Business

House sale pictured in detail

In an effort to curb the "flipping" of houses, appraisers are going to be flipping a few extra pages beginning today when a new, longer appraisal form becomes the norm. The switch, from a two-page form to a six-page form, is intended to make appraisers do a better job of documenting their findings, said Sarah C. Vetault, a certified residential appraiser in Tucson and a member of the Arizona Board of Appraisal. The hope is that appraisers will more closely scrutinize planned sales and provide more information to both the lender and the buyer, Vetault said. That way, parties involved in the transaction will be able to make more informed decisions than they could with the old forms. Every home sale involving a mortgage will require an appraiser's OK to show that the price is justified. Some local appraisers have worried that their colleagues are lax in their practices, contributing to inflated prices. The old forms, in use for about 12 years, were changed after housing markets across the country, including Tucson, saw rapid increases in home values. Although appreciation has slowed here in recent months, the first six months of the year saw the median home-sale price in the Tucson area increase by at least $6,000 each month. The new form is not required in every appraisal, but it will be used in most cases, Vetault said. The form will be required in any case in which a mortgage will be bundled and resold on the secondary mortgage market to investors - a standard practice. Vetault said one major change deals with how the condition of a house is recorded. Before, an overall condition of "good" or "average" was enough. Now, appraisers will have to detail specific conditions of the house. Is the kitchen fine while wall tiles in the bathroom are falling off? Are there stains on the carpet in the master bedroom? Can they be removed? All that should go on the form, Vetault said. Fannie Mae drafted the new form, but it will be used by other institutions such as Freddie Mac, the Veterans Administration and the Federal Housing Administration. Mark Altizer, a local appraiser, noticed the new forms specifically ask for details of the contract, including price and if the seller is also the owner of public record. When might that be important? When the flipping is fervent and a buyer is also a seller, closing on both transactions in the same day. "That goes on, too, where they actually try to close simultaneously," Altizer said. In Pima County, transactions are recorded at the Recorder's Office within about a day's time. But it can take weeks for ownership to be recorded at the Assessor's Office. Coty Ferenchak, chief residential appraiser at Southwest Appraisal Associates, said the new form asks the appraisers to state whether they did or did not analyze the contract price. It's a notice to lenders and buyers that an extra pair of eyes has or has not scrutinized the contract price. Another notable change: A statement at the very top of the form says, "The purpose of this summary appraisal report is to provide the lender/client with an accurate, and adequately supported, opinion of the market value of the subject property." "That's always been the goal," Ferenchak said, "but it's never been stated as the first thing in the report. They want that right out there." The data needed to fill in the additional boxes is something that a good appraiser should already be collecting and computing, Ferenchak said. Now, the appraiser is required to simply report more information. Another notable change includes a more detailed prior transaction history that documents how many times the property has been sold in the last three years. "It involves a lot more work for the appraiser, but in the end the buyer is gaining a lot more, because there's a lot more information," said Paul Volpe, of Nova Home Loans. The additional information also benefits the lender, who may think twice about financing a home that has been sold more than once in just a few months' time, he said.