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

[Lee Lansford]

Do they have small lake communities by you?

We have lots of them here.

So lakefront in one community might be comparable to lakefront in an other community, however, these different neighborhoods, might require location adjustments, which, you will mistake for changes in market conditions when used unadjusted raw data in the 1004MC. And OMG! if you have 3 that are smaller than the subject and 2 that are larger, your median value is going to be one of the 3 smaller ones.

Now how is that showing the market trend for the subject?

The concept of the 1004MC was valid. The propagation of "how" to fill in the form, or even address market conditions is still being dictated to in "fuzzy" requirements.

Even the APB does not come up with what defines a market that is increasing, decreasing or stable.

And yes, there are some markets that are dead, or have no market activity, which may or may not be lacking market activity over prolonged periods, and may or may not be historically the activity in the market.

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Whatever conclusion the appraiser arrives at...it requires support. Something.

 

[Meandering]

Whatever conclusion the appraiser arrives at...it requires support. Something.

Totally agree.

But in limited activity markets, the 1004MC just isn't it, and is no support.

Adding more crap to the 1004MC still does not produce the desired results of the trends that impact the subject.


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[Lee Lansford]

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I am one of the few people that actually like the 1004MC, despite the flaws many people cite. When it falls in line with the other statistical data, it's a wonderful thing. That happens about 60% of the time in my market.

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I, too, like the 1004MC as an additional tool in the appraiser's tool-kit.

My point is this: Whatever opinion of "overall trend" that the appraiser arrives at--it can't be pulled from thin-air (which, from what I frequently see, more than a few appraisers do).

 

[Meandering]

Lee,

Thank you for your use of the "overall trend". Overall, seems to be a concept that clients and many appraisers totally ignore and go right after pricing. I've lost more than a few clients I've told to go pound sand, when they come back telling me, I should have positive market adjustments because that's what 6 sales on the 1004MC said to them, even though they ignored my 7 page market condition analysis, and HUD's county wide market condition analysis, all included in my report . I have no problem telling clients or anybody to go pound sand when they think trends, historic and forecasted can be opined from limited data sets.

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[Lee Lansford]

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The bottom line is that if the 1004MC has too little data for trend analysis, then the 1004MC has not been completed correctly. :new_llying:

The 1004MC instructions, printed right on the 1004MC, say that the data in the 1004MC MUST be used to support the trends reported in the neighborhood section.

The grid should be based solely on comparable properties in the subject's neighborhood. But the grid is just part of the form. If the grid does not have enough data for trend analysis, then more data must be added. What kind of data and how much? Data that supports the trends reported.

What some folks are overlooking among the good advice shared by Mr. Wiley is found in the final three sentences:

"If the grid does not have enough data for trend analysis, then more data must be added. What kind of data and how much? Data that supports the trends reported."

 

[Lee Lansford]

Totally agree.

But in limited activity markets, the 1004MC just isn't it, and is no support.

Adding more crap to the 1004MC still does not produce the desired results of the trends that impact the subject.


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As I recall sharing with prospective appraisers when I taught principles some years ago: "Explain, explain, explain".

Few...very few...appraisers "explain" (on the other hand, many don't do the research and analysis and they don't want to have to explain that ).

 

[Meandering]

What some folks are overlooking among the good advice shared by Mr. Wiley is found in the final three sentences:

"If the grid does not have enough data for trend analysis, then more data must be added. What kind of data and how much? Data that supports the trends reported."

I addressed it in two of my posts.

So if you're going to let me "add some data" to support a trend, I'm going right to the superior neighborhoods, and superior comps, and get that "increasing market" thing happening so I can make positive adjustments to all my comps, and bring it in at contract price or better,

Yeah that's the ticket.



No more ROV's for me!


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[Scott Brown]

The 1004MC form is the hornet's nest of appraisal issues. I spend an adequate amount of time collecting and reporting market data and I'm consistent. To me the key is to have a large sample size - 100 closed sales or so. I've seen some reports where the neighborhood is too narrowly defined. Typically its a geographic area that defines the market but when doing a duplex the market might be the city and a couple cities nearby. Or if its a high-dollar waterfront property then the characteristics will define the market.

Lenders like to see all the neighborhood data/conclusions consistent in the report. I have no problem with that. I know that on the top of the 2nd page of the URAR it says "comparable properties" but I put the whole range of sale prices in those fields. Is a 2-bedroom townhouse selling for $40,000 comparable to a 4-bedroom detached dwelling selling for $300,000? No, but I think the best use of these fields is to list the raw data. If you start sorting the data then you it seems you are defeating the intended purpose.

I had a underwriting request today on a 1004MC issue. The median price in the current period was lower than the previous two. Decline? Maybe, but I attributed the "decline" to REO activity and the timing of such activity. I concluded that values were stable based on other indicators such as sale to list ratios, DOM, etc. Sometimes I'll include secondary data: Case - Shiller, etc. Regardless, the box checkers see that "declining" in the 1004MC median sale price field and then they need sales that occurred within the past five minutes.

 

[Mr Rex]

Why do so many appraisers hate the MC? Because it requires narrative discussion of market conditions. I just did a review that showed 25 months of inventory on the MC. First page of the 1004 showed stable growth (no new construction in the area at all) and Demand/Supply as in balance with 25 months inventory. The MC at a minimum exposes the market trends that skippy appraisers have been trained to ignore or obfuscate.

 

[Meandering]

Here:

http://www.huduser.org/portal/ushmc/mag.html

reconcile your 1004MC to what HUD says about your county.

Yup, free market report and you don't even have to think about it, and, how are your clients going to argue with HUD's analysis?


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