addressed. The supercomputer just reads your C and Q info and generates a letter – a letter saying your comparables are TOO comparable. The letter goes on to say it is important to provide clear, accurate, and reliable information. Apparently this is done by finding comparables less like my subject?!
I did send a rebuttal to a provided e mail address. There is no name or signature on the letter (I assume a robot stuffed it in the envelope). My rebuttal explained that by reading Fannie’s definition of C3 it is actually VERY LIKELY that 80% of slightly older improvements are C3. C4 dictates “Chronological and Effective age are relatively close”. So a house built in 1980 would have an effective age of +/-35 to be a C4. I had this discussion in my last class with the instructor and after 2 days convinced him he needed to go back and relook at the work in their office. I also explained the C3 rating on all does NOT mean they are all in the same condition. If adjustments are made within the C3 parameters an explanation is given. I also disagreed that any of the C ratings are “Very specific” but that is a discussion for another time. I also asked them to have an actual human call me to discuss this further – we’ll see how that goes. Maybe the computer will call me.
So – are there any other Appraisers out there that have the same C rating on the subject and comparables? If so raise your hand. While it’s up there, wave at the mailman.