I recently had the opportunity to spend several days with agents and brokers at the Texas REALTORS® Shaping Texas Conference, including two hours together discussing the changes coming with UAD 3.6.
The conversations didn't stop when the class ended. Throughout the conference, I continued hearing many of the same practical questions:
- How long will the appraisal take?
- Should we allow more time?
- What should I tell my client?
- What information will be needed?
Those are the questions that matter. Agents and brokers don't need to learn how to write the new appraisal report. But understanding what is changing, what to expect and how to prepare your clients can reduce surprises and make the transition easier.
Expect More Time on Appraisals
One of the first differences your clients may notice with UAD 3.6 is that the appraiser may spend more time on the property.
The new reporting format requires considerably more detailed property information. Depending on the property, the appraiser may need additional time to document individual levels, rooms and areas, improvements, amenities, site characteristics and other property features.
Prepare your clients for that.
If an appraisal appointment has historically taken a certain amount of time, don't assume the next one will be the same. A longer property visit doesn't mean there is a problem with the property. There is simply more information to collect and report.
The additional time may not end when the appraiser leaves the property. Appraisers and software providers are adjusting to a substantially different reporting format, while appraisal management companies (AMCs), lenders and underwriting departments are adapting their review processes and systems.
During the transition, assume the appraisal process may take longer and plan accordingly.
That doesn't mean every appraisal will take longer. But this probably isn't the time to build a transaction around the shortest turnaround you've experienced.
Talk with the lender early about anticipated timing and allow reasonable time in the transaction.
Nov. 2: Help Your Client Ask the Right Question
Beginning Nov. 2, Fannie Mae and Freddie Mac will require the UAD 3.6 format for new appraisal reports submitted through their appraisal data system, the Uniform Collateral Data Portal (UCDP). However, Nov. 2 should not be viewed as the day everyone suddenly has to switch. Lenders can begin making that transition before the mandatory date.
Lenders may order UAD 3.6 appraisal reports now. They do not have to wait until Nov. 2.
Related: Nudge Your Lenders to the Starting Line Before Nov. 2
Agents and brokers don't need to understand or manage the submission process. The lender does. But if there is any question about whether the loan timing could extend across the Nov. 2 transition, encourage your borrower to ask the lender one simple question: “Which appraisal report format are you ordering?”
Also, remember that completion of the appraisal report isn't the end of the process. After the appraiser delivers the report, reviews by the AMC and lender, underwriting and the lender’s submission through UCDP to Fannie Mae or Freddie Mac still follow. Those reviews may also result in requests for clarification or revision. Each step takes time, and many of those systems and workflows are also adjusting to UAD 3.6.
Let the lender determine the appropriate appraisal format and manage those requirements. The important thing for the borrower is to ask the question early enough to avoid a surprise.
Currently, the Nov. 2 requirement applies to conventional lending involving Fannie Mae and Freddie Mac. The FHA has announced that it is adopting UAD 3.6 but has not yet announced a mandatory implementation date. Other government lending programs are expected to transition in time. Until their requirements are announced, don't assume the Nov. 2 Fannie Mae and Freddie Mac date applies to VA or USDA loans.
Today’s Listing Becomes Tomorrow’s Market Data
Although the appraiser typically observes the subject property, we generally have not observed the interiors of the comparable sales.
Much of what can be learned about a comparable comes from the MLS, public records, photographs, transaction participants and other available sources.That means the quality of the information preserved with a transaction matters.
A listing may say a property was “updated.” But what does that mean? Were the kitchen cabinets replaced or painted? Was the HVAC system replaced? Was the bathroom completely renovated or were fixtures changed? Was the roof covering replaced or repaired?
Those distinctions matter to anyone trying to understand that property and transaction later.
The same is true of things that negatively influenced a sale. Perhaps the property needed significant repairs. Maybe there was a location influence that isn’t obvious from the photographs. Perhaps concessions or unusual transaction circumstances affected the sales price.
Accurate market data includes the good, the bad and the unusual.
Leave Some of What You Know Behind
Think about how much you know about a property and transaction on the day it closes.
Six months later, much of that knowledge may be gone.
If your MLS allows additional closing remarks, notes, documents or supplements, consider using them to preserve meaningful information about the transaction.
What improvements were completed and when? Were there concessions? Were there unusual circumstances affecting the transaction? Was there something positive or negative about the property that influenced the sales price? You know more about that transaction at closing than almost anyone researching it later will know. Leave some of that knowledge behind.
