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When it comes to USPAP and neighborhood analysis, many appraisers think such an analysis is a waste of time. After all, every house in the US is near shopping, schools, houses of worship, entertainment, and recreation, right? But what does Fannie Mae say about neighborhood analysis? She makes her demands really clear in section B4-1.3-03, Neighborhood Section of the Appraisal Report, under “Neighborhood Analysis”. In fact, there are 36 criteria she looks for in this analysis in addition to merely highest and best use. In fact, in this podcast, we cover five of those 36 just to make sure you’re familiar with them.
So, why do some appraisers think USPAP and neighborhood analysis are a waste of time? Well, first of all they are entitled to their opinions, right? Second of all, there is not enough space on that archaic and poorly designed 1004 form. Third, they think the neighborhood section is merely the location for more boilerplate. In reality, it is not such a location. In fact, if the appraiser answers all 36 of Fannie Mae’s questions, it is going to be really hard for someone to call out an appraiser on bias. How so? If the appraiser analyzes the neighborhood, and then answers all 36 of those questions, it will be obvious s/he has considered all the options. When that happens, there is no bias.
So, when we appraisers pay attention to USPAP and neighborhood analysis, we are really (1) giving the client a clear picture of what’s happening in the neighborhood. And (2) we are working to cover our assets, too!