Desirable, Rite or Rong?

Dave Towne

Dave Towne

Certified Residential RE Appraiser at Towne Appraisals
AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003.
Dave Towne on e-AppraisersDirectory.com
Dave Towne

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Desirable - banned Fannie Mae words

Desirable, banned or permitted?

I was caught up in a minor ‘dispute’ last week when a review appraiser wacked my knuckles when I described a ‘neighborhood’ as being “Desirable.”

My original message was re-distributed on various forums and I’ve tried to read all comments to see how I might learn from this episode.

Lots of appraisers offered their input. Some supportive and positive, some cautionary, and some who believe much of what we have to deal with is pretty trivial.

“Banned words” were originally identified in the Fair Housing Act law many years ago (not the EEOC law as I originally wrote). That F.H.A. law concerns ADVERTISING of real estate, and real estate brokers and salespeople have to take update classes on this topic every few years as refreshers, to maintain their license. “Desirable” is not one of the banned words. In fact, I saw one list where it is actually an ‘approved’ word!

However, Fannie Mae, in their Selling Guide, has a section devoted to LENDER RESPONSIBILITY to insure we appraisers write exceedingly carefully with only facts and no subjectivity to avoid offending anyone directly or indirectly.

Well, guess what? I was wrong. “Desirable” is indeed a ‘banned word’ from Fannie Mae’s perspective.

Here’s what it says in the Selling Guide, B4-1.1-02. This section appears to be a new addition, or revised, as of Feb. 23, 2016, which may be the reason why my use of DESIRABLE was caught by the reviewer:

Objective and Unbiased Appraisals

A lender must ensure that the appraiser

  • described the property and the neighborhood in factual, unbiased, and specific terms;
  • considered all factors that have an effect on value; and
  • was objective and unbiased in the development of the opinion of market value in the appraisal report.

A number of federal, state, and local laws prohibit discrimination in the appraisal of housing. Fannie Mae expects professional appraisers to fully understand that discriminatory valuation and appraisal reporting practices are not only illegal, but also unethical. Unintentional discrimination can occur as the result of what an appraiser states, or fails to state, in his or her appraisal report. The lender and the appraiser must ensure that the integrity of the loan decision is not influenced by subjective, racial, or stereotypical terms, phrases or comments in the appraisal report.

Prohibited practices include:

  • use of unsupported, descriptive comments or drawing unsupported conclusions from subjective observations. These actions may have a discriminatory effect;
  • use of unsupported assumptions, interjections of personal opinion, or perceptions about factors in the valuation process. These actions may have a discriminatory effect, and may or may not affect the use and value of a property;
  • use of subjective terminology, including, but not limited to:
    • “pride of ownership,” “no pride of ownership,” and “lack of pride of ownership”;
    • “poor neighborhood”;
    • “good neighborhood”;
    • “crime-ridden area”;
    • desirable neighborhood or location”;
    • or “undesirable neighborhood or location”;
  • use of subjective terminology that can result in erroneous conclusions;
  • actions that may have a discriminatory effect or may affect the use and value of the property; or
  • basing the analysis or opinion of market value (either partially or completely) on the race, color, religion, sex, handicap, familial status, or national origin, of either the prospective owners or occupants of the property being appraised or the present owners or occupants of the properties in the vicinity of that property.

Reporting Unfavorable Conditions

The lender must ensure that appraiser comments regarding unfavorable conditions, such as the existence of an adverse environmental or economic factor, also discuss how the condition affects the value or marketability of the property being appraised and explain how the condition was taken into consideration in the valuation process. In such cases, the appraiser’s analysis must reflect and include comparable sales that are similarly affected whenever possible. The appraiser must address the impact these factors may have, if any, on the value and marketability of the subject property. (See B4-1.3-06, Property Condition and Quality of Construction of the Improvements, for further information).

The lesson here is to re-read and potentially re-write your report templates. Be cautious about cloning old reports. Remove any comments that are subjective. Only report facts backed by data.

So instead of writing

“the 6 block neighborhood surrounding the subject is a crime-ridden area with dangerous activity perpetrated by multiple people in the past 5 weeks”,

you should say

“according to the Metropolitan Police Department crime statistics web site, 27 shootings, 38 car prowls, 15 burglaries and 6 armed robberies have occurred in the six block neighborhood surrounding the subject in the past 5 weeks.”

