1004MC Help Please

[JeffSH]

"This form is not the best tool for demonstrating market conditions since there are usually too few comparable sales to produce any meaningful trends from the information in the grid. In order to form the best picture possible, the search criteria includes all ranch sales. This data is also reported at the top of pg 2. The text addendum includes additional market conditions data.

Home prices increased tremendously in 2020 and 2021 during the pandemic and as a result of the lowered interest rate and severe shortage of inventory. Interest rates are currently increasing and there is uncertainty about a coming recession, but the market remains strong. The number of homes for sale remains low compared to the number of buyers, but days on market and supply are increasing. Overall it is still a sellers market, but the market is cooling and recent prices are stable. It is recognized that the MC form shows a sharp decrease in prices in the past 3-months, but there have only been 4 sales. The market slows down during the winter. More detailed graphs are attached."

Anyone has permission to steal and modify my writing if they like it.

 

[Fernando]

Don't need to think so hard.
Each appraisal is unique so you have to find sufficient relevant data to get a price trend.
If you don't know how then you need to think outside the box.
That's the Fernando Way and I never had an issue with reviewers.

 

[Fernando]

"This form is not the best tool for demonstrating market conditions since there are usually too few comparable sales to produce any meaningful trends from the information in the grid. In order to form the best picture possible, the search criteria includes all ranch sales. This data is also reported at the top of pg 2. The text addendum includes additional market conditions data.

Home prices increased tremendously in 2020 and 2021 during the pandemic and as a result of the lowered interest rate and severe shortage of inventory. Interest rates are currently increasing and there is uncertainty about a coming recession, but the market remains strong. The number of homes for sale remains low compared to the number of buyers, but days on market and supply are increasing. Overall it is still a sellers market, but the market is cooling and recent prices are stable. It is recognized that the MC form shows a sharp decrease in prices in the past 3-months, but there have only been 4 sales. The market slows down during the winter. More detailed graphs are attached."

Anyone has permission to steal and modify my writing if they like it.

It's great commentary for general discussion.
Yet the appraiser still needs to get the data to draw the conclusions. And some appraisers have problem with that.

 

[JeffSH]

It's great commentary for general discussion.
Yet the appraiser still needs to get the data to draw the conclusions. And some appraisers have problem with that.

If you are in a major city, your MLS might have some sort of built-in graphing. You just have to figure it out. We even have a tool that produces co-star like reports, but nobody uses it. I suspect it's because they just don't know about it. Check out all the tools and links in your MLS. You might find something good.

 

[Tawfik Ahdab]

Jeff wrote:

“When I use it, I include all sales from the neighborhood and not just the comparable sales. This usually makes the form better at demonstrating what the market is doing.”

With all respect. the 1004MC form references COMPARABLE sales or listings only. Providing anything other than or over that is a misuse of the form. Even the creator of the form itself- Fannie - has given up on it as a meaningful market indicator. Why would anyone try to ennoble or redeem that poorly-designed and frequently misleading secondary market supplement with information that isn’t even requested? If you want to demonstrate the market trend, do so in a market conditions addendum. Trying to fit a square peg in a round hole is as futile as the information to be gleaned from the 1004MC form itself absent the broader market context within which it must be considered.

 

[Fernando]

Jeff wrote:

“When I use it, I include all sales from the neighborhood and not just the comparable sales. This usually makes the form better at demonstrating what the market is doing.”

With all respect. the 1004MC form references COMPARABLE sales or listings only. Providing anything other than or over that is a misuse of the form. Even the creator of the form itself- Fannie - has given up on it as a meaningful market indicator. Why would anyone try to ennoble or redeem that poorly-designed and frequently misleading secondary market supplement with information that isn’t even requested? If you want to demonstrate the market trend, do so in a market conditions addendum. Trying to fit a square peg in a round hole is as futile as the information to be gleaned from the 1004MC form itself absent the broader market context within which it must be considered.

The point of the form is to get a trend on prices. If the best way is to get all sales in neighborhood, I do that too. No problem with reviewers.

 

[shrubberyvaluation]

The point of the form is to get a trend on prices. If the best way is to get all sales in neighborhood, I do that too. No problem with reviewers.

Fernando is a rebel that likes to mislead his clients, which just makes him like Fannie Mae.

 

[shrubberyvaluation]

For those that go against the instructions of the 1004MC and use all sales and listings regardless if they are comparables do you cross out the part that says "Sales and listings must be properties that compete with the subject property...?"

 

[Carnivore]

You could try researching competing neighborhoods. Maybe combine the outputs of several competing neighborhoods which collectively could be described as being part of the same market segment insofar as trend analysis goes.

I quoted your post because it says a lot.

I agree, and so does FNMA. Where appraisers have to be careful is expanding your market area just to get a more recent sale or something more similar in physical characteristics. FNMA actually says not to do that. Like you said and FNMA says if a comparable is in another Hood and these Hoods compete is not just acceptable, no you must do that.

It is inaccurate for anyone to say across the board the 1004mc is worthless. The 1004mc is a tool for an Appraiser to use along with other tools.

Others above had said that if the data/comparable sale are weak or low then you must develop Supplemental Statistics.
To the OP the attached is worth downloading and easier to use if you print a hard copy

On-Line there are other sources of more detailed 2004mc Instructions. This link is very Good . The Instructions are 36 pages and detailed.

https://icapweb.org/uploads/Reporting_Market_Conditions_Final_V1.0_1418844119.pdf

 

[jay trotta]

To many variables when jumping neighborhood to neighborhood.

Fannie Mae expects the appraiser and the lender’s underwriter to be aware of the varying conditions that characterize different types of neighborhoods. Conditions that are typical in certain neighborhoods may not be present in other neighborhoods. This does not mean that the existence of certain types of conditions or characteristics are unacceptable; rather, it is an indication that they must be viewed in context with the nature of the neighborhood in which the security property is located. For example, some neighborhoods consist of a variety of property types that have different uses. It is not uncommon to find properties that have mixed-uses, such as residential properties that also have child-care facilities, doctor or dental offices, and other types of business or commercial uses. The presence of mixed-use properties or a variety of property types within a neighborhood should be viewed as a neighborhood characteristic that the appraiser considers when performing the neighborhood analysis and describing the neighborhood boundaries.

The appraiser must consider the influence of market forces, including but not limited to, economic, governmental, and environmental factors on property values in the neighborhood. Economic forces that must be considered include such things as the existence of vacant or boarded-up properties in the neighborhood, and the level of essential local support services. Examples of governmental forces that should be taken into consideration include the regulations, laws, and taxes that are imposed on properties. Environmental forces that must be considered include, among other things, the existence of a hazardous waste site on or near the property, and the proximity of a property to an airport. Certain other factors that are not appraisal factors, such as the racial or ethnic composition of a neighborhood or the age or sex of the individuals who live in a particular neighborhood, must not be considered in the valuation process.

IMO- the last line (sentence for the grammar freaks) appears to have been part of the practice for years and would appear to be supported by the 1st paragraph. IMO-sorting out the subject specific zoning vs the competition is not a 1-day event for verification purposes and would appear to support the theory of "complex issue's" in each & every report.