Fall 2015


"House M"
A surprising transformation opens this residence towards protected landscape in the Netherlands.

A traditional home has undergone a drastic makeover: all of the unnecessary elements were removed from the old house and the building was clad with a new insulated facade so that a clear, recognizable form would remain.

Read more about it and see more pictures on Architizer.com

Featured Article

Fannie Mae Frequently Asked Questions

Did you remember that Fannie Mae maintains a “Frequently Asked Questions” feature on its website. It was last updated May 15, 2015. It is only 11 pages with 46 questions. I highly recommend that you take a look at it. I bet you will find helpful information on it that you never knew before.

The following are a few of the FAQ’s:

Q7. Why does Fannie Mae require the lender to provide the sales contract to the appraiser?
Fannie Mae’s policy is intended to help ensure that the appraiser is aware of all relevant aspects of the transaction. The sales contract provides important sales and financing data, including whether there are any concessions as part of the transaction. If the contract is amended, the lender must provide the updated contract to the appraiser to ensure that the appraiser has been given the opportunity to consider any changes and their effect on value. If the appraiser determines that there is no impact to value, then no additional commentary is required from the appraiser.

Q11. Is it acceptable for an appraiser to obtain and provide the required interior photographs at the time of the inspection for the Appraisal Update and/or Completion Report (Form 1004D)?
Yes. If the property being appraised is proposed or at a stage of construction where the required photographs cannot be obtained, they may be obtained at the time of the inspection for the Certification of Completion and provided with the Form 1004D.

Q12. If an appraiser provides an Appraisal Update and reports an increased value, can the lender utilize the value increase to underwrite the loan in process?
No. The purpose of the Appraisal Update portion of the Form 1004D is to indicate whether the value has remained the same or decreased. If the value has increased, the lender would need to obtain a new appraisal that reflects the increase in value in order to utilize the higher appraised value in underwriting the loan.

Q17. Are the trends that are reported on the Market Conditions Addendum to the Appraisal Report (Form 1004MC) the same trends that are to be reported in the One-Unit Housing Trends section of the appraisal report (Form 1004)?
Yes. The conclusions regarding trends that are obtained from the Form 1004MC must be the same trends reported in the Neighborhood trends section of the Form 1004. The information reported on both forms must be consistent to provide the lender with a clear and accurate understanding of the market trends and conditions present in the subject neighborhood, based on properties that are considered competitive with the subject being appraised.

Q19. Will Fannie Mae accept a loan for which the lender has requested the appraiser to appraise only a portion of a larger piece of property?
No. Fannie Mae expects that the appraisal will reflect the value attributable to the entire property. It is important for the underwriter and Fannie Mae to fully understand the value of the entire property that is serving as security for the loan.

Q23. Are loans secured by unique or non-traditional homes eligible for delivery to Fannie Mae?
Yes. Fannie Mae does purchase loans secured by unique or non-traditional housing types, such as, but not limited to, log homes, earth berm homes, and geodesic domes, which can be located in all areas, including rural locations. Loans on these types of properties are eligible for delivery to Fannie Mae provided the appraiser has adequate information to develop a reliable opinion of market value.

Q30. What is expected with regard to the appraiser’s inspection of a property?
Fannie Mae requires that the appraiser conduct a complete visual inspection of the accessible areas of the interior and exterior of the property. The appraiser is responsible for noting in his/her report any adverse conditions (such as, but not limited to, needed repairs; deterioration; or the presence of hazardous wastes, toxic substances, or adverse environmental conditions) that were apparent during the inspection of the property or that he/she became aware of during the research involved in performing the appraisal. The appraiser is expected to consider and describe the overall condition and quality of the property and identify items that require immediate repair as well as items where maintenance may have been deferred and which may not require immediate repair. On the other hand, an appraiser is not responsible for hidden or unapparent conditions. In addition, Fannie Mae does not consider the appraiser to be an expert in all fields, such as environmental hazards. In situations where an adverse property condition may be observed by the appraiser but the appraiser is not qualified to decide whether that condition requires immediate repair (such as the presence of mold, an active roof leak, settlement in the foundation, etc.), the property must be appraised subject to an inspection by a qualified professional. In such cases, the lender may need to ask the appraiser to update his or her appraisal based on the results of the inspection, in which case the appraiser would incorporate the results of the inspection and measure the impact, if any, on his or her final opinion of market value.