You’re correct. That would not be a DESIRABLE place to live. And you are forbidden from saying it’s an ‘undesirable’ place to live.

Have fun appraising, and by all means, never inject any report with any comment or word that could be considered SUBJECTIVE.

Image credit flickr - Jennifer Moo
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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8 Responses

  1. Surfmore says:

    Perhaps replace “desirable” with “sought after area”.

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  2. Mike Ford Mike Ford says:

    Dave, loved the original article and this follow up. You did indeed stir up a lot of interest. Why? Because we have ALL been negatively affected by this asinine micromanagement coming out of FNMA.

    FNMAs second bullet item above says that we “…have considered all factors that have an effect on value…”

    One of those factors IS overall desirability of the property just as we consider overall condition (minus and specific issues that we address individually).

    “The subject fronts to a busy  predominantly commercial use boulevard (subjective? unsupported? Im not doing a traffic count!!!). Comparable sale Number 1 is located on a seemingly quiet interior neighborhood cul de sac street with little apparent cross traffic. Now, You know and I know that a location adjustment is probably applicable.

    Assuming the subject and comparable sale are identical in all other respects and the comparable sold for $30,000 more, its “probable” that the market perception is the comp’s location is $30,000 more DESIRABLE. Rephrased, the subject location is LESS desirable than other interior neighborhood street properties.

    We have all accepted the infallibility of FNMA for so long, that we rarely zero in on the idiocy of so many of their statements and “guidelines.” Like the infamous 15%/25% net/gross adjustments in effect for over 40 years that the CU database is predicated on!

    It is no wonder their CU system is so flawed. Congress is right. FNMA needs to be phased out completely and replaced with a market-profit driven organization without one single system, policy or rule borrowed from FNMA.

    Hopefully investors will also realize not one individual from FNMA should be hired either. It’d be like hiring Enron’s accounting firm to design your bookkeeping system.

    FNMA makes HUD look efficient!

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  3. Pat Turner says:

    Good Lord

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  4. Discount Baggins Discount Baggins says:

    “Nobody has the right to not be offended. That right doesn’t exist in any declaration I have ever read.

    If you are offended it is your problem, and frankly lots of things offend lots of people.

    I can walk into a bookshop and point out a number of books that I find very unattractive in what they say. But it doesn’t occur to me to burn the bookshop down. If you don’t like a book, read another book. If you start reading a book and you decide you don’t like it, nobody is telling you to finish it.

    To read a 600-page novel and then say that it has deeply offended you: well, you have done a lot of work to be offended.” Salman Rushdie

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  5. Along those lines, heard on the news that Dept. of State just adopted regulations that preclude telling of jokes now (seriously). Because even those that are not off color or risqué may offend and THAT would be considered a “micro aggression” according to their HR people.

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  6. KenQ says:

    I refuse to be censored by the SPEECH police. The other day I was told not to use the word MASTER for master bedroom. Censorship-creep is all too real a phenomenon nowadays. Another appraiser was told he violated fair housing rules because he said one of the comparables was located in a superior location, and AMC said he cannot use the word SUPERIOR. Idiots!

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    • Mike Ford, CA AG; AGA, GAA, RAA Mike Ford, CA AG; AGA, GAA, RAA says:

      Agree in both instances. “Master” is not purely, or even most commonly a slave/racial term. Any that believe it is are 100% complete morons. Master of a ship, Master of one’s own destiny, Master Craftsman, Master Chef, Master Chief Petty Officer, Master One’s Fears, Master Bedroom, Master Baiter (really! its a fisherman).

      I am so stinking fed up with PC speech and I too refuse to knuckle under to it anymore. I am offended at petty bureaucrats that disregard an entire nation’s spoken language over IMAGINED POTENTIALLY offensive words that the truly ignorant may be exposed to!

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      • Baggins Baggins says:

        Infowars has a good one for that line of thought.  People do not have the right, to not be offended.  If people become offended by simple language, that’s their problem, not mine.

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Desirable, Rite or Rong?

by Dave Towne time to read: 3 min
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