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Neighborhood vs. Comparable Sales

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by Jason Boston, Sep 15, 2009.

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  1. Jason Boston

    Jason Boston New Member

    0
    Dec 9, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    Indiana
    Is the neighborhood section on page 1 only for Comparable sales?

    If not, then the way the questions are asked on the Market Conditions Addendum, is it possible to have conflicting data.

    Could the entire neighborhood be stable, but for an upper end home and the Comparable Sales, could the market be in a decline?

    Thanks
     
  2. Mike Kennedy

    Mike Kennedy Elite Member

    62
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
     
  3. Jason Boston

    Jason Boston New Member

    0
    Dec 9, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    Indiana
    Thanks! That the way I read it.
     
  4. Mike Kennedy

    Mike Kennedy Elite Member

    62
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
  5. Vegan702

    Vegan702 Senior Member

    0
    Feb 24, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Nevada
    Mike nailed it. I have had several lately where the overall market was in decline, however the homes at the bottom of the market were appreciating/stable due to the increased activity in that area of the market.
     
  6. VegasWayne

    VegasWayne Senior Member

    12
    Nov 15, 2007
    Professional Status:
    Licensed Appraiser
    State:
    Nevada
    Vegan, I've seen increases in the past six months for a couple of large houses in the west and northwest part of town. I also did a condo in Lake Las Vegas that sold for 860,000 a year ago that I just appraised for 129,000, a drop of 85% in on year or about $2,000 a day.
     
  7. DMZwerg

    DMZwerg Senior Member

    0
    Mar 25, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Wisconsin
    I have seen areas where the top of the market is stable, the bottom is somewhat stable, and the middle looks like Swiss cheese, but they don't necessarily appear that way because the number of foreclosures and such are high enough to make all market segments appear to have declined then (partially) recovered. Knowing the sub-markets and interpreting the data is very important.
     
  8. Terrel L. Shields

    Terrel L. Shields Elite Member
    Gold Supporting Member

    245
    May 2, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    The form is an as$. The whole form, not just the MC. The characterization of "neighborhood" is so enigmatic it is rendered pretty much meaningless. Many small towns that were separate communities as late as say the 1970s, absorbed into larger metro areas, retain a mixed 'neighborhood' makeup consisting of retail, duplex, apartment and SFR in a confined area, often less than a Square mile. Within that "market area" or "neighborhood" are older homes, middle aged homes, small homes, and new subdivisions. Over-building in those subdivisions means the property prices have plunged. Meanwhile back at the ranch-the original town-which likely never participated in the run up in prices in the same degree as the outskirts, chugs along.
    It is easy to make the case that the competing neighborhood for these newer houses is a series of often disconnected subdivisions, some with only 4 or 5 lots, sprinkled around a greater community.

    Likewise, a "greenfield" subdivision, surrounded by farm properties, can hardly include those farms as "complimentary uses". again, these kinds of subdivisions are not coherent contigeous parcels, but rather disjointed splotches of toxic McMansions in an otherwise somewhat pristine countryside. I have 2 within 2 miles of my house and they have, respectively, sold 2 and 5 lots over the past 3 years....Both developers are obviously hurting bad. They have cut prices from $65,000 to $35,000 per lot and cannot even get a looker. Neither should have been built. Neither were the HBU of the property. Neither will ever turn a profit for the developer. I would be surprised if both escape being foreclosed on, even though the developers had deep pockets at one time.

    These kinds of "neighborhoods" are no "hood" at all. They defy catagorizations required by Fannie mae.
     
  9. Mike Garrett RAA

    Mike Garrett RAA Elite Member

    13
    Jan 14, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Colorado
    My understanding of the issue is this...

    Page 1 data is the neighborhood, subdivision, or marketing area in general. It would include all one unit housing (single family attached, detached, and condo).

    Page 2 (top) data is COMPARABLE TO THE SUBJECT PROPERTY. If your subject is a single family ranch style home of, say, 1500SF GLA then the offerings and sales would be what you might use in the grid as comps.

    MC Form...the data should be COMPARABLE PROPERTIES, ie, same as used on the top of page 2. This should be consistent with page 2 data for the current period.

    Just yesterday I was discussing this with 34 students in a USPAP update class (they brought it up, not me). I recommended working backwards, that is, starting with the MC form first to establish the trend for comparable properties, Use that data to indicate the comparable listings or offerings and sales for page 2 (top). Then, drop the filters and look at the data for all sales and listings in the neighborhood, subdivision, or neighborhood for all three periods. Now you have support for what you put in the neighborhood section on page one in regards to property values, Supply/Demand, and Marketing Time.

    Granted, not all areas or parts of the country are going to have sufficient data to make the analysis meaningful but at least the appraiser has ANALYZED the market. This analyzing should have been done all along...the MC form merely gives a vehicle to report it in a more clear manner.

    So, to repeat...start with the 1004mc, do page 2 (top) and then page 1, neighborhood section. I think you will grow to appreciate the intend of the form.

    Comments?
     
  10. VolcanoLvr

    VolcanoLvr Senior Member

    5
    Oct 30, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Washington
    Terrel and Mike are both correct.

    My wheels come off the train due to the skitzoid Fannie opinion that all neighborhoods = subject, or vice versa. It isn't so in many cases.

    This process or defined neighborhood works fine in areas where the neighborhood is composed of homogeneous properties, i.e., virtually all the same, like in dense urban areas. Then neighborhood trends may transfer to the subject property.

    But when the neighborhood is heterogeneous, i.e., different types of properties, the marketability and trend of property type A is not necessarily the same as property type B. This is what I deal with constantly, and to what Terrel discusses.

    Our assignment is to appraise a specific property by its characteristics, and by choosing comparables that closely match the subject. That's all that matters. What is the trend of those, or that type, of property?

    That's why the MC form was developed (because appraisers were not doing credible reporting to meet F/F requirements). And it's why the two lines were added to the 2005 version of the F/F forms, among other changes.

    So, yes, the neighboorhood data trend can be different than the subject trend. I may be a lone wolf on this, but I concentrate on the subject and give very little weight to the 'neighborhood' in the way F/F consider it.
     
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