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

[Wayne Henry]

I sure wish there could be a consensus on this issue. It is frustrating to get different opinion's on a form that we all use which should be clear. I guess Fannie Mae has failed to educate there vendors on how to accurately report using there form.

 

[J Grant]

The MC form has some relevance...it just is limited and clients always think it is of more wide relevance to greater market.

 

[Lee Lansford]

I sure wish there could be a consensus on this issue. It is frustrating to get different opinion's on a form that we all use which should be clear. I guess Fannie Mae has failed to educate there vendors on how to accurately report using there form.

What are you struggling with?

 

[Person of Noninterest]

My general approach is to fill in the numeric section of the 1004MC with the numbers that correspond with the assignment instructions, then select the checkboxes (increasing, decreasing, stable) that apply to the actual market trends as determined through a more comprehensive market analysis.

I almost always fill the entire last paragraph with justification for the checkbox selections, and I have a paragraph in the addenda which explains why the 1004MC is a pile of dooky. The checkboxes on page 1 of the URAR will always match the checkboxes on the 1004MC.

Haven't had any problems from clients doing it this way.

 

[VolcanoLvr]

Yep .... "the 1004MC is a pile of dooky!" Added to the bovine essence.

The 'concept' of this market conditions report form is worthy. But the design and execution of the form, including the contradictory instructions, statistically improper reporting sequences for trend analysis, and the inclusion of the LP/SP % info that can be considered fraudulent in many MLS areas is appalling.

Frankly, the appraisal forms as we know them need major revisions and redesigns. But of course, that won't happen until and unless the actual fate of the GSE's is finally determined.

 

[Lee Lansford]

My general approach is to fill in the numeric section of the 1004MC with the numbers that correspond with the assignment instructions, then select the checkboxes (increasing, decreasing, stable) that apply to the actual market trends as determined through a more comprehensive market analysis.

I almost always fill the entire last paragraph with justification for the checkbox selections, and I have a paragraph in the addenda which explains why the 1004MC is a pile of dooky. The checkboxes on page 1 of the URAR will always match the checkboxes on the 1004MC.

Haven't had any problems from clients doing it this way.

More or less my approach.

 

[Wayne Henry]

A conclusion I hope we can all agree on so we can come to a consensus, finally!

Reference:
https://www.fanniemae.com/content/guide/selling/b4/1.3/03.html


My conclusion on the neighborhood one unit housing trends and the 1004MC form.
Per the instructions on the top of the 1004MC addendum form which was released in 2009 as an amendment to the Fannie 1004 form released in 2005, it states that the 1004MC form is justification for the three sections on page one of the neighborhood market trends sections for property values, demand/supply and marketing time.

I located further instructions on this matter which state:

Note that these instructions state that the appraiser must use the information in the 1004MC as the basis for the trends reported in the NEIGHBORHOOD section. Because the data in the
1004MC is focused on those properties that compete directly with the subject, the trends
reported in the NEIGHBORHOOD section should be the trends for properties that compete with the subject (i.e. the subject’s sub-market), and not the trends for the neighborhood as a whole. While this is contrary to the way that many appraisers have been trained, it is logical. The mortgage loan is being placed with a specific home used as collateral – not the entire neighborhood. Hence, it is logical to focus on the trends for the subject property and other properties that compete with the subject property.

Regarding reporting one-unit housing trends property values:

If the NEIGHBORHOOD section indicates that prices are either increasing or decreasing, then
the expectation is that the comparison approach adjustment grid will contain corresponding
adjustments for the increase or decrease. Conversely, if the NEIGHBORHOOD section
indicates stable prices, then market condition adjustments would not be expected in the
comparison approach.

Regarding reporting one-unit housing trends demand/supply:

If the NEIGHBORHOOD section indicates over supply or under supply, this should be supported
by the analysis of the months of housing inventory on the 1004MC.
Regarding reporting one-unit housing trends marketing time:
The marketing time reported in the NEIGHBORHOOD section should be supported by the days on- market data that is provided for each comparable and by the data reported in the 1004MC.

If the data in the grid is insufficient for trend analysis, the appraiser must consider additional
information. If there is limited comparable data within the subject’s neighborhood, that data should be reported, even if it is insufficient for trend analysis. The report should specifically note that the data in the 1004MC grid is insufficient for credible trend analysis. The appraiser should then analyze additional information that is sufficient to indicate trends.

Additional data that one might consider could include things such as:

•Analysis of data in other nearby neighborhoods
•Analysis of a broader data set within the subject’s neighborhood (i.e. all sales rather than
just comparable sales)
•Consideration of market studies from local, regional or national sources
•Any other relevant data

Supply and Demand Page 2 Top of 1004 form:

At the top of page two of the URAR, the appraiser provides information about the number of
comparable sales in the neighborhood over the past year and the number of comparable
properties currently offered for sale.
This section of the URAR existed prior to the release of the 1004MC in 2009. The data in this
section is intended to provide a “snapshot” of supply and demand for comparable properties in the subject’s neighborhood. When conducting the searches required to provide this data, the geographic area searched should be consistent with the neighborhood boundaries reported in the NEIGHBORHOOD section of the URAR.
An appraiser should always run the query for comparable sales and listings using independent
criteria such as location, style, bedroom count, GLA, etc... Price should not be a primary search parameter. Searching by price range infers a predetermined range of value for the subject property rather than an objective analysis of data.
The appraiser should further filter the results by removing non-comparable properties before
reporting the query results in ranges. Ask, “Would I, or could I, have used this sale or listing to value the subject?” If not, do not include it in the ranges.
This is a common mistake that I notice when I view other appraisals. The numbers at the top of page 2 sometimes will be in the hundreds with a range in value over 50%. This probably means they are not using comparable properties and instead using the entire query of sales in the neighborhood.

