"Quantifiable Market-Derived Methods" for adjustments required by FNMA/USPAP

[J Grant]

AI Overview

Yes, the GSEs (Fannie Mae and Freddie Mac) require appraisers to provide adjustment support, particularly for time (or market trend) adjustments, with a new focus on incorporating market data for a minimum of 12 months to demonstrate trends and the reasoning behind the adjustments. This involves showing your work, often with charts or graphs, to explain how the adjustments were determined based on market changes between the comparable sale's contract date and the appraisal's effective date.

Key Aspects of the New Requirements

• Focus on Time Adjustments:
  The GSEs are specifically highlighting the importance of time adjustments in appraisals to reflect the overall market movement.
  
  
• 12-Month Data Requirement:
  Appraisers must base these time adjustments on a minimum of 12 months of data to show market trends accurately.
  
  
• Market-Based Reasoning:
  The adjustments should be derived from properties comparable to the one being appraised and reflect market changes between the comparable sale's contract date and the effective date of the appraisal.
  
  
• Show Your Work:
  Appraisers need to clearly explain their reasoning for each adjustment, with the use of charts or graphs suggested as a helpful tool for communication.
  
  
• Non-Linear Markets:
  If a market is behaving in a non-linear way, the adjustments must reflect this non-linear trend.
  

Why the New Focus?

• Past Issues:
  The GSEs identified issues with appraisers making unsupported or indefensible adjustments in the past, especially regarding time adjustments during the COVID-19 housing boom.
  
  
• Improved Accuracy:
  This updated guidance aims to improve the accuracy and standardization of market analysis in appraisals, ensuring lenders have a clear understanding of the basis for adjustments.
  

How to Ensure Compliance

• Use Data-Driven Analysis:
  Employ data analysis tools to identify trends and support time adjustments with robust data.
  
  
• Document Your Process:
  Clearly document your market analysis methods and the data sources you utilized to determine adjustments.
  
  
• Explain Adjustments:
  Provide fact-based and objective comments within the appraisal report to detail your work and the data used to support your adjustments.

 

[DWiley]

AI Overview

Yes, the GSEs (Fannie Mae and Freddie Mac) require appraisers to provide adjustment support, particularly for time (or market trend) adjustments, with a new focus on incorporating market data for a minimum of 12 months to demonstrate trends and the reasoning behind the adjustments. This involves showing your work, often with charts or graphs, to explain how the adjustments were determined based on market changes between the comparable sale's contract date and the appraisal's effective date.

Key Aspects of the New Requirements

• Focus on Time Adjustments:
  The GSEs are specifically highlighting the importance of time adjustments in appraisals to reflect the overall market movement.
  
  
• 12-Month Data Requirement:
  Appraisers must base these time adjustments on a minimum of 12 months of data to show market trends accurately.
  
  
• Market-Based Reasoning:
  The adjustments should be derived from properties comparable to the one being appraised and reflect market changes between the comparable sale's contract date and the effective date of the appraisal.
  
  
• Show Your Work:
  Appraisers need to clearly explain their reasoning for each adjustment, with the use of charts or graphs suggested as a helpful tool for communication.
  
  
• Non-Linear Markets:
  If a market is behaving in a non-linear way, the adjustments must reflect this non-linear trend.

Why the New Focus?

• Past Issues:
  The GSEs identified issues with appraisers making unsupported or indefensible adjustments in the past, especially regarding time adjustments during the COVID-19 housing boom.
  
  
• Improved Accuracy:
  This updated guidance aims to improve the accuracy and standardization of market analysis in appraisals, ensuring lenders have a clear understanding of the basis for adjustments.

How to Ensure Compliance

• Use Data-Driven Analysis:
  Employ data analysis tools to identify trends and support time adjustments with robust data.
  
  
• Document Your Process:
  Clearly document your market analysis methods and the data sources you utilized to determine adjustments.
  
  
• Explain Adjustments:
  Provide fact-based and objective comments within the appraisal report to detail your work and the data used to support your adjustments.

I am still looking for a citation of the requirement that you asserted

 

[J Grant]

I am still looking for a citation of the requirement that you asserted

If there is not citation, then there is not one; however, AI returned the result about it being a requirement and several clients have stated it is wrt illustrating support for adjustments or market conditions.

 

[TerryRohrer]

AI Overview

Yes, the Fannie Mae and Freddie Mac (GSEs) require adjustment support in appraisal reports, with new requirements in effect from February 4, 2025. Appraisers must now provide more detailed market analysis, explain and support their adjustments with robust data like paired sales or home price indices, and consider non-linear time adjustments based on a minimum 12-month trend. The goal is to ensure the sales comparison approach and resulting adjustments are well-supported, transparent, and reflect current market conditions accurately.

Clicked on your post, you are the same toxic toad as ever.

