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1004mc

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Would a typically motivated buyer for your subject in a rural area look throughout the entire county?
you can't put adjoining comp data on the MC form. The form strictly wants comps within the subject's neighborhood
Again, define neighborhood (area of complimentary uses) and differentiate that from "the neighborhood" (where our unicorn buyer would live). In a robust economy like that surrounding Walmart and the towns surrounding. My pastor works for Walmart. He has lived in three towns, about 12, 10, & 5 miles from work. His decision to buy is driven by his desire for the best bang for the buck...he is an accountant after all. There might be places within that "circle" he might not live, such as in downtown, or next to the interstate , and some areas within that are older homes, smaller homes, or such. Areas you cannot live such as the few remaining pockets of agriculture. So the "neighborhood" so ill-defined by Fannie in NWA could be 400 sq. miles less pockets of alternative uses. How do you decide what is a fanniespeak neighborhood except to arbitrarily define it? You can't. Census tracts are useless and haven't changed in decades. If one defines "complimentary uses" as homes of similar size, age, and quality with a given zoning in a given governmental district, then the "neighborhood" looks like an octopus with tentacles sprawling in all directions. Do people target some specific small area to live? You live in a very segregated area indeed. A home buyer here might look at 10 homes in a 10-15 mile radius. Only those with children seeking to stay within the same school district would not look far afield. And even then our school districts are sprawling as well.

So the MC serves little purpose, never did, it is just more scope creep, and I doubt after completing one, that the scales ever fell from an appraisers eyes and they shouted "Eureka I've found it." & the black light of stupidity left them and the glorious glow of intuitive market knowledge flooded their soul.
 
Denis, I don't disagree with what you posted...we are saying similar things (imo). I presume commecrial or investor buyer wanted benefits are different than residential/owner occupant, with choices limited at some point to their budget.

There are myriad ways of analyzing markets, which lead us in appraisal to choosing the best substitute properties for a subject. Choosing best comps substitutes entails astutley identifying the typically motivated buyer for a subject property. Every buyer wants the maximum benefits for the $ they can spend, even though a benefit to one buyer is not important to another. But buyers share the reality that unless they have unlimited wealth (its own niceh market) at some points, only so many benefits are availabe to a buyer in a given price range in an area. (at that point they comprise, or settle on the best choice they can afford)

As you said, serach by characteristics similar to our subject starts to exclude other certain properties. Within the pool left of possible comps, there can be a range of prices. Imo it is useful at on many assignments to introduce price as one search (not the only search) I've found searching by price range can find a comp that was not found in the other searches (why? who knows seems a quirk of MLS)

It can also yield useful information. I've pulled my comps by property characteristics to subject and identified a group of similar property sales ranging from 250k to 275k . Now, as an additional search, I punch in 250k -275k for properties in area and see what comes up. It might reveal a whole bunch of "better" properties, which might cause me to reevaluate my chomp choices /value for subject. Or, it may reveal no other sales, or very inferior properties. All of it is meaningful. If the pool of properties around your subject chosen by feature cluster between 250-275k, what is wrong with then doing a search for what a buyer can get from 250-275k. The results can be surprising/ or be predictable, and confirm our opinion.

What is important to one buyer is no important to another , even among similar price ranges in same geo area. The key defining features of a subject should be found in the best comps. "Bland" subdivisions houses with no defining features...are best compared to other bland subdivision houses.
 
So the MC serves little purpose, never did, it is just more scope creep, and I doubt after completing one, that the scales ever fell from an appraisers eyes and they shouted "Eureka I've found it." & the black light of stupidity left them and the glorious glow of intuitive market knowledge flooded their soul.
Not to mention that they are looking at unadjusted sale prices. Comps aren't identical and often have 10-20% variance, not to mention seasonality, temp govt stimulus, etc. When adjusted, the comps could easily show an increasing trend, not a decreasing trend. More often than not, the 1004MC ends up being a comic dramatic work using buffoonery data and manipulation, typically including crude characterization and ludicrously improbable situation stretches for the neighborhood.
 
Res-

I happen to know Rich personally and consider him a peer in the technical-USPAP sense; that is to say, someone who is competent and has the experience in the appraisal issue he is dealing with. I am not his peer as he has likely forgotten more than I know. I happen to consider him a friend, so I have a bias here (so weigh my comments with that in mind).

I believe that Rich's intent and objective in writing articles and developing courses in regards to residential mortgage appraisals and the Fannie/Freddie forms and guidelines is based on his sincere desire to give back to the appraisal community.
In every presentation of Rich's (or his partner's) that I've attended regarding Fannie, 1004mc, etc., the vast majority of the participants start the class by saying how they don't like the form, don't like UAD, don't like CU, etc., etc. (Hell, I don't like it either). Rich will sit there, listen for a bit, and say something like,
"I hear you. This presentation isn't designed to defend what they are doing and it doesn't matter whether I, you, or the guy next door likes it or doesn't like it. This presentation is designed to inform you of what the expectation is and how the form/process/guideline works. So, at the end of this presentation, you will know how to do what they are asking you to do."

