Tips for Dealing with Complex Residential Appraisals
The residential lending appraisal landscape is poised to change with the implementation of appraisal waivers from Fannie Mae and Freddie Mac. Thanks to the Uniform Appraisal Dataset, Fannie and Freddie now have a massive database of residential sales across the United States and are starting to use automated valuation models (AVMs) to replace residential appraisals. We don’t know full details about these programs at the time of writing but the future is clear: there will be fewer simple appraisals going forward. The lending appraisals left will be complex assignments not easily handled by AVMs. Now is the time to move into complex residential assignments.
This article is not intended to be an in-depth examination of the many ways a residential appraisal can be complex nor how to solve every complex appraisal problem you encounter. Instead, the purpose of this article is to get you thinking about the issues involved with complex residential assignments. I will offer two definitions of complex assignments, discuss categories of complexity, provide examples I’ve encountered in my business recently, mention business considerations, offer some problem-solving techniques, and will break down in detail an assignment with a lot of issues. Finally, I offer advice for increasing your skills with complex residential assignments.
What is a Complex Residential Appraisal?
The FDIC uses the following definition for complex residential appraisals.
“Complex 1-to-4 family residential property appraisal means one in which the property to be appraised, the form of ownership, or market conditions are atypical.” 
Atypical is the key word. But what is an “atypical” assignment?
The California Bureau of Real Estate Appraisers (BREA) uses a slightly different definition. From the Fall 2015 edition of The California Appraiser:
“Q: What constitutes a “complex” assignment?
A: This is a report in which the scope of work had to be expanded to address some unusual property or ownership attribute.
Examples of “complex” are:
- A unit in a community land trust might provide an example involving ownership type.
- A house abutting an auto body shop might be an example of an external complication that might have a negative impact on value.
- A property in which you have to pass through the kitchen to get to the only bathroom would reflect a complication in functional utility.
These are the kinds of properties that help the Bureau of Real Estate Appraisers (BREA) decide whether a residential (AL) upgrading to a certified residential (AR) can handle the more demanding assignments.”
The BREA definition has the very practical idea that expanding an assignment’s scope of work from the typical assignment implies complexity. However, like the FDIC definition, there is a relative aspect. If most properties in an area are custom homes on large acreage lots, the typical assignment in that area is what most of us would consider at least somewhat complex.
 FDIC Law, Regulations, Related Acts 2000-Rules and Regulations, Part 323-Appraisals