Does the 1004MC equal the Neighborhood One-Unit Housing trends on page 1

[Wayne Henry]

Does the 1004MC equal the Neighborhood One-Unit Housing trends on page 1

I received the following email yesterday out of the blue from one of my clients:

"Market conditions Comments should support the boxes checked in One-Unit Housing Trends. Appraiser comments current market status as increasing however stable box is checked in One-Unit Housing Trends please correct."

I have use the 1004MC as a trend indicator if there is a substantial sample but since we are only breaking down "comparable" sales on the 1004MC this is usually a few sales and not sufficient to reconcile a trend so I use a statistical neighborhood analysis for the past three years of all homes.

I specially say in the 1004MC

"Due to a lack of comparable sales data above I used the supplied zip code addendum and gave more market trend weight to the zip code addendum. The data above should only be used as a reference for the specific comparable data analyzed and not the overall market trend in the market. In conclusion, the 1004MC data is limited therefore the overall zip code trend was used for the neighborhood section on the top of page one and to make market adjustments to the sales."

I have no problem reconciling the overall comparable price as increasing, stable or declining based on the comparable sales data but I do believe it would be incorrect to then apply that in the neighborhood section on the top of page 1. IMHO the top of the first page discusses the neighborhood in its entirety which should include comparable sales as well as non comparable sales. I do not see how the overall trend for the market "and" the neighborhood could be stated as increasing, stable or declining based on seven sales.

I reviewed the Fannie Mae website for further explanation at:
https://www.fanniemae.com/content/guide/selling/b4/1.3/03.html

They have conflicting information there. Under the neighborhood section they state the following.

Neighborhood:
The appraiser must report the primary indicators of market condition for properties in the subject neighborhood as of the effective date of the appraisal by noting the information in the table below. (DOES NOT SAY COMPARABLE PROPERTIES)

1004MC section:

"Form 1004MC is required for all mortgage loans delivered to Fannie Mae with appraisals of one- to four-unit properties. It is intended to provide the lender with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. The conclusions regarding trends that are obtained from the 1004MC Form must be reported in the Neighborhood section of the report form."


The next question is if I did mark increasing for property values under the one-unit housing trends are they expecting a positive market adjustment for dated sales? Does anyone do positive market adjustments in the type of economy we are in now?

If it said One-Unit comparable trends instead of One-Unit Housing trends this would be a non factor.

Your opinion on this matter is greatly appreciated.

 

[bnmappraisal]

I, personally, can't stand the MC form. It seems to cause much more confusion than it seems to help (IMO). I get random/"dumb" requests often enough. It seems the people "reading" it either:
A) don't know how to read it
B) don't know how to understand it
C) all of the above

...I think it's all too often C

 

[CindyR]

[QUOTE=Wayne Henry


1004MC section:

"Form 1004MC is required for all mortgage loans delivered to Fannie Mae with appraisals of one- to four-unit properties. It is intended to provide the lender with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. "

HA HA - I agree with you completely. I love this quote about the MC form intended to give a clear and accurate picture. The MC is the most unclear and inaccurate document in the universe.

I extend my disclaimers even further about the MC form and explain that the page one data and the MC data are from two different sources and include different subsets of market data and that is why they do not agree with one another. "The MC form contains an insufficient amount of data to yield meaningful results" and refer the reader to the data and analysis of the page one Market Conditions.

 

[J Grant]

Imo. The MC form is often too limited in data, concentrating just on comps for subject to be reliable for trends on first page of report. Just explain that and why trends are based on additional Heracles beyond the small data sample on MC form ,

 

[Lee Lansford]

Does the 1004MC equal the Neighborhood One-Unit Housing trends on page 1

...

To answer the question: Yes.

When and where the data which populates the various fields in the 1004MC are too sparse to support a credible opinion of an "overall trend", the appraiser is obligated to conduct additional research and analysis. I suppose that even with this additional research and analysis, support for credible opinions remain limited.

Most frequently what I see is THIS: Data in the 1004MC are limited--and certainly inconclusive--yet the appraiser opines to an "overall trend" but with no support. Credible? Of course not.

 

[J Grant]

When MC data is to sparse for any reliable trend, I state that. A very stupid form.

 

[Lee Lansford]

When MC data is to sparse for any reliable trend, I state that. A very stupid form.

Actually, not a "stupid form".

The concept is reasonable and prior to its inception, it is doubtful that more than a few residential appraisers even attempted any sort of analysis of the market.

Even in those circumstances (which are frequent--particularly when appraising outside of urban & suburban areas) where there is a dearth of data (side-note: it seems as though many appraisers hold closely--and not willing to share--what constitutes a "comp" for the subject and, following, what is appropriate for inclusion in the 1004MC), the data and information are a matter of interest.

A frequent problem is that the appraiser stops at the 1004MC--when and where the data in the various fields are very limited and certainly inconclusive--and fails to conduct additional research and analyze (as best a competent appraiser can) what else is available.

 

[VolcanoLvr]

I agree with Lee that most appraisers, prior to 2009, didn't do sufficient market research on COMPARABLE properties to understand market trends.

It comes from a very poorly designed primary appraisal form promulgated by the GSE's, then the attempt to correct the page 1 deficiency with the warmed over afterbirth MC form. Page 1 and the MC contradict each other in a vast majority of cases. As a statistical reporting form, the MC is bovine essence....my polite way of saying BS.

Almost NONE of my page 1 info (if done the way the form suggests) and the MC grid info would correspond, so quite frankly, I have this statement (below) in my MC form to inform the readers that the page 1 and MC grid info is based on the same data set:

The appraiser's responsibility is to determine market value based on COMPARABLE PROPERTY analysis. Dissimilar properties have no direct relevance to the assignment.

Too few sales to be statistically reliable. Reported trends on this 1004MC Form and for the Neighborhood section on Page 1 of the major report form are analyzed from similar-to-subject comparable properties within the defined neighborhood, and/or from competing neighborhoods in the nearby market area if travel outside the immediate neighborhood was necessary. Since some appraiser-defined neighborhoods often contain a mix of properties that may not be comparatively similar to the subject, the trends of those neighborhood area dissimilar properties are not deemed directly relevant to the subject's appraisal assignment. One year is too short a time period to show an accurate long term real estate trend for values. See the attached Historical Value Trends page. Analysis of comparable property values researched for this report has been demonstrated to be declining ***stable ***increasing over the last five **four years. It was not necessary to utilize pending sales, expired or withdrawn listings to arrive at this conclusion.
The HVT chart has been relied upon for trend analysis, rather than this MC Form.

 

[bnmappraisal]

...still not a big fan of the MC "form"

Sorry

Again, we can do all the analysis in the word and try to explain it with all kinds of verbiage/form(s), but at the end of the day, unless someone competent is reading it, we might as well be writing in another language...

 

[Meandering]

1004MC section:

"Form 1004MC is required for all mortgage loans delivered to Fannie Mae with appraisals of one- to four-unit properties. It is intended to provide the lender with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. The conclusions regarding trends that are obtained from the 1004MC Form must be reported in the Neighborhood section of the report form."

Sometimes with unique, or "special" properties, or in very stable neighborhoods, there are no comps in the neighborhood, and the comps have to be drawn from the subject's market area. When that happens the 1004MC has all zeros. Wonder what market trend the lender is getting a clear and accurate understanding of.

I just did one where there was one sale comp and one active listing in the subject's neighborhood in 2 years. Nothing else listed, expired, withdrawn or pending.

Go ahead and opine a trend from two data points.

.