Words matter in real estate appraisals
The scrutiny surrounding word choice within appraisals has reached an all-time high. With the release of the Property Appraisal and Valuation Equity (PAVE) report, government agencies, lenders, GSEs, and appraiser regulatory bodies are providing more guidance and oversight on this topic.
Understandably, many appraisers are uncertain about which phrases and words qualify as subjective terminology. If you find yourself confused by requests to revise phrases or words in your appraisal report deemed subjective, our update this month offers additional guidance to help you avoid revisions in this category.
The importance of objective language
Fannie Mae, Freddie Mac and lenders continue to emphasize the importance of ensuring objectivity throughout all appraisal reports to avoid bias and maintain fairness for borrowers. The USPAP Ethics Rule in addition to the new advisory opinions AO-39 and AO-40 provide guidance on objectivity and subjective terminology by addressing anti-discrimination language and an appraiser’s ethical obligation not to engage in discrimination. Consider the following examples of phrases to avoid subjective terminology and alternative comments to create more objective appraisal reports.
Examples:
Subjective terminology to avoid:
“Desirable” — Desirable is a personal opinion and might not mean the same thing to one person as it does to another person.
Objective alternative:
“The property’s kitchen and bathrooms were renovated in the last year.” or “The property has an inground pool..” — State factual information to objectively describe amenities, features, and characteristics of the property.
Subjective terminology to avoid:
“Convenient” or “Within walking distance” — This is subjective and could be perceived as bias against people with physical limitations.
Objective alternative:
“Within 5 blocks of shopping and public transportation” — Stating the actual distance is objective and factual.
Six easy steps to avoid subjective terminology:
- Review our risky text pre-check rule. During submission of your report the risky text rule flags any word or phrase that may raise concerns for our reviewers, allowing you to address potential issues early. When a word is flagged, take a moment to review it and consider replacing it with a more objective, fact-based statement.
- Do not copy and paste MLS sheets or MLS remarks in the appraisal report. MLS sheets and remarks used to market the property often include subjective terminology to describe the appeal and location.
- Stick to the facts. Finding a way to be descriptive with objective and fact-based language is necessary.
- Review and familiarize yourself with Fannie Mae’s Unacceptable Appraisal Practices and Freddie Mac’s Unacceptable Appraisal Practices which include guidance on fair housing, and some prohibited phrases.
- Update appraisal software template comments to ensure prohibited or subjective comments and words are not included.
- Pre-screen reports prior to delivery. Conduct a word search of common subjective terminology words and consider how a reader of the report might perceive the words used in the report.