Q33. Can the appraiser use comparable sales that closed over twelve months ago?
Yes. The best and most appropriate sales may not always be the most recent. A sale more than 12 months old may be more appropriate in situations when market conditions have impacted the availability of recent sales as long as the appraiser reflects the changing market conditions. Additionally, older comparable sales that are the best indicator of value for the subject property can be used if they are appropriate. For example, if the subject property is located in a rural area that has minimal sales activity, the appraiser may not be able to locate three truly comparable sales that sold within the last twelve months. In this case, the appraiser may use older comparable sales as long as he or she explains why they are being used.

Book Review

Harrison’s Illustrated GuideHow to Make an FHA Single Family Appraisal - 2015 Edition

by Henry S. Harrison, MAI, RM, ASA, DREI
New Collegiate Publishing Company
320 Pages, Soft Cover; Price $59.95


In March 2015, HUD/FHA announced the publication of two new books: the “FHA Single Family Housing Appraisal Report and Data Delivery Guide” and the “FHA Single Family Housing Policy Handbook 4000.1.” These two publications represent a major revision of the old FHA Appraisal Requirements. The Single Family Housing Appraisal Report and Data Delivery Guide was specifically produced for appraisers and the 4000.1 handbook was published for both lenders and appraisers. Altogether, the publications provide over 500 pages of complicated material with no index.

Appraisers who are trying to use these two new publications soon discover there are hundreds of requirements labeled “the appraiser must” that are not covered in the “FHA Single Family Housing Appraisal Report and Data Delivery Guide.” As he did in his popular URAR Guide, noted appraisal author and educator Henry S. Harrison has organized this material in a new line-by-line URAR guide — focusing on these new FHA requirements. For example the “
appraiser must” inspect the attic, only the 4000.1 Handbook states: “If unable to view the area safely in their entirety, the appraiser must contact the Mortgagee and reschedule a time when a complete visual observation can be performed, or complete the appraisal subject to inspection by a qualified third party (FHA 4000.1Handbook Page 445).” Mechanical system requirements are another “FHA requirement” that is not covered in the Single Family Housing Appraisal Report and Data Delivery Guide. “The appraiser must not include the value of leased mechanical systems and components in the Market Value of the subject property. This includes furnaces, water heaters, fuel or propane storage tanks, solar or wind systems (including power purchase agreements,) and all mechanical systems and components that are not owned by the property owner. The appraiser must identify such systems in the appraisal report. (FHA 4000.1 Handbook Page 440).

Harrison’s new Illustrated Guide makes accessing crucial information far easier for appraisers. It goes page-by-page through the URAR and MC forms, covering FHA and other requirements. The Model Comments sections of the book have been updated in this edition. By purchasing a copy of this guide, you obtain permission to use them as you wish. With this book you can easily find the pertinent FHA requirements for each line of the URAR and helpful information on how to complete the Market Conditions Addendum Form (MC) which is required for every FHA appraisal.

With this book you can easily obtain the FHA requirements for each line on the URAR form and helpful information on how to complete the Market Data Addendum Form which is required for every FHA appraisal.

To purchase
Harrison's Illustrated Guide How to Make an FHA Single Family Appraisal 4000.1 - 2015 Edition, you can buy it, along with hardcopies of both the FHA 4000.1 Handbook and FHA Single Family Housing Appraisal Report and Data Delivery Guide directly from Henry S. Harrison's publisher New Collegiate Publishing. http://www.newcollegiatepublishing.com.



Dear Henry,
You taught a two week class I attended in the early 1970s. I believe it was the Society’s 101. Lewis Garber was the other instructor. To this day, I share the most important lessons I learned at that class.

First thing the second Monday, you stood in front of the class and wrote an odd word on the blackboard. You asked if anyone knew what it was. The word was NOGGIN. Everyone was stumped, so you explained it was the rubble that was put between the half timbers of an English Tudor house. My explanation may not be precise, but I’ll argue I should get an A just for remembering this.
The second wasn’t so much a lesson, but a funny story. At the start of a session, with no explanation, Lewis proceed to read a very old legal description recorded in his home state of Tennessee ). It was a lengthy and eventually the class came to realize what Lewis was reading. Then came the punchline. The “coordinate” that had everyone howling was when Lewis read something to the effect of … in an easterly direction 27 rods to where Jonah shot the bear.  
Two or three years after that course, I had an appraisal assignment that took me too Connecticut. I made a point to stop in and say hello. It’s been a long time Henry. From all I can tell, it appears you are doing well. Just thought I’d say hello and wish you well.
- Mike Hesson

Dear Mike,
It was great to receive your letter. Lewis and I held the SRA record for teaching the most SRA 101 classes together. You are correct, I am doing well, writing books and enjoying working with my son H Alex producing REV Magazine. Hopefully, you are doing well too.