Miss Disinformation, it is hilarious that, as a a leading critic of AI, you rely on AI to mask your inability to read and comprehend plain English while defending the infallibility of your vast experience and apparently trying to justify your false statement referenced above. The fact remains that you lack the emotional maturity to post honestly, regardless of the topic at hand, and you would achieve much greater contribution by being silent on most matters herein.

 

[Fernando]

AI Overview

Yes, the GSEs (Fannie Mae and Freddie Mac) require appraisers to provide adjustment support, particularly for time (or market trend) adjustments, with a new focus on incorporating market data for a minimum of 12 months to demonstrate trends and the reasoning behind the adjustments. This involves showing your work, often with charts or graphs, to explain how the adjustments were determined based on market changes between the comparable sale's contract date and the appraisal's effective date.

Key Aspects of the New Requirements

• Focus on Time Adjustments:
  The GSEs are specifically highlighting the importance of time adjustments in appraisals to reflect the overall market movement.
  
  
• 12-Month Data Requirement:
  Appraisers must base these time adjustments on a minimum of 12 months of data to show market trends accurately.
  
  
• Market-Based Reasoning:
  The adjustments should be derived from properties comparable to the one being appraised and reflect market changes between the comparable sale's contract date and the effective date of the appraisal.
  
  
• Show Your Work:
  Appraisers need to clearly explain their reasoning for each adjustment, with the use of charts or graphs suggested as a helpful tool for communication.
  
  
• Non-Linear Markets:
  If a market is behaving in a non-linear way, the adjustments must reflect this non-linear trend.

Why the New Focus?

• Past Issues:
  The GSEs identified issues with appraisers making unsupported or indefensible adjustments in the past, especially regarding time adjustments during the COVID-19 housing boom.
  
  
• Improved Accuracy:
  This updated guidance aims to improve the accuracy and standardization of market analysis in appraisals, ensuring lenders have a clear understanding of the basis for adjustments.

How to Ensure Compliance

• Use Data-Driven Analysis:
  Employ data analysis tools to identify trends and support time adjustments with robust data.
  
  
• Document Your Process:
  Clearly document your market analysis methods and the data sources you utilized to determine adjustments.
  
  
• Explain Adjustments:
  Provide fact-based and objective comments within the appraisal report to detail your work and the data used to support your adjustments.

With 1004MC, appraiser can interpret differently from the data.
For example, if first six months showed median at $1 million.
And the later six months show median of $800,000, do you call the trend decreasing?
I call market stable based on recent six months. Or you can argue prices have decreased.

 

[Dublin ohio]

With 1004MC, appraiser can interpret differently from the data.

Especially, by you own admission you expand the neighborhood to get enough data to populate the 1004mc to your liking

 

[DWiley]

...however, AI returned the result about it being a requirement and several clients have stated it is wrt illustrating support for adjustments or market conditions.

Did you actually read what you posted?? I ask because you posted so quickly and because it does not say there is such a requirement.

 

[Terrel L. Shields]

AI returned the result about it being a requirement and several clients have stated it is

AI is reading the internet posts and resolving that into their own answer. Therefore, again, garbage in, garbage out. But despite no FNMA REQUIREMENT to go to the detail expressed, that does not mean mortgage companies and reviewers are not demanding such a rule exists and if you don't do it their way, it gets thrown back in your face. It's no hill to die on. It will take far more time to rebut them, make them show where the requirement is, than it will be to simply provide charts etc. to make them happy.

As for programs...why? Are appraisers so math illiterate that they cannot even do a simple single linear regression. Do they even know what that is? I mean like an X Y plot. If you do that in Excel, then you can have it write the formula and a plot of price vs SF, as an example will yield a number that is the typical adjustment. Or you can create a simple sensitivity chart to do the same. Been one floating around this forum for 20 years or more.

 

[J Grant]

Did you actually read what you posted?? I ask because you posted so quickly and because it does not say there is such a requirement.

AI Overview

Yes, the GSEs (Fannie Mae and Freddie Mac) require appraisers to provide adjustment support, particularly for time (or market trend) a

It said require appraisers to provide.........( rather than there is a requirement _)

 

[DWiley]

We see the shift of requiring "support" specified as an illusraiton chart or graph as elevating that over the expeirence of applying other methods in addition to that, exp if it shows a different result.

AI Overview

Yes, the GSEs (Fannie Mae and Freddie Mac) require appraisers to provide adjustment support, particularly for time (or market trend) a

It said require appraisers to provide.........( rather than there is a requirement _)

LOL - Now that is a back pedal worthy of a politician.

Your assertion was that support has to be in a certain form (chart or graph).

Of course adjustments have to be supported, that is a fundamental USPAP requirement. What the GSEs added was the requirement for the report to include support for market conditions and time adjustments (or lack thereof). They did NOT say that the support had to be in any specified form or format.