April 1st Mortgage Appraisal Changes Impact Cincinnati Real Estate

The Housing and Urban Development agency (HUD) is now adopting the same appraisal guidelines as Fannie Mae and Freddie Mac on April 1, 2009. The changes are intended to provide a more accurate appraisal in the changing real estate market. Changes include:

• At least two of the three recent sales (comparables/comps) must be within the last 90 days of the effective date of the appraisal.

• Include a minimum of two active listings or pending sales. The appraiser must insure the active listings and pending sales “have reasonable market exposure to avoid the use of over priced properties as comparables.”

• Include the original list price, any revised prices and total days on the market.

• Adjust active listings to reflect list to sale price ratios for the market.

• Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sales price ratios.

• Include an absorption rate analysis to determine market trends.

• Known or reported incentives or sales concessions must be noted for any comp that’s used on the appraisal.

These changes may impact certain areas of the Cincinnati real estate market more than others. Some areas of the city have seen very little activity in the last 90 days being that winter is a slower period for sales here. The positive side is that appraisals will be much more true to current market conditions, helping buyers and lenders finance their homes at real market values.