Ask Henry

Dear Henry,
Hers how it goes: AMC A calls or emails a bid request for a single family appraisal report from lender B. If the fee and due date are acceptable I receive the engagement letter with the agreed fee and due date. Sometimes the same day or even up to 2 weeks later I will receive a second bid request from AMC B for fee and due date from same lender B for same property. Once I have an engagement letter from AMC A and they cancel order because someone else will do the appraisal report for a lower fee or quicker turn time do I have any recourse from AMC A.

Is lender B playing by all the rules once they have already committed to AMC A? I have a small office of 6 appraisers and we are seeing a lot of this lately. Besides being unethical does lender B have the legal right do this? The lenders doing this are nation wide banks and mortgage company's

Please advise and respond to
Patrick Solitz
Appraiser in Oregon

Dear Patrick,
I wish I could say that this is the first time I have heard this story. Keep in mind that I am not a lawyer (though I have three children that are). In business law 101, they teach you that once both parties have agreed to something (it must be legal) both parties are bound to the contract and neither party can cancel the contract without being liable for either damages or specific performance.

Unfortunately, any legal action will probably result in the loss of one or both of the parties.

My advice is to start by giving both the lender and the AMC the benefit of the doubt that they didn’t realize what they were doing by informing both of them as to what they have done. I would first try to do this verbally and if not successful then in writing. Hopefully, when they realize what they done they will take steps to correct the problem by reinstating your first contact.

If this continues to happen in the future and you don’t care if you lose their business I would try a small claims action in court which you can do yourself. This will bring a whole new level of people at the companies involved and this sometimes results in a correction without the loss of the customer.

If this does not work either forget it or hire an attorney keeping in mind that this will only bring you satisfaction as most likely you will never collect enough to pay the attorney fees.

Book Review

A Guide to Appraising Automobile Dealerships
by Bradley R. Carter, MAI
Appraisal Institute, Chicago, IL 60606
Soft cover, 180 pages
$50 non-members, $40 members
(888) 756-4624; FAX (313) 335-4400

A Guide to Appraising Automobile Dealerships provides up-to-date information on:
• Market, site, location, and improvement analyses;
• Highest and best use and land valuation;
• Application of the cost, sales comparison, and income capitalization approaches to value;
• Report writing for auto dealership valuation assignments.

Other topics covered are economic trends and locational issues that affect dealerships.

Each time I buy an automobile I am filled with apprehension because I don’t understand how dealerships actually work. I can’t understand how they claim they sell their cars for a few thousand dollars or less above their costs, yet they support what appears to be large and expensive real estate, big staffs, expensive TV advertisements, etc.

I was surprised to read that new car dealerships have decreased in the United States from 49,200 in 1949 to less than half as many (17,838) in 2013. Since then, they have leveled out. In Connecticut where I live they seem to be increasing with the addition of many single brand foreign car dealerships that use to be combined with American automobile dealerships.

A chart in the book shows that the average dealership in 2013 grossed $23,599,234 from new car sales and that the average sale price for a new car was $31,762. I worked this out to be 744 cars. This seems like a lot of cars for a dealership to sell! These sales represented 57.1% of the total gross income. The rest (31.3%) came from used car sales, with 11.6% from service and parts sales.

The book tries to address the complex problem of how to determine what portion of the total value of the dealership is derived from the value of the real estate and how much derives from the non-real estate property and how much for the good will. This is critical information when the sales comparison approach is used,as the sale price of the comparable sales is often not broken down into these categories.

The book points out the importance of knowing the purpose of the appraisal, and whether it is for tax purposes, condemnation proceedings, or some other value such as insurable value or going concern value, which considers the value of the personal property plus the good will value of the dealership.

