The 1004 MC form & driving by the comparables

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by vanguard, Feb 23, 2009.

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  1. vanguard

    vanguard Member

    0
    Oct 18, 2004
    Professional Status:
    Retired Appraiser
    State:
    Minnesota
    The new forms label the selection in the "Inventory Analysis" and Median Sale & List Price" section as "Comparable Sales". Based on USPAP and the reporting requirements, the appraiser must view the comparables from the street. If they don't then a violation of USPAP has occurred. Based on my interpretation this may require significant drive time if your selection of comparables in each monthly category is substantial. You could have 10-30 Comparable sales in each of the three monthly segments. This may require driving by 30-90 properties which in turn may require extended hours in an effort to view all of the comparable sales. Turn times would have to be discarded in an effort to complete each report. In addition, photos may be necessary which would load up a report with unnecessary file information. I realize that this might be contrived; however, it is a realistic concern for those who wish to be USPAP compliant. I have heard that REL's Valuation has utilized a form similar to this; although, I do not know how successful it has been. I have been thinking about sending a letter off to each of the States Appraisal Boards regarding this concern.
     
    Last edited: Feb 23, 2009
  2. VegasWayne

    VegasWayne Senior Member

    3
    Nov 15, 2007
    Professional Status:
    Licensed Appraiser
    State:
    Nevada
    Where in USPAP does it say that comparables must be viewed? It is not in my copy.
     
  3. TJSum

    TJSum Elite Member

    1
    Nov 12, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Maryland
    The top of the grid on page two states the same thing. Have you been driving all the listings and sales for these and provided photos since the new forms have been in use? I hate the new form just as much as everyone else, but I think you are barking up the wrong tree...
     
  4. Vetteman

    Vetteman Member

    0
    Jan 5, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    I agree with you Robert. There is much about this new form that lacks clear direction. Yet many on this forum are rushing to fill it out, sign it and send it in. Some say they can do it in 10 minutes, some say up to a week. All are arguing about what they are going to charge. An accurate count of "comparable" sales and listings in the neighborhood, as defined on the first page of the report, would need to include 1) a definition of what is considered to be comparable and 2) all the comparable properties sold and listed, both MLS and FSBO, including developer. If you cannot defend those counts, then what you put in the boxes is misleading. Providing misleading information is a violation of USPAP. Until they revise the form, I am filling it out with an asterik in the boxes - * Unable to reliably complete this field due to...
     
  5. Peter LeQuire

    Peter LeQuire Elite Member

    9
    Jan 3, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Tennessee
    The comparables which the appraiser certifies that s/he has viewed are the comparables used in the sales comparison approach in the 1004, not the population of sales/listings that make up the market trends analysis.
     
  6. George Hatch

    George Hatch Elite Member

    17
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    You're confusing Fannie's requirements for their assignments with the (much lower) minimum requirements that apply to all appraisal practice as laid out in USPAP. Fannie's appraisal policies speak to exterior inspection and photos of the direct comparables in the Sales Comparison - USPAP doesn't because that's not a minimum requirement that applies to all appraisal assignments.

    Now if Fannie required appraisers to do exterior inspections of all the sales data used to analyze the market conditions then it would be a different story - USPAP comes into play only because these user-defined requirements are part of the assignment conditions.

    But so far, Fannie isn't asking appraisers to perform inspections on every single listing in a subject's market segment - just those sales presented as direct comparables in the appraisal report. One other thing to remember is that Fannie defines "Comparables" differently for the 1004mc than anywhere else. They refer to properties "the buyers would consider to be comparable", not the "sales that are locationally, physically and functionally the most similar to the subject property" as appears in Cert #7 on the URAR.

    There's a big difference between the two. Really, I think Fannie should have used a different term in the 1004mc.
     
  7. George Hatch

    George Hatch Elite Member

    17
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    BTW, Fannie has already acknowledged the limitations of the databases used by appraisers. They already know they won't be getting medians and FSBOs and that some MLS systems will have better data than others. Seeing as how Fannie has already acknowledged these and other limitations, that I don't see where "misleading" comes into it.

    If you don't want to do it because you aren't getting paid enough it would probably be more honest to simply say that in your report.
     
  8. Vetteman

    Vetteman Member

    0
    Jan 5, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Cert #7 refers to the comparables used in the sales analysis grid, because they are, in the appraiser's opinion, the most similar. There are no other sales that are more similar. Page 2 of the report (at the top) is looking for all comparable sales in the past 12 months, as well as all current comparable listings. I have always assumed that Fannie is looking for data here on comparables that fall within their guidelines, or maybe mine, but where does one draw the line? At what point does a sale or listing become not comparable? When the 2005 forms first came out, I saw this as a vague attempt to gather a little more information on what is happening in the market and treated it as such. Quite frankly I end up only reporting the number of comparable sales and listings that are +/- 15% of my final value estimate.

    The new 1004mc form is obviously a hasty attempt to gather more specific data, most of which is either not available or unreliable. I can't wait until they come up with the 1004cba addendum...the crystal ball approach. If we appraisers could only tell them where the market is going from here. Financial advisers are paid quite handsomely to do that, unfortunately they are always optimistic.
     
    Last edited: Feb 23, 2009
  9. David Beasley

    David Beasley Senior Member

    1
    Dec 12, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Robert, I think you are *way* overthinking this thing. You have to view and photograph the comps and any listings you actually submit in an appraisal report and use to derive your end-use value opinion...you don't have to view and photograph comps contained within a quasi-statistical analysis, which is all the 1004MC is. Were that the case, we'd already be out days on end shooting images of the sales we use to report the SFR sales/age ranges in the neighborhood section of the 1004, as well as the "comps and listings" shown at the top of 1004/Page 2. You aren't driving by and photographing all those now, are you? God bless you if you are, but it isn't needed and certainly isn't required.

    Besides, I don't really think that USPAP is the entity that demands we view and photograph comps used in our reports. I think those specific demands technically come from the agencies that are intended as the ultimate end users: Fannie, Freddie, HUD, VA etc.
     
  10. John Hassler

    John Hassler Senior Member

    0
    Jul 23, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    I've come to the conclusion that the 1004mc will need a solid half page SOW addendum. In most cases I anticipate the 1004mc to be treated much like a request for an unnecessary Cost Approach; that which is not relevant to the appraisal problem but is an assignment condition of the client's.
     
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