The IRS in October made changes to its Penalty Handbook
and Penalties Applicable to Incorrect Appraisals
. Appraisers who conduct work for the IRS are strongly encouraged to familiarize themselves with the procedures outlined in the manual, which, among other things, defines how a 6695A penalty would be applied against appraisers. Also addressed are issues surrounding the issuance of a Letter 4477, audit appointment meetings and the “more likely than not” exception.
The National Fair Housing Alliance, under contract by the Appraisal Subcommittee and the Council on Licensure, Enforcement and Regulation, on Jan. 19 released its report
on whether the Uniform Standards of Professional Appraisal Practice and Appraiser Qualifications Criteria support or promote fairness, equity, objectivity and diversity in both appraisals and the training and credentialing of appraisers.
The findings and recommendations are far reaching and address appraisal standards, appraiser qualifications and mortgage processes and procedures; some recommendations will require legislative action.
“The report acknowledges that enhanced standards and greater diversity within the profession are critical elements in addressing equity and rooting out bias in appraisal, and we agree,” said Appraisal Institute President Jody Bishop, MAI, SRA, AI-GRS.
The report recommends that consumers be considered intended users of appraisal reports under USPAP, that TAF develop guidance around reconsideration of value policies and procedures related to communications with consumers, that an emphasis be placed on fair housing education, and that several governance issues be reviewed, including the makeup of the ASB and AQB to how proposals are exposed and ultimately adopted.
Another report, this one from the Property Appraisal and Valuation Equity Task Force, known as PAVE, is expected soon and its findings and recommendations will be reported to President Biden by late February or early March. The findings are expected to address consumer disclosures and appeals processes, diversity efforts within the valuation profession, education and the appraisal regulatory structure.
The Appraisal Institute has participated with the PAVE Task Force through both listening sessions and meetings with White House and agency staff. AI has also engaged with congressional oversight offices because the task force is expected to issue several recommendations that would requiring congressional action.
Combined, the two reports are expected to set the stage for an active regulatory and legislative year for the valuation profession.
Beginning April 1, Fannie Mae will require appraisers to report a property’s gross living area and non-gross living area for appraisals involving interior and exterior inspections by using the American National Standard for Single-Family Residential Buildings, Square Footage Method of Calculating, ANSI Z765-2021
. This standard was last updated in May.
Historically, Fannie Mae’s Selling Guide has not required the use of a specific measurement standard, but this mandate will establish a standard for measuring, calculating and reporting living area. Additionally, all sketches for property footprints and floor plans must be computer-generated, indicate all dimensions necessary to calculate gross living area and other areas (such as a garage or basement) and show the calculations so it’s clear how the gross living area was tallied.
Fannie Mae hopes its new requirement will create alignment across market participants, provide a professional and defensible method for appraisers to calculate living area and allow transparent and repeatable results for the users of an appraisal report.
A significant period of transition is expected, and appraisers likely will have to do more rigorous research and analysis to comply with the new requirement. Analysis of subject properties with comparable sales information probably will not readily align with information in the MLS and tax records; a small number of MLS systems have adopted the ANSI standard.
The Appraisal Institute maintains a seminar on the ANSI standard
, which has been updated to include the Z765-2021. The updated seminar is pending state approvals.
Find more information in Fannie Mae Selling Guide B4-1.3-05
, Improvements Section of the Appraisal Report, and B4-1.2-01
, Exhibits for Appraisals.