OVERALL TRENDS:
For each line item in the 1004MC data grid, there are corresponding boxes for the appraiser to indicate the overall trend for the data reported on each line. The boxes are arranged so that indicators in the far left column reflect positive change, indicators in the far right column reflect negative change, and indicators in the center column reflect stability.
It appears that if you use additional information to come to a overall trend conclusion the reconciled trend should be marked in this section regardless to what the Prior months show to the left. I am still up in the air with this one but it makes more sense for reviewers. If there doing an automatic check on the sale price trend on the 1004MC with the one unit housing property values on page 1 then both should line up.

 

[Joyce Potts]

Like everything else, no one agrees on this topic.

My opinion is, it can be. Or it can represent a sub, micro or macro market, depending on what you elect it to be within the context of its PURPOSE in the first place.

There will always be properties that will NEVER fit into any statistical modeling and in those cases the appraiser will probably spend more time elaborating on why certain properties will not fit into typical 1004MC or guidelines.

 

[Deleted member 128537]

My general approach is to fill in the numeric section of the 1004MC with the numbers that correspond with the assignment instructions, then select the checkboxes (increasing, decreasing, stable) that apply to the actual market trends as determined through a more comprehensive market analysis.

I almost always fill the entire last paragraph with justification for the checkbox selections, and I have a paragraph in the addenda which explains why the 1004MC is a pile of dooky. The checkboxes on page 1 of the URAR will always match the checkboxes on the 1004MC.

Haven't had any problems from clients doing it this way.

This is exactly what I do, and I explain why. I typically put real estate trends that I get from our state Real Estate board for our county in the report. It shows a 8 year trend month to month for all sales. About every 2 months I update it.

Sometimes I will put a second form the report in that looks like the 1004MC so that I can run a more specific market segment like all condos. So I will analyze all condo sales in the county using the 1004MC and then compare that 1004MC from year to year. It's about the only real way to look at over all trends because my market is so incredibly seasonal.

BUT THE 1004MC by itself is worthless.

 

[Meandering]

I hate to have to point out an obvious DUH! to the GSEs and other people who wear suits to work, but this is what you get when bean counters who know nothing about appraising, start designing protocol ......

Reference:
https://www.fanniemae.com/content/guide/selling/b4/1.3/03.html

Note that these instructions state that the appraiser must use the information in the 1004MC as the basis for the trends reported in the NEIGHBORHOOD section. Because the data in the
1004MC is focused on those properties that compete directly with the subject, the trends
reported in the NEIGHBORHOOD section should be the trends for properties that compete with the subject (i.e. the subject’s sub-market), and not the trends for the neighborhood as a whole. While this is contrary to the way that many appraisers have been trained, it is logical. The mortgage loan is being placed with a specific home used as collateral – not the entire neighborhood. Hence, it is logical to focus on the trends for the subject property and other properties that compete with the subject property.

Fannie left out a step on the 1004MC.

Now this is a biggie, so every one pay close attention.


IF, you only use comparables from the neighborhood in the 1004MC...

Lets just say that 10 were sold over the year and 10 were active over the year.

So,

Do you expect those 10 sales to have the same sale prices????

and

Do you expect those 10 listings to have the same list price???

If they do, then you have a perfect appraisal that does not require adjustments to the comparables.

But if you use all 10 of the comparable sales in the grid, and all 10 of the comparable listings,

you will find that you will not know what the market trend of the comps are

UNTIL YOU MAKE ALL THE ADJUSTMENTS FOR FAVORIABLE FINAINCING AND THE PHYSICAL DIFFERENCES,

Because,

If the comps without a garage sold 6 months ago, and the comps with the finished basements sold last week....

The 1004MC will show an INCREASING TREND,

when really, the price difference are attributable to different amenities of each property,

AND IS THE REASON WE MAKE ADJUSTMENTS TO START WITH.

So by using unadjusted comparables in the 1004MC we are committing A non sequitur reasoning error if we do not control for the physical differences and favorable financing that caused the prices to differ, and then are forced into relating those differences only to the age of the sales (time).

So, you could put all the comps on the grid, and make no adjustments to anything other than market conditions, if the inferior comps sold either earlier or later than the superior comps.

Or did we forget, we are choosing comps to BRACKET everything?

Try it.

You can not opine a market price trend with comparables, UNTIL YOU MAKE ALL THE OTHER ADJUSTMENTS TO THE COMPARABLES.

:Eyecrazy:

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