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Financing concessions and USPAP! More on this? Haven’t we heard enough on concessions, cash equivalency, and stuff they don’t teach us in appraisal school?! If you listen to what Fannie and Freddie have to say on these topics, the answer would have to be an emphatic “NO!”. Why? Because Fannie and Freddie continue to tell us we are not making the necessary adjustment when we need to. If we can’t believe Fannie and Freddie, who can we believe, right?
Financing concessions and USPAP are real issues! When it comes to making adjustments, any adjustments for that matter, education is the key. We may not make the necessary adjustments because we don’t know we are supposed to make them. Or maybe we don’t know how to make them. Well, education solves those problems. And this education is easy-to-access, as well as easy-to-afford. So, what’s stopping you from getting the education you need?!
As you know, NAR settled the Sitzer-Burnett case. And this case, in part, dealt with financing concessions. Now, is the party who pays the buyer’s broker’s brokerage commission granting a sales or financing concession? Or, is that party merely negotiating the best purchase and sale deal they can? How you, the appraiser, choose to answer those questions is important. One answer will require a sales financing adjustment. One answer will not. But there is no one-size-fits-all response. So it will be necessary to do the analytics on this question for each and every assignment. Critical thinking is a hallmark of a real estate appraiser. So, think critically about your answers to the financing concessions question. Your answers will affect how you make a living.
And don’t forget to make sure your E&O insurance is up-to-date. If you answer the above critical thinking question properly, you won’t need legal counsel to get you out of a jam!