Across The Board Time Adjustments?

[DARREN GODFREY]

Submitting an appraisal report with a statement that part of that appraisal report (in this case the 1004MC) is "probably going to be misleading" is very problematic and could lead to problems for you if anyone decided to make an issue of one of your appraisal reports. It certainly could be argued that if you believe that the information included in the 1004MC is misleading, then you had an obligation under USPAP to include whatever additional information/explanations are needed so that the information you provided is not misleading. If you actually did provide the additional information needed to supplement the 1004MC so that it is not misleading then the inclusion of the statement that the "1004MC is probably going to be misleading" is actually a false and misleading statement.

I didn't go that far, I put myself in that appraisers shoes. I just pointed out where the errors were...they can decide his motive.

 

[DARREN GODFREY]

Submitting an appraisal report with a statement that part of that appraisal report (in this case the 1004MC) is "probably going to be misleading" is very problematic and could lead to problems for you if anyone decided to make an issue of one of your appraisal reports. It certainly could be argued that if you believe that the information included in the 1004MC is misleading, then you had an obligation under USPAP to include whatever additional information/explanations are needed so that the information you provided is not misleading. If you actually did provide the additional information needed to supplement the 1004MC so that it is not misleading then the inclusion of the statement that the "1004MC is probably going to be misleading" is actually a false and misleading statement.

I didn't go that far, I put myself in that appraisers shoes. I just pointed out where the errors were...they can decide his motive.

Then perhaps he/she was inappropriately applying time adjustments. Do your own search on the appraisal specific market, did prices appreciate , and if they did, did they stabilize at some point? I agree, long marketing times, unless it is a high end luxury market, and concessions are not typical of a rising price market. what is listing supply like? A rising market usually has inventory shortage. Did you run alternate search to see if the appraiser used best similar sales as the comps?

All the trends looked like a stable market , in fact I think only 1 out of his 5 comps was under contract in less than 30 days . One was in the 200 range...because it was a stable market. That's why from the beginning I thought the MC form was a waste of our time. It shows you data , but not apples to apples data.
It's like the email I get from the MRIS say how the median price has increase 20%. That makes you think it is the same house appreciating by 20% when in fact it is the same house gutted rehabbed and then sold . So it's pretty much 140% of the same house lol. I would guess that I get a lot of work through people who read that think , hey my upside down house is worth 20% more now....then they get the appraisal.

 

[J Grant]

I still can't know what went on with the OA under review.

But a time adjustment made on older comps, up to either the effective date if conditions are still increasing or declining, or up to date where market stabilized , should bring sold sale prices up to effective date probable sale price. Listings and pending reinforce the current market conditions . Are listings going to contract? On market a long or short time? Selling for less than list price, at list price or more? Shortage of inventory, or ample supply or over supply?

Remember that the question on page one is market stable, increasing, or declining (not has it increased past tense, or decreased, past tense). So if there was an increase, but the increase stopped 2 months ago, and due to listing activity, pendings, feedback from market, interest rates or other impacts, if market is now stable, we would not mark increasing...the increase is in the past, and 2 months ago it went from increasing to stable. So the time adjustment would best be stopped 2 months ago....right? Whereas if market is still increasing, the time adjustments should go up to effective date .

 

[DARREN GODFREY]

I still can't know what went on with the OA under review.

But a time adjustment made on older comps, up to either the effective date if conditions are still increasing or declining, or up to date where market stabilized , should bring sold sale prices up to effective date probable sale price. Listings and pending reinforce the current market conditions . Are listings going to contract? On market a long or short time? Selling for less than list price, at list price or more? Shortage of inventory, or ample supply or over supply?

Remember that the question on page one is market stable, increasing, or declining (not has it increased past tense, or decreased, past tense). So if there was an increase, but the increase stopped 2 months ago, and due to listing activity, pendings, feedback from market, interest rates or other impacts, if market is now stable, we would not mark increasing...the increase is in the past, and 2 months ago it went from increasing to stable. So the time adjustment would best be stopped 2 months ago....right? Whereas if market is still increasing, the time adjustments should go up to effective date .

Isn't that why we have recent comps...they will simply show it's increase . Since we are dealing with historic data for the most part , should it the last comp be a snap shot. I mean you can't prove that the listing is going to sell for more. It may well likely, but it may not.

 

[residentialguy]

You know , i don't have a problem with across the board adjustments per say, but an across the board time adjustment is in fact predicting a future value it would seem perhaps if it was used for an older comp it would make sense. What this appraiser did however was say that this property would sell for this much today IF the trend continued...what if he wrote the report at 11:59 and the fed bumped the rate up 2 full points by 12.