That is what Rich is doing (IMO) with his articles, etc. He has gone to the powers that be, found out what they expect, and has tried to communicate that to appraisers who are still confused as to how to fill out a stupid form.
And in regards to the 1004mc, we can supplement it to our hearts content, so if we think it by itself may be misleading, I don't see how we can still think that if we supplement it and draw our conclusions (and explaining such in the report) based on our supplemental analysis.

In the four-hour Residential Cost Approach class I teach, I get death stares when I tell the participants that if you are not supplementing your site valuation estimate with hard data that cannot be replicated, you are not completing the assignment correctly per the expectations and you leave yourself open to an easy "gotcha" by a state regulatory agency. Then I demonstrate three methods that can be applied under any scenario and I emphasize "any". There is usually a component in the class that says, "that's way too much work... you are nuts... there is no data.... that isn't reliable....we don't get paid enough...[and my favorite]..no one uses the cost approach anyway."
When the dust settles, I say, "I hear you. I'm just providing you the techniques and examples of how you can complete the assignment and never worry about not meeting expectations. Whether you want to do it or not, I'll leave to you."
(and, trust me, I'm not getting rich teaching courses. I don't do it for the money, and that is fact).

Rich didn't develop the 1004mc form. But Rich knows what the expectations are by those who did develop it and Rich is simply informing appraisers what those expectations are to enable them to correctly complete the form. There is no hidden agenda here. But there is worthwhile information here.

Finally, the reason I'm jumping in and sticking my nose into this is because I just don't like to see two forumites, who I like, have spoken with, and respect, argue about something where I don't really understand what there is to argue about. :shrug:
One guy's opinion of the 1004mc reflects the vast majority of appraisers: The form sucks.
The other guy is simply providing information on how the form, as suckee as it is, is expected to be filled out.
What's the argument about?
 
Terrel, if you read Fannie Guidelines, they have a section about rural areas, and that they recognize rural areas may be very widespread geographic and/or contain many non conforming sales. Fannie has a lot of useful guidelines and insight in their handbooks...of course the appraiser determines competing properties per their market and explains if selection/conclusions differs significantly from Fannie guidelines in a report where Fannie is an expected user.
 
If the purpose is to control the appraisers, then the form works good.
 
T-"Again, define neighborhood (area of complimentary uses) and differentiate that from "the neighborhood" (where our unicorn buyer would live). In a robust economy like that surrounding Walmart and the towns surrounding. My pastor works for Walmart. He has lived in three towns, about 12, 10, & 5 miles from work. His decision to buy is driven by his desire for the best bang for the buck...he is an accountant after all. There might be places within that "circle" he might not live, such as in downtown, or next to the interstate , and some areas within that are older homes, smaller homes, or such. Areas you cannot live such as the few remaining pockets of agriculture. So the "neighborhood" so ill-defined by Fannie in NWA could be 400 sq. miles less pockets of alternative uses."

Don't confuse a neighborhood defined of complimentary land uses as a robotic substitute for neighborhood meaning a market area of similar properties to subject a typically motivated buyer would select ( and typical seller competes with subject on for that buyer) Neighborhood as verbiage might be unfortunate on page one of a Fannie form, but it does not excuse losing all sense about how to pick comps /define a market relevant area.

Then what you state above contradicts itself. Your pastor as typically motivated buyer wants to live within 12-15 miles from work and near Walmart/certain towns. (your subject is located in that area I presume) Sellers competing for that buyer is also part of that mix, and sellers of nearby property is the immediate competition. Knowing all this, why would you be considering comps from 400 miles away, assuming similar comps for subject sold within the 10-15 mile range?

When was the last time you read Fannie handbook? They offer a lot of insight about comp selection and neighborhoods/market areas that are a lot better than some of what is posted here. Fannie is an intended user with guidelines, but it is still your appraisal .Blaming Fannie for appraiser inability to understand /explain difference between a geo area boundary /land use neighborhood and what constitutes a reasonable market area for subject , or terrible comp selection seems childish to me.
 
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I answered, so could you respond now?
You did not answer the question. I asked if you were referring to me in your post #51. The question is simple and calls for a yes or no answer. Are you going with yes or with no?
 
Res-

I happen to know Rich personally and consider him a peer in the technical-USPAP sense;
I consider him a peer in the technical-USPAP sense, too. That's just it...he's just a FNMA sounding board; I don't ever hear him go against FNMA, rather he fights me when I do. All too telling. It's one thing to "know the rules"...it's another to promote them when they are bad. Just waiting for his response.
 
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