1004mc

[residentialguy]

... 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)

BINGO!!!

 

[residentialguy]

Fannie uses the terms in a non-recognized way.

What do you mean by that? They just use the term "Neighborhood". You stated the definition above. You set the boundaries of the neighborhood on page one. They ask for comparable sales data within the neighborhood on the 1004MC, of which you have set the boundaries for already. That is the only sales data to be used to populate the 1004MC form. As we all agree, that rarely produces enough data for a reliable indicator of market trend, therefore you have to research more in depth in order to find out what the market trend is doing, which can be done by broadening your search parameters, talking to RE professionals in that area, etc. Then you can check the correct trend boxes. I don't remember seeing Danny, Rich, and TimD saying anything to the contrary. If so, plz point it out.

 

[residentialguy]

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.

So the forms clearly say we certify that the intended use can't be changed and everything on the report is true and correct, and yet they have instructions elsewhere working it out by telling us that we can change it.

Here's a novel idea. (touched on by JG) How about working it out by correcting the forms so that the information we put on the form is actually true, correct and makes sense, as we certified?

 

[hastalavista]

Not sure what the issue is?
I am not broadening my search parameters. I'm using the recognized terms to identify the neighborhood and market area.

Here is an example of a map I put into my reports.



The "neighborhood" happens to be the complimentary land uses that surround the property (in blue). The competitive market area (in red) is where the comps are located and used to populate the 1004mc.

Here is a summary of all the SFRs from within the market. Note that I say these include comparable and non-comparable properties. These properties represent the price and age-range that goes on page 1 for the subject's submarket (detached SFRs).



Next, I present a table of the sales that are competitive from the subject's market (the red area in the map). This is the same data captured in the 1004mc:



Then, I continue with my supplemental analysis that supports my market condition conclusion...



There are 2.5 more pages of subject-specific data plus a summary of the market participants interviewed that follow that supports the "stable" characterization noted in the above. In total, for this assignment, there was 4-pages of supplement.

The 1004MC form is filled out EXACTLY as the instructions require it to be filled out.
My report identifies what the neighborhood and market area is based on the how those terms are defined by the recognized sources.
I could skip that if I wanted to; it wouldn't change how the 1004mc was completed.
I include it because I believe it is an important differentiation to make:
My competitive market is not necessarily the tract development or "neighborhood" name of the area in which my subject is located.
But, as a rule, comparables from within the neighborhood (as I have defined it) are superior to those outside of that neighborhood but within the competitive market.

Fannie is using imprecise terms to define what it wants. I understand that and give them what they want. I supplement my analysis using the recognized terms for what they are.

What's the hubub, bub?

 

[ucbruin]

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."​

Maybe RG's questioning your sentence....

"The competitive market is where the comparables are located that would populate the 1004MC."

Is there a typo in the sentence????

 

[residentialguy]

The "neighborhood" happens to be the complimentary land uses that surround the property (in blue). The competitive market area (in red) is where the comps are located and used to populate the 1004mc.

The 1004MC asks for "the neighborhood" for competitive sales (comps)....it does not say to expand the data to include competitive market area outside the neighborhood for the data blanks on the form. I personally don't have a problem with how you are doing it (it's far superior to FNMA's way)...but it is not the way FNMA requires. They want all that information you're giving them, but they want on comps in the neighborhood to populate the MC form

 

[hastalavista]

The 1004MC asks for "the neighborhood" for competitive sales (comps)....it does not say to expand the data to include competitive market area outside the neighborhood for the data blanks on the form. I personally don't have a problem with how you are doing it (it's far superior to FNMA's way)...but it is not the way FNMA requires. They want all that information you're giving them, but they want on comps in the neighborhood to populate the MC form

Yeah, I think the issue here is this:
You are concluding that the "competitive market" is different than the "neighborhood" in terms of what should be included in the 1004mc.
My assertion is the other way around: The "competitive market" (defined by the recognized sources) is the "neighborhood" used for purposes of the 1004mc. And that is why I supplement my analysis with clarifications.
I'm not expanding the search parameters regardless of the difference of terms.
But, I hope my map I included makes the case:
There are two areas identified in the map; the subject's neighborhood (which is its development, and consists of complementary uses) and the market area, which consists of different uses but does include homes that directly compete with the subject.
Q: What is the appropriate area to research for my subject's assignment in regard to comparables: the blue area or the larger, red area?
A: (Rhetorical Question: The larger, red area)
Q: If I eliminate the identification of the subject's neighborhood, does it change the competitive market or change the area I would search to populate the 1004mc?
A: No.
Q: Assume Fannie changes its term; eliminates "neighborhood" and uses something else. Does that change the area where the comparables exist?
A: No.
Final Question: Regardless of the terms used by Fannie or by the appraiser, is the 1004mc filled out correctly with the data that is expected, and is the market analysis supplemented by whatever information the appraiser thinks is necessary to (a) meet that expectation and (b) conclude a credible market analysis?
A: Yes.

 

[residentialguy]

You are concluding that the "competitive market" is different than the "neighborhood" in terms of what should be included in the 1004mc.
My assertion is the other way around: The "competitive market" (defined by the recognized sources) is the "neighborhood" used for purposes of the 1004mc.

what sources are those that say that the "competitive market" is the same thing as "neighborhood"? The AI Dict spells out the definition of Neighborhood.

and to go with your way...then on your neighborhood boundaries on page 1, I trust you state the red boundaries, since those are the boundaries that you are using when the 1004MC says to include only comps within your subject's neighborhood. And your use of neighborhood (being the competitive area) is what you use for top of pg 2?

 

[residentialguy]

Q: Assume Fannie changes its term; eliminates "neighborhood" and uses something else. Does that change the area where the comparables exist?
A: No.

Comparables can exist anywhere. You can have comparables in another town.

 

[hastalavista]

...and to go with your way...then on your neighborhood boundaries on page 1, I trust you state the red boundaries, since those are the boundaries that you are using when the 1004MC says to include only comps within your subject's neighborhood. And your use of neighborhood (being the competitive area) is what you use for top of pg 2?

Your trust is well placed. The answer is "yes".