In my opinion a time adjustment is a sensitive thing...at least you last sale chronologically shouldn't have one.

You aren't predicting anything. You analyze the market and have a supportable adjustment. BTW, Market trends aren't established by the 1004MC, regardless of what FNMA wants you to believe. And market trends don't just stop, unless there was some big event that caused it. Markets have spikes, but don't confuse that with trends. Markets take months to change...even the big bubble crash took over a 1/2 year to turn.

 

[timd354]

I didn't go that far, I put myself in that appraisers shoes. I just pointed out where the errors were...they can decide his motive.

Darren, my post that you are referring to was not directed at you but was in reference to the statement that another poster states that he includes in the 1004MC

 

[Terrel L. Shields]

You aren't predicting anything.

I dont know why everyone is so terrified of the words "forecast" or "predicting". In fact, that is exactly what we do. Nevermind it really isn't possible because we underestimate the impact of the rare event, the "Black Swan" problem. Rumsfeld was ridiculed but in reality, Rumsfeld was exactly right and talking military planning lingo when he talked about the known unknowns and the unknown unknowns. To wit, we know N. Korea has a potential nuclear bomb..but few details. That is a known unknown {risk} but an unknown unknown would be for Kenya to launch a nuclear weapon onto Europe. Some things cannot be predicted. But trends in RE are relatively easy to predict and we are usually right if the past trend continues in the future. The crash was a known unknown but even then, we saw prices going nuts and knew it was above trend but no one could predict exactly when and the magnitude of the crash that occurred. So we are predicting a price that we call market value. And in a rapidly rising market in general but a relatively slow one in a particular neighborhood there is no reason why a continuation of that trend cannot be extrapolated from the comp sale date to the present. The prospective appraisal relies upon this predictive power almost exclusively.

 

[DARREN GODFREY]

I dont know why everyone is so terrified of the words "forecast" or "predicting". In fact, that is exactly what we do. Nevermind it really isn't possible because we underestimate the impact of the rare event, the "Black Swan" problem. Rumsfeld was ridiculed but in reality, Rumsfeld was exactly right and talking military planning lingo when he talked about the known unknowns and the unknown unknowns. To wit, we know N. Korea has a potential nuclear bomb..but few details. That is a known unknown {risk} but an unknown unknown would be for Kenya to launch a nuclear weapon onto Europe. Some things cannot be predicted. But trends in RE are relatively easy to predict and we are usually right if the past trend continues in the future. The crash was a known unknown but even then, we saw prices going nuts and knew it was above trend but no one could predict exactly when and the magnitude of the crash that occurred. So we are predicting a price that we call market value. And in a rapidly rising market in general but a relatively slow one in a particular neighborhood there is no reason why a continuation of that trend cannot be extrapolated from the comp sale date to the present. The prospective appraisal relies upon this predictive power almost exclusively.

 

[DARREN GODFREY]

Well the last boom was actually a number of things, the one big thing was supply due to the sudden bunch of folks that could "afford" homes.
We don't quite have that problem yet, I guess if you know you have multiple contracts then leaning foward would be to not adjust for things as much. Or ignore some superiority. Back then it seemed if it was equal square footage someone would in fact buy it at top of the market pretty much.
It's not that way now.
We all know across the board adjustments stick out like a sore thumb generally. This person got it because he did it on time , but he had no proof due to marketing time and supply.
And that's pretty much why I got the review.

 

[DARREN GODFREY]

I dont know why everyone is so terrified of the words "forecast" or "predicting". In fact, that is exactly what we do. Nevermind it really isn't possible because we underestimate the impact of the rare event, the "Black Swan" problem. Rumsfeld was ridiculed but in reality, Rumsfeld was exactly right and talking military planning lingo when he talked about the known unknowns and the unknown unknowns. To wit, we know N. Korea has a potential nuclear bomb..but few details. That is a known unknown {risk} but an unknown unknown would be for Kenya to launch a nuclear weapon onto Europe. Some things cannot be predicted. But trends in RE are relatively easy to predict and we are usually right if the past trend continues in the future. The crash was a known unknown but even then, we saw prices going nuts and knew it was above trend but no one could predict exactly when and the magnitude of the crash that occurred. So we are predicting a price that we call market value. And in a rapidly rising market in general but a relatively slow one in a particular neighborhood there is no reason why a continuation of that trend cannot be extrapolated from the comp sale date to the present. The prospective appraisal relies upon this predictive power almost exclusively.

This is all interesting talk, hmm.