Difference Between Neighborhood Section/1004mc

[Ariba]

I know here we go again.

STIP

Please make the Property Values Trend selection consistent with the Median Comparable Sale Price Overall Trend selection on the 1004MC or explain the apparent inconsistency including a summary of the alternative market data that was analyzed to determine the Median Comparable Sale Price Overall Trend on the 1004MC. When the Property Values Trend reported in the Neighborhood section is not consistent with the Comparable Sale Price Overall Trend on the 1004MC, commentary must be provided. (NOTE: It is our interpretation of Fannie Mae guidelines, based upon significant research, that these trends should correlate, but we realize that there is not unanimity on this topic)

The Selling Guide Published 02/24/205 - Neighborhood Section of Appraisal Report (09/30/2015) appears to collaborate this. https://www.fanniemae.com/content/guide/selling/b4/1.3/03.html

What say you? How would you address this STIP?

 

[hastalavista]

What data did you use to conclude your value trend on the form, and why is it different from the 1004mc?

This is the question I believe you are being asked. You probably know the answer, what it is?

(I suspect it is this: Your data in the 1004mc analysis is limited, so you used other data to make your page 1 conclusions. Many times I find the data in my 1004mc analysis is insufficient to make a valid conclusion; so I incorporate additional data. But I comment and explain in the 1004MC that I relied on additional data, and I provide the additional data in the report to support my conclusions. Maybe you didn't, or maybe the client didn't read where you did explain what you did.
Is my suspicion correct?)

 

[Ariba]

To me the Neighborhood indicates the price range of all one-unit housing properties in the defined neighborhood. The price range reflect the high and low prices for residential properties that are comparable to the property being appraised (one-unit properties, two- to four unit properties, condo units, or co-op units). The 1004MC is a sub-set of the neighborhood data and is limited to those properties that are comparable to the subject property in GLA, bedrooms, etc. This makes sense to me but apparently not to Fannie. .

 

[Howard Klahr]

... the Neighborhood indicates the price range of all one-unit housing properties in the defined neighborhood..

You are correct in the above statement

The price range reflect the high and low prices for residential properties that are comparable to the property being appraised (one-unit properties, two- to four unit properties, condo units, or co-op units)..

If your subject property is SFR, you would not include 2-4 unit, condo and coop properties in the information listed in the neighborhood section in that these are not one-unit housing

The 1004MC is a sub-set of the neighborhood data and is limited to those properties that are comparable to the subject property in GLA, bedrooms, etc. .

This statement is also correct and stating the difference in the two statements is the answer to your initial question.

This makes sense to me but apparently not to Fannie.

The reference to Fannie is not accurate but rather the underwriter/clerk that sent you the stip on your report.

 

[J Grant]

Even though the traditional concept of neighborhood was all the one unit housing in the market area of subject, this is not the same as comparable properties to subject, and Fannie now wants appraisers to make neighborhood on page one reflect ONLY those properties comparable to subject in reporting trends ( declining, increasing, stable etc...should match the MC form conclusions even when additional research was done).

 

[The Bob]

The only part on page 1 that must match the 1004MC is the "One Unit Housing Trends".

One-Unit Housing Price and age, as well as land use reflect the entire neighborhood.

 

[hastalavista]

I'm still wondering why your 1004MC trend is different from what you indicated on page 1 (which now I'll assume is based on the entire market's data set).
Is your subject's sub market moving in a different direction than the market as a whole (possible, but not expected and not what usually occurs)?
Did you mechanically fill out the 1004MC check-boxes without considering if the data set was large enough to make credible market trends (I see that a lot)?

Here are your options as I see them:
1. The trend you put on page one is the best characterization of the market trends for your subject's sub market. Your indication on your 1004MC addendum reflects a mechanical analysis of that data and thus is not the best characterization of the market trend. The most likely reason why this would be the case is that your 1004MC data set is too small to rely upon. The fix to this is to change the 1004MC and then supplement your trend analysis with whatever other data you think is necessary to consider in order to conclude credible results.
2. The trend in your 1004MC is the best characterization of the subject's sub market (which is the expectation). The trend indication on page 1 is of the entire market, but your subject's sub market is moving in a different direction than the market as a whole. I see this sometimes in new construction scenarios, where there is a new tract development introduced into a market that contains older homes. If the subject is an older home, and new homes are considered in the market trends, it may skew the trend toward the new homes (in my market, a builder may offer 75 homes, and are selling them one right after another; these are probably the predominant sales during that period; if prior to that, it was all resales of older homes, the price trend may jump during the new home sell-out; the new home sales influence on the market trend does not necessarily reflect my subject's sub market values are increasing). If your market is bifurcated, and your subject's sub market is moving in a different direction than the larger market, then change page 1 to reflect the 1004MC and describe that the subject's sub market is moving in a different direction than the general market (hopefully, you'll have some insight as to why that may be).


Whatever you do, make sure you can substantiate the trend you identify. If your conclusions are not what most would expect, then what is expected is that you explain why there is an unexpected result.

Good luck!

 

[hastalavista]

To me the Neighborhood indicates the price range of all one-unit housing properties in the defined neighborhood. The price range reflect the high and low prices for residential properties that are comparable to the property being appraised (one-unit properties, two- to four unit properties, condo units, or co-op units). The 1004MC is a sub-set of the neighborhood data and is limited to those properties that are comparable to the subject property in GLA, bedrooms, etc. This makes sense to me but apparently not to Fannie. .

I agree with you 100% and my trends on page 1 were for the larger market... until the GSEs clarified exactly what they want.
It isn't what I would want if I were them, but I'm not them. So, I give them what they want, and then I supplement my analysis and provide what I think is important.
They may not think my supplement is important. That's ok. This way, they're happy and I'm satisfied. A win-win.

 

[Mr Rex]

Since I'm in a rural area, most of my MC's have no sales or listings at th top of the MC form as Fannie wants this to reflect the subject's "neighborhood" or immediate market area. So I create another MC that includes all of my extended search area, save it as a pdf labeled "Market Conditions from extended search criteria" in my report as the next page behind the MC. The lower part of the MC narrative indicates that the trends at the top of the MC form are from the extended search as there is insufficient data from the neighborhood or immediate market area. The 1004 neighborhood section matches the trends from the MC. I typically amend the Market Conditions section to indicate if the subject's neighborhood's % of built out, SFR etc differ from the larger data set.

 

[chad hampton]

I learned a long time ago that whatever #'s I have on page #1, match the #'s I have at the top of page #2, and those match the #'s I have on the 1004mc.

Right or wrong, I no longer fight it. I state what my criteria was and use the same set of data for the entire report. Whether they are all truly comparable or not - maybe, maybe not? It's sometimes debatable.

But I've never had a call back asking why I said 40 sales at the top of page #2 and I don't have 40 sales in the 1004mc. Same for prices (highs and lows). I'm not about to break things down more than that. We already give too much information for what we're paid.