Chapter 11 addresses this problem and offers suggestions on how to word statements that make it clear as to what is and is not included in the final estimated value. The author also includes a discussion of how business appraisers estimate “blue sky” value.

Appraising an automobile dealership is a complex assignment. The author presents a case for the real estate component of the dealership to be considered a special purpose property. This would make the cost approach a useful tool in the valuation process

However, a major portion of the book covers how to value the dealership that occupies the real estate. Somehow, appraising automobile dealerships reminds me of the song sung by Elvis Presley: "Fools Rush in Where Angels Fear to Tread”.

Welcome to the New REV | Ask Henry Harrison Blog!


Dear Readers:

In 2013 I was diagnosed with a sever case of Shingles that paralyzed my right leg and foot. So I took a hiatus from publishing REV Magazine and the Ask Henry Harrison blog while I recovered. Now two years later, I have recovered sufficiently to play tennis (mostly doubles), bike almost daily, and I have even started taking golf lessons (Last time I played was over 60 years ago).

I am releasing my newest line-by-line Illustrated Guide focusing on the new FHA requirements, which you can read more about below. My Harrison's Illustrated Guide How to Make an FHA Single Family Appraisal - 2015 Edition makes accessing crucial information easier for appraisers by going page-by-page through the URAR and MC forms, covering FHA and other requirements. The Model Comments sections of this book have also been updated in this edition. Appraisers who buy the book may use all of the model comments as you wish.

When I looked at our last REV issue — from Fall 2013 — I was surprised to see that not as much has changed as I expected. The previous editorial was about Fannie Mae and Freddie Mac who had been taken over by the Federal Government and in a conservatorship under the supervision of the US Treasury and controlled by Federal Housing and Finance Agency.

In the Fall 2013 issue, I also reported that Fannie Mae Stock was trading for less than $1.50 a share. I implied that someone looking for a highly speculative investment might be interested. In March of 2014 it sold for over $4.25. It is now selling for about $2.50. In this same issue there was a review of the HUD-FHA Handbooks 4155.2 and 4150.2. In March 2015, the two Handbooks have been replaced with a new FHA Handbook 4000.1 and a new Appraiser’s Guide. These publications were scheduled to replace the old ones in June 2015. Swamped with complaints of the short notice of the change the FHA extended the replacement date until September 15, 2015.

Over the last two years, I have answered numerous Ask Henry questions. We have selected a few some of them for immediate publication for our re-launch.

We will continue to review new Appraisal Books starting with Valuing Contaminated Properties Volume II Edited by Richard J. Roddewig, MAI. Published by the Appraisal Institute.

Our new policy will be to send an email to our mailing list each time the magazine/blog is updated. This issue was sent to your last known email address. If you would like to be notified at another address, or like to be taken off our mailing list or have our magazine sent to anyone else you think would want to receive it please click here to update your information.

My son, H Alex Harrison, Esq., editor of REV Magazine and Ask Henry Harrison Blog, now works for the Massachusetts Commission Against Discrimination, as the Executive Assistant to the Commissioners. He has assured me that he is still committed to working evenings and weekends as editor of REV magazine and the Ask Henry Harrison Blog. You can contact him at webmaster@revmag.com.

I am looking forward to hearing from you and I will try an answer all emails in a timely manner.

Ask Henry

Based on the questions being asked online there seems to be a lot of confusion about the new HUD-FHA regulations. Here are the official answers to some of the most common questions.

When do the new HUD-FHA regulations become effective?
Answer: They were supposed to be effective 6/15/2015. The effective date has been postponed until September 14, 2015.

If mortgagees are ready to implement on June 15, will they be allowed to submit cases that use the SF Handbook on or after this date?
Answer: No. Mortgagees must submit cases that use existing FHA policy until the new SF Handbook becomes effective on or after September 14, 2015.

Will FHA publish a “Highlights of Changes” document that summarizes the policy changes contained in Origination through Endorsement?
Answer: No.

