Desirable, Rite or Rong?
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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.