Once your listing closes, it becomes market data that agents, brokers, appraisers, lenders and others may rely upon when analyzing future transactions. Better information today creates better market data tomorrow.
Specific Updates Beat ‘Updated’
One of the easiest ways to improve property information is to replace general descriptions with specifics. Instead of: “Beautifully updated throughout,” how about:
- 2024: Kitchen remodeled, including cabinetry, countertops and appliances.
- 2022: HVAC system replaced.
- 2021: Primary bathroom remodeled.
- 2019: Roof covering replaced.
You don’t need to determine what those improvements contribute to market value. That’s the appraiser’s job. Provide the facts. The appraiser is responsible for researching, analyzing and determining what effect, if any, that information has on the appraisal.
That distinction is important.
An Appraisal Packet Is About Information
An appraisal packet, provided by the agent to the appraiser, can be a useful way to make information available that may not otherwise be readily apparent. It might include a detailed list of improvements to the subject property, relevant documentation and information considered when pricing the property.
The packet might also include comparable transactions that you believe may be useful to consider. Don’t simply give addresses. Again, share your knowledge. What do you know about those sales? Was there something particularly positive that influenced a sales price? Was there something negative? Did a property require repairs? Were there unusual concessions or circumstances surrounding the transaction? Do you know something important that isn't reflected in MLS?
If you know it, include it. And include information regardless of whether you think it supports a higher or lower value.
Providing a comparable doesn't mean the appraiser must use it. Providing information doesn't determine an adjustment or value conclusion.
You provide the facts. The appraiser performs the analysis. That keeps everyone’s role exactly where it belongs.
Related: Download the one-page "Effective Communication for Accurate Appraisals"
When an Appraiser Calls, Please Call Back
Sometimes information simply isn't available in the MLS, public records or other sources. That’s when an appraiser may reach out to an agent who participated in a transaction.
If you receive that call or email, please respond as soon as you reasonably can.
The question may involve condition, improvements, concessions, transaction circumstances or another fact necessary to understand the sale accurately.
Someone else’s transaction may be waiting for your answer.
The appraiser calling you may not be working on one of your transactions. One of your previous sales may now be relevant market data in another appraisal. A timely response can help keep another consumer’s transaction moving. Someday, an appraiser working on your client’s transaction may be waiting for that same response from another agent.
It’s a small professional courtesy that contributes to better information throughout the marketplace.
Same Appraisal. New Reporting Format.
The appraisal report is changing dramatically, but the fundamental responsibilities of the appraiser are not.
Appraisers remain responsible for researching and analyzing relevant market data, developing credible assignment results and maintaining the independence and objectivity required of the profession.
Your role is not to assume any of those appraiser responsibilities. Nor is it to develop an opinion of value for the appraisal.
What has become increasingly important is the quality and specificity of the property and transaction information you make available in the marketplace. UAD 3.6 replaces the familiar collection of legacy appraisal forms with a dynamic reporting structure containing substantially more detailed property information.
When you receive your first UAD 3.6 report, don't be surprised when it doesn't look like the appraisal reports you've been seeing for years.
What Can You Do Now?
You don't need to become an expert in UAD 3.6 to prepare for it.
- Prepare your clients for the possibility of a longer property visit, and allow reasonable time for the entire appraisal process. Remember that delivery of the appraisal report is not the end of the process. AMC and lender reviews, underwriting and the lender’s submission through UCDP to Fannie Mae or Freddie Mac still follow. Those reviews may also result in requests for clarification or revision.
- Encourage borrowers to talk with their lenders about appraisal and loan processing timelines and, as Nov. 2 approaches, which appraisal report format is being ordered. Remember, lenders can order UAD 3.6 reports now.
- Provide specific property information rather than general descriptions. Preserve meaningful information when your listings close. Consider providing an appraisal packet containing factual information about the subject and relevant transactions.
- When an appraiser contacts you about one of your previous sales, return the call when you can. Another consumer’s transaction may depend on information only you have.
Agents, lenders and appraisers have different responsibilities, and those boundaries are important. But we all rely on good information.
The information created during today’s transaction becomes part of the market data used in tomorrow’s transaction. The more complete and accurate that information is, the better equipped all of us are to serve our clients and consumers.
UAD 3.6 is a major change in appraisal reporting. We have an opportunity to prepare for it rather than simply react to it.
Let’s use it.