Will you publish a new “Harrison’s Illustrated Guide – How to Make an FHA Single Family Appraisal”?
Answer: Yes! I am working on now and plan to have it available in early August. You can make a publication order from Forms and Worms 1-800-243-4545 or www.formsandworms.com. Pre-Order and Save 10%! Pre-order price of $44.95 for orders placed before 9/14/2015. Regular price $49.95

Book Review

Valuing Contaminated Properties-An Appraisal Institute Anthology Vol. II

Edited by Richard J. Roddewig, MAI, CRE
American Institute of Real Estate Appraisers
Chicago, Il, 60607
500+ Pages, Soft Cover; Price $75 (AI price $60

My first reaction to this book was “wow it is big and heavy!" In this day of Google and the Lum Library, who needs to spend money on an Anthology when you can get a custom made bibliography from the Lum Library (312-335-4467). That being said, in my view, an appraiser should not even think about making an appraisal of a contaminated property until they are familiar with the Appraisal Foundation Advisory Opinion AO 9 which is covered in Chapter 1.

Chapter 1, USPAP and the Appraisal of Properties Impacted by Contamination or Environmental Risk, starts with a five page introduction by the editor. It points out, for example, “The distinction between source sites, non-source sites, adjacent sites, adjacent sites and proximate sites is one of the topics covered by AO-9." By the time I finished reading Chapter 1 I was mentally exhausted.

Chapter 2, The Recognized and Generally Accepted Methods for Appraising Property Affected by Contamination and Environmental Risk, starts with another five page introduction by the editor.

After reading and digesting these two chapters, I realized it is not necessary to read the rest of this book as it is an Anthology with 67 articles, divided into 10 chapters, covering many topics. For example, article 10.2, How Australian Appraisers Assess Contaminated Land, will have limited use to most appraisers.
Whereas, chapter 7 consists of 17 pages across 5 articles all of which cover the subject of Mold — A topic which all appraisers should be knowledgeable.

Summary: This Anthology is a definitive compilation of accepted appraisal knowledge written by many authors, selected and interpreted by the editor, who is a valuation expert. If you make or are planning to make appraisals of contaminated property, the cost of this book is a small price to pay for a valuable reference to help you improve your work.


HUD-FHA New Handbook 4000.1 (FHAHB4000.1) and FHA Single Family Housing Appraisal Report and Data Delivery Guide (SFHAP&DDG)

It took the FHA 16 years to replace the long ago outdated FHA Handbook 4155.2 and 4150 (Chapter #4). At that time I wrote a book “How to Make An FHA Single Family Appraisal.” All of that is now history as HUD-FHA has issued two new books that make the old ones and most of the Mortgage Letters obsolete. This is not surprising since a lot has changed in 16 years. Unfortunately, these two new books do not clearly indicate what is new and what is unchanged. This is the first of several articles that will point out some of these changes.

These two handbooks were released on March 18, 2015 to be effective June 15, 2015. Late in April in response to many complaints the effective dates were advanced to September 14, 2015.


Many of the changes are covered in the new FHA Single Family Housing Appraisal Report and Data Delivery Guide (SFHAP&DDG). However, FHA HB 4000.1 covers most of the other types of property that are insured by the FHA.

Environmental (page 391):
The Mortgagee must require corrective work to mitigate any condition that arises during construction that may affect the health and safety of the occupants, the Property’s ability to serve as collateral, or the structural soundness of the improvements.

Comment: The Lender cannot do this unless that appraiser supplies this information in the Site section of the URAR among other options.

Lead-Based Paint (page 71):
Comment: There is new emphasis on what steps lenders must take when a building is built before 1978. However, the appraiser should keep in mind that some houses built after 1978 still might contain lead paint as paint that was stored (often for many years) containing led was used after 1978. Therefore the appraiser should consider using a standard comment in their appraisals that the appraiser did not inspect the property for lead paint contamination

Pre-Foreclosure Sales (Short Sales) – Definition (Page 121):
Pre-Foreclosure Sales, also known as Short Sales, refer to the sales of real estate that generate proceeds that are less than the amount owed on the Property and the lien holders agree to release their liens and forgive the deficiency balance on the real estate.

Stationary Storage Tanks (Page 431):
The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the subject property line is located within 300 feet of an aboveground or subsurface stationary storage tank with a capacity of 1,000 gallons or more of flammable or explosive material. This includes domestic and commercial uses as well as automotive service station tanks.

Proximity to High Pressure Gas Lines (Page 430):
The Appraiser must identify if the dwelling or related property improvement is near high-pressure gas or liquid petroleum pipelines or other volatile and explosive products, both aboveground and subsurface. The Appraiser must determine and report the marketability of the Property based on this analysis. The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the Property is not located more than 10 feet from the nearest boundary of the pipeline Easement.