1004mc argument with reviewer

[sickofit]

Hello my fellow intelligent appraisers. I am in the mids of a back and forth argument with a reviewer at an AMC about what goes on the 1004mc and top of page 2. (yup same ole same ole argument). The reviewer went on to say that Fannie Mae just redefined what goes on the top of page 2 and 1004mc. The claim is that it should be comps that are in the "immediate neighborhood". My argument is it should be comps in the "neighborhood defined by the neighborhood boundaries, which are determined by the appraiser based on market evidence." According to the Reviewer, Fannie Mae just release answers to this question. I looked everywhere and don't see anything that says "immediate neighborhood". Does anyone else know about this apparent change? TIA

 

[Terrel L. Shields]

http://appraisersforum.com/showthread.php?t=204381

check in the Fannie Freddy forum ...on-going debate

 

[sickofit]

Thank you I did read those. However my issue is not if page 1, top of 2, and 1004mc should be the same. My issue is what is the "neighborhood". The review is telling me the neighborhood is basically the subdivision. My argument is that a neighborhood is defined by the boundaries that I the appraiser call out. This is all stemming from the fact that I am working with a very small town and called out the boundaries to spread over 2 miles and have included a comp that is about 2miles away and said that it is still within the neighborhood boundaries and included it in the 1004mc. So the reviewer is asking me to take it out of the 1004mc because its beyond her perception of what the "neighborhood" is defined as. So she said Fannie Mae defined the neighborhood as the "immediate neighborhood" or subdivision I guess. That is what I am trying to figure out.

 

[hastalavista]

My issue is what is the "neighborhood". The review is telling me the neighborhood is basically the subdivision. My argument is that a neighborhood is defined by the boundaries that I the appraiser call out.

(my bold)

You are correct; you win the argument.

 

[sickofit]

LOL - Denis. OF course Im right. LOL. hehe.

I pulled out the Fannie Mae sellers guide and looked everywhere for the word "immediate neighborhood" and found nothing.

So just to make my self better understand..The only change that Fannie Mae is now saying is that page 1 (trends), top of page 2, and the 1004mc should all be the same, right? Just want to make sure I understand exactly what this new update is so I can better argue my point.

 

[hastalavista]

My argument is that a neighborhood is defined by the boundaries that I the appraiser call out.

You are right, but I should have qualified my answer.
The term "neighborhood" has a definition. I describe my neighborhood and the competitive market for my assignments. The "neighborhood" may be the immediate area and could be just the subject's tract (not usually, but could be). The Competitive market is where I go to find my comps; it is from this area that I populate the 1004MC.

Here is my description of the neighborhood and competitive market for an assignment I'm working on right now:

The Dictionary of Real Estate Appraisal (4th ed.) defines the term "neighborhood" as:
A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.
The neighborhood boundaries are: Foothill Rd (W), Muirwood Cir-Muirwood Park (N), Interestate 680 (E), and Los Positas Blvd (S).

The competitive market is where similar properties compete against one another for the same buyer pool. "Competitive Market" is defined as:
The geographic or locational delineation of the market for a specific category of real estate, i.e., the area in which alternative, similar properties effectively compete with the subject property in the minds of probable, potential purchasers and users.
The competitive market boundaries are: Foothill Rd (W), Stoneridge Dr (N), the Interstate 680 (E), and Ashwood Dr-extended (S).

Sometimes my neighborhood and competitive market are the same. But many times, the competitive market is larger than the neighborhood (the neighborhood is contained within the competitive market).
I should note that Fannie implies that it defines the "neighborhood" as the competitive market. I'm pretty clear in what I do in my report (a rose, by any other name...) so there is no confusion.

The significant question is this: You may have to go 4-miles out to get comparables for your appraisal, but is that really where a buyer is going to purchase his/her substitute home for the subject?
It is possible that your 1004MC will have zero data; and, because there are no sales in the neighborhood/competitive market. You have to go to a competing market and get the sales. But you should never expand your 1004MC just to populate the data. The fact that the 1004MC has little (or no) data is the strongest argument one can make for (a) going as far away as necessary to find something similar, or (b) going back more than 12-months within the competitive market to find something similar.

 

[hastalavista]

So just to make my self better understand..The only change that Fannie Mae is now saying is that page 1 (trends), top of page 2, and the 1004mc should all be the same, right? Just want to make sure I understand exactly what this new update is so I can better argue my point.

Yes; for it is willed where what is willed must be! (according to them).

 

[sickofit]

This is where our argument is, exactly. I keep telling this review that my competitive neighborhood is the same as my neighborhood and is still within my boundaries therefore should be on the 1004mc and the reviewer keeps stating that a competitive neighborhood should NOT be on the 1004mc. He keeps stating that the neighborhood area is the tract or subdivision and that's what should be included in the 1004mc.

 

[hastalavista]

You might want to sit through and watch the 1004MC training video on the website (Efannie.com) just to make sure they haven't slipped in that term in their presentation (I watched it again a few months ago; I don't recall them defining the neighborhood as the "tract").

Good luck!

Oh, and you've probably already thought of this, but I'll throw it out:

Let's assume that your client won't budge but you don't want to lose the client over this; some hills are worth dying on, some are not. What can an appraiser do?

IMO, the appraiser can
1. explain in the addendum the contradiction and conflict between the client's interpretation and the appraiser's,
2. state that the form-portion of the report is being completed consistent with the client's interpretation,
3*. state that the report also includes a supplemental analysis that is consistent with the appraiser's understanding, and
4. since this item is fully disclosed and both sets of analyses are provided, the client and any intended user can fully understand the market dynamics affecting the subject and that were considered in this appraisal analysis.


* For what it is worth, I supplement every report I do with a 4-6 page market analysis. Sometimes, the data on the 1004MC is too limited, so I would need to supplement that form anyway. The reason I do it is because I want to make it very clear how I analyzed the market and provide support for my market conclusions.
Some other appraisers on this forum do something similar.

Good luck!

 

[sickofit]

Thank You Denise, I think I will do it that way. This is over 1 comparable. Its crazy. 1 comparable is over a 1 mile so they think it shouldn't be in the 1004mc. This is where the entire argument falls. I do like the idea of changing the report and showing an additional addendum showing how it really should be and explaining that I changed it for the AMC. Of course it will be much more professional than my ranting here. Thank you so much for the idea. Have a great rest of the weekend.