1004mc

[timd354]

Just a final thought on this subject. It appears to me that the problem is with the definition of Neighborhood(not clearly defined by Fannie Mae). A neighborhood is not just a a place name. For example, in some PUD's there may be many separate place names. The neighborhood may be the entire PUD or just a small portion of it. Same is true for a subdivision of properties. There may be several place names in one neighborhood/subdivision. Fannie needs to better define what they consider to be a neighborhood.

In my opinion they ought to remove the term "neighborhood" from the appraisal forms altogether and replace it with the term "market area" which is defined in The Appraisal of Real Estate as follows: The defined geographic area in which the subject property competes for the attention of market participants.

 

[J Grant]

http://appraisersblogs.com/appraisal/differences-between-neighborhood-and-market-areas-analysis/

Imo this blog is pretty good, added to Fannie's own description of neighborhood, added to our own observation and plain old common sense. Ask Re agents if confused, put yourself in shoes of a buyer. A Subject's PUD or subdivision, though it might be a great source for comps, typically does not comprise the neighborhood (the PUD or subdivision is located in a neighborhood).

Withing their Budget, a buyer is drawn to a certain neighborhood for X reasons. At same time, a seller is "stuck" with their property's location within a neighborhood in terms of what buyers it will attract and what they can or will pay to live there.

Fannie in a default may become the seller after all...

 

[J Grant]

In my opinion they ought to remove the term "neighborhood" from the appraisal forms altogether and replace it with the term "market area" which is defined in The Appraisal of Real Estate as follows: The defined geographic area in which the subject property competes for the attention of market participants.

I agree with this. Either this, or revise the form with two sections on page one , one for the defined neighborhood per geo boundaries/land use, and one for the market area, so there is no confusion. (and they can have results of each clearly spelled out)

 

[djd09]

Where is the OP?

 

[djd09]

And what's up ResG? TimD just bashing you and now you liking him. Is it the bird theory?

 

[hastalavista]

In my opinion they ought to remove the term "neighborhood" from the appraisal forms altogether and replace it with the term "market area" which is defined in The Appraisal of Real Estate as follows: The defined geographic area in which the subject property competes for the attention of market participants.

Yeah.

In the addendum of my reports, I make that differentiation:

NEIGHBORHOOD BOUNDARIES

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: XXXXX

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: XXXXX

See addendum exhibit "Subject Competitive Market/Transaction Summary Table" for a map of the competitive market area and a summary of the sales transactions per MLS.​

My neighborhood can be smaller than the competitive market or, sometimes, it can be the same.
The competitive market is where the comparables are located that would populate the 1004MC.
The neighborhood would typically have the best comparables to use (if they are available).

This identification also serves to counter a possible argument of,

Q: "Why didn't you use this sale? It is in the list of your 1004MC substitutes?"
A: "True, but as you can see, the comparables I did use are all located in the defined neighborhood and are more similar than the sale you suggest. While that sale does fit the comparable criteria, it is inferior to the subject-similar sales from within its neighborhood. Adding it in the grid doesn't change anything."​

 

[residentialguy]

And what's up ResG? TimD just bashing you and now you liking him. Is it the bird theory?

lol...I let stuff like that roll off my back. He had a good point and I have no problem liking it. Nothing personal.

 

[residentialguy]

The competitive market is where the comparables are located that would populate the 1004MC.
The neighborhood would typically have the best comparables to use (if they are available).

Neighborhood is what is required to populate the 1004MC. The competitive market might be additional support you include where the comparables are located that would support your market trends.

 

[Don Clark]

Yes, I understand that we can add more language to try to fix FNMA's mess. It's kind of like having your spouse divorce you and the form states that they get all your money and the pre-print certifications says that modifications to the intended use is not permitted, all statements are true and correct, etc then your spouse adds a few sentences saying to disregard that. Would you sign it???? Any lawyer would say, rip it up and have your spouse use the correct language through out the form.

This is contrary to the pre-printed form but TAF, Fannie Mae, and the AI as I recall worked this out when the "new" forms came out in 2005. It goes in everyone of my reports:

INTENDED USERS/INTENDED USE:
The intended use of this appraisal report is for the Lender/Client. The intended use is to evaluate the property that is the subject of this appraisal report, for a Mortgage Finance Transaction, subject to the stated scope of work, purpose of the appraisal, reporting requirements of this appraisal report form, and definition of Market Value. No additional intended users are identified by the appraiser.

 

[hastalavista]

Neighborhood is what is required to populate the 1004MC. The competitive market might be additional support you include where the comparables are located that would support your market trends.

Res-

I refer to Don Clark's post and Timd's post..
Fannie uses the terms in a non-recognized way. I quote the Dictionary of Real Estate Appraisal to define the terms.
In the end, it doesn't matter as the 1004MC is populated exactly as FANNIE wants it populated. I've explained exactly what I do and have used the correct and recognized terms.
My personal home's neighborhood is its development. Well defined and identified.
My personal home's market area is a larger geographic area; if you are considering purchasing my home, you'd first look in my neighborhood and also look in the market area.
The market area is where the comparables exist. However, if there are sales in my neighborhood, as a rule, they would be better substitutes.

This goes to my point of the 1004mc not being ideal. It isn't. But I can still use it, supplement it as necessary, and in the end, the analysis in my report is credible and meets the minimum standards. I'm not changing anything and reporting it exactly how the GSEs expect the form to be reported.