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1004mc Median Sale Price

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Steven Spychalski

Junior Member
Joined
Jan 14, 2003
Professional Status
Certified Residential Appraiser
State
Illinois
Hi All:

Since the 2/12/16 FNMA FAQ was released with clarifications on the 1004MC and trend reporting, I have been getting several requests from underwriters demanding that the Trend Boxes in the 1004 correlate to the Median Sale Price data in the 1004MC.

In other words, if the Median SP is indicated as in declining, then the 1004 Market Conditions section should also indicate declining.

My issue is that occasionally despite a dip/rise in Median Sale Price, I deem the market to be stable. (The sample size is too small and is manufacturing a trend, the specific property type is unique to the market, limiting the pool of data, etc.) In these instances, I typically state something like:

Median sale price has Increased/Declined over the past 3 months. However, the overall pool of comparables is limited for the most recent period (0-3 months) making this analyses less reliable. The small data set appears to have manufactured this trend. A search of the greater market indicated stable to increasing trends. See addendum. (I include data and charts that assisted in my determination)

In some markets over the winter months we may see a handful of comparable sales for a given period, which makes median SP less reliable IMO. My argument is :Why do any other analysis if the only factor we are to consider is Median SP? Median SP is only one data point reviewed in forming my conclusion....

I know we are reviewing specific comparable data, but if only 1-3 similar properties sold in the given period, how can median SP be indicative of anything?

These UWs cite the last guidance from FNMA and claim it equates to using the Median SP data in the 1004 section. Am I wrong to argue against that? Any additional guidance I can cite in return? Thanks for the help!

FNMA:
Are the trends that are reported on the Market Conditions Addendum to the Appraisal Report (Form 1004MC) the same trends that are to be reported in the One-Unit Housing Trends section of the appraisal report (Form 1004)?

Yes. The conclusions regarding trends that are obtained from the Form 1004MC must be the same trends reported in the Neighborhood trends section of the Form 1004. The information reported on both forms must be consistent to provide the lender with a clear and accurate understanding of the market trends and conditions present in the subject neighborhood, based on properties that are considered competitive with the subject being appraised.
 

residentialguy

Elite Member
Joined
Mar 24, 2009
Professional Status
Certified Residential Appraiser
State
Minnesota
I have been getting several requests from underwriters demanding that the Trend Boxes in the 1004 correlate to the Median Sale Price data in the 1004MC
The trend box is to be the same on page 1. Keep in mind that the data on the grid of the 1004MC form may not support your conclusions of overall trend due to lack of data of similar comps within the subject's neighborhood. When that happens, which for me has been 99.9% of the time, you need to use additional analyses to show your support of the market trends on your additional comments page.
To recap: The data graph of comps on the left side do not need to match up with the overall trends on the right side of the MC form. You overall analysis needs to support the trends.
 

Steven Spychalski

Junior Member
Joined
Jan 14, 2003
Professional Status
Certified Residential Appraiser
State
Illinois
Thanks for the reply.... That is what I do. However, they have been citing some"recent guidance from the GSE's" that indicates the Median SP trend is to be reported on the 1004 Neighborhood section.

I think they are mistaken, but wanted to be sure I did not miss any updated communications....
 

residentialguy

Elite Member
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Mar 24, 2009
Professional Status
Certified Residential Appraiser
State
Minnesota
Median SP trend is to be reported on the 1004 Neighborhood section.
The neighborhood section comments is the Market Conditions section of the 1004. That is where I put my analyses for the MC form. The trend box is on the 1004MC form, which matches page 1. How does this "recent guidance from the GSE's" tell them to do something different? What aren't you supposedly doing?
 

Tom4value

Senior Member
Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
I have stated before here, the 1004mc addendum is one of the few " new requirements" I agree with. Ever since I was a young appraiser, appraisers report so-called "opinions" specified by the office appraisers. The market comments, standard adjustments, all dictated by the head office reviewer. Market conditions were the most boilerplate of them all.

The 1004mc addendum was created to tell appraisers, "enough of your BS, boilerplate comments. Prove your work!". The 1004mc addendum should be developed before you write the market section because it IS THE MARKET SECTION. The conventional wisdom is if the 1004mc addendum is your support for your comments/conclusions, it should coincide. If you feel there are exceptions, you must be able to explain it in the report.
 

Steven Spychalski

Junior Member
Joined
Jan 14, 2003
Professional Status
Certified Residential Appraiser
State
Illinois
I largely Agree. The argument was that the reader was assuming the Median Price trend alone should dictate the conclusion. So if there is a drop in Median SP over the 0-3 month section, the market had to be in decline. I do not agree with that assertion.

Prior to the 1004MC, we would analyze several factors, but broken out over 3 years. This was useful as our market exhibits a degree of seasonality. It was especially helpful when the market began to turn... I received several 'calls for correction' when indicating certain markets were in decline... One UW became upset when I refused and asked them to refer the market analysis section we included. They responded with, "But its real estate, and real estate does not decline!". That was 2007. :)
 

Tom4value

Senior Member
Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
Correct, Steven. That is why I ended with explain any deviations. I totally agree that a decline in only 1 3 month period is nothing. It could be a traditionally slow period or just that at that particular period more lower end sales were the norm.It is when there is a notable decline in all three periods over the last year but still call the market stable is when there is an issue. Btw- that underwriter is just as guilty as the rest of the appraisers. "Never mind what the facts say. We say the market is stable!"
 

residentialguy

Elite Member
Joined
Mar 24, 2009
Professional Status
Certified Residential Appraiser
State
Minnesota
The argument was that the reader was assuming the Median Price trend alone should dictate the conclusion. So if there is a drop in Median SP over the 0-3 month section, the market had to be in decline
Do you base your overall trend box on the 1004MC from the comp data stated on the form?
 

Steven Spychalski

Junior Member
Joined
Jan 14, 2003
Professional Status
Certified Residential Appraiser
State
Illinois
Yes I do Resguy. In this case, the UW was arguing that only Median SP was applicable to the overall trends.

FYI, I argued successfully and they dropped the request.... Even sent over an apology!
 

residentialguy

Elite Member
Joined
Mar 24, 2009
Professional Status
Certified Residential Appraiser
State
Minnesota
Do you base your overall trend box on the 1004MC from the comp data stated on the form?
Yes I do Resguy.
That's the problem. The overall market trend boxes on the 1004MC (as well as page 1) are to be based on the actually market trend, which usually does NOT line up with the Comp Data on the form due to lack of comp data, skewing the trend impression. If the data on the 1004MC form is not adequate for a reliable indicator of trend (which it isn't 99% of the time in most areas) then additional support is needed, which you put in your Neighborhood Market comments.(you don't change the data on the 1004MC).

Repeat: Your overall trend boxes do not have to line up with the data stated on the 1004MC. The median price on the 1004MC could say 150,000, 140,000 and 130,000, giving the impression that the market is in decline....but, if thats based on unreliable skimpy data, further analysis is needed and it may show that the market trend is actually increasing, therefore you mark Increasing, not Declining.
 
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