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

[headscratch]

The 1004mc must provide support, not it must be supported. If page 1 says its an increasing trend and the 1004mc says stable, then comparable properties similar to the subject do not support an increase in value. All the form is asking is to provide additional support, since 2 bedroom 1 bath 800 sf houses have a completely different trend than 4 bedroom 3 bath homes around 2000 sf. If page 1 and the 1004mc don't agree simply state the trends of properties similar to the subject and if it does or does not warrant an adjustment for market conditions. If there is a lack of data, there is a lack of data. Do NOT add additional properties just so there is data. That is misleading and not the purpose. Just state do to the lack of data there is no evidence that supports an increasing trend for the subject as page 1 implies.

 

[JSmith43]

Then there are the three choices, Increasing, Stable, & decreasing. What if the trend indicates erratic price swings in a short time frame with not much data? Where is the "unstable" check box?

There have been quite a few times I have had to hold my nose to check Stable.
Talk about being forced to put words in your mouth. Sure, I explain that Stable is my default check box when there is no clear trend up or down but it sure doesn't mean I observed price stability.

 

[Amy Perkins]

I think that the whole form is a bit misleading. If my supply is at 1 month, then two months, then three months, it is not necessarily an increasing supply trend. Anything less than three months is a low supply. The median price is almost always skewed due to views, I have to explain why the boxes checked might not be reliable results so many times in the written portion of the form. Say the supply went from 40 months to 30 months is this decreasing, no it is an oversupply for that market. I also struggle with the whole stable box without any unstable box.

 

[residentialguy]

Until they change the 1004 to state "Comparable Trends" instead of "One Unit Housing Trends" or "2-4 unit Housing Trends" or "Condominium Unit Housing Trends"...the 1004MC and page 1 will NOT be the same. Until then....they will have both. Any other way would be misleading.

That is consistent with HUD handbook 4150.2 that correctly clarifies this with: "the information on the 1004 MC relates to properties that are comparable to the subject property and which a buyer may select as a competitive property. This reflects the subject’s micro market. The information in the neighborhood section is broader and encompasses market activity in the subject’s macro market."

 

[Rich Heyn]

When completing the One-Unit Housing Trends portion of the Neighborhood section of the appraisal report forms, the trends must be reflective of those properties deemed to be competitive to the property being appraised. If the neighborhood contains properties that are truly competitive (that is, market participants make no distinction between the properties), then all the properties within the neighborhood would be reflected in the One-Unit Housing Trends section. However, when a segmented or bifurcated market is present, the One-Unit Housing Trends portion must reflect those properties from the same segment of the market as the property being appraised. This ensures that the analysis being performed is based on competitive properties. For example, if the neighborhood contains a mix of property types not considered competitive by market participants, then a segmented or bifurcated market is present. Additionally, the conclusions reported in this portion of the appraisal will be supported by the analysis contained in the Market Conditions Addendum to the Appraisal Report (Form 1004MC). The appraiser should also provide commentary on the other segment(s) of the neighborhood when segmentation is present.

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

 

[residentialguy]

When completing the One-Unit Housing Trends portion of the Neighborhood section of the appraisal report forms, the trends must be reflective of those properties deemed to be competitive to the property being appraised. If the neighborhood contains properties that are truly competitive (that is, market participants make no distinction between the properties), then all the properties within the neighborhood would be reflected in the One-Unit Housing Trends section. However, when a segmented or bifurcated market is present, the One-Unit Housing Trends portion must reflect those properties from the same segment of the market as the property being appraised. This ensures that the analysis being performed is based on competitive properties. For example, if the neighborhood contains a mix of property types not considered competitive by market participants, then a segmented or bifurcated market is present. Additionally, the conclusions reported in this portion of the appraisal will be supported by the analysis contained in the Market Conditions Addendum to the Appraisal Report (Form 1004MC). The appraiser should also provide commentary on the other segment(s) of the neighborhood when segmentation is present.

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

Rich,

Aside from the fact that the page 1 does not suggest that...typically there is not enough data to conclude trends. Trying leaving page 1 blank once. We already have the 1004 MC telling all bout the trends of comps in the neighborhood (which is typically blank due to lack of data). Now FNMA want to repeat that on page one???? Why???? They have that info on the MC. Since the subject is influenced by it's surroundings, it only makes perfect sense that the appraiser take a look at the whole "neighborhood" as page 1 indicates.

Don't let stupid people make you do stupid things.

 

[residentialguy]

Their idea of "competitive" is not the same a "comparable".


Don't believe me? Read closer on that link you posted
https://www.fanniemae.com/content/guide/selling/b4/1.3/03.html

Trend of Neighborhood Property Values, Demand/Supply, and Marketing Time

"When completing the One-Unit Housing Trends portion of the Neighborhood section of the appraisal report forms, the trends must be reflective of those properties deemed to be competitive to the property being appraised."

Ok...pg 1 asks for competitive properties. Now go down a bit further. They distinguish comparable from competitive properties.


Price Range and Predominant Price

"The appraiser must indicate the price range and predominant price of properties in the subject neighborhood. The price range must reflect high and low prevailing 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) and, in some cases, for competing properties>> (one-unit properties when the property being appraised is a two- to four-unit property or a condo unit, or condo units when the property being appraised is a co-op unit)."


Hmmm... competing properties: "one-unit properties when the property being appraised is a two- to four-unit property or a condo unit, or condo units when the property being appraised is a co-op unit."

Sounds like a neighborhood analysis, not a sub-market analysis.

 

[J Grant]

The 1004mc must provide support, not it must be supported. If page 1 says its an increasing trend and the 1004mc says stable, then comparable properties similar to the subject do not support an increase in value. All the form is asking is to provide additional support, since 2 bedroom 1 bath 800 sf houses have a completely different trend than 4 bedroom 3 bath homes around 2000 sf. If page 1 and the 1004mc don't agree simply state the trends of properties similar to the subject and if it does or does not warrant an adjustment for market conditions. If there is a lack of data, there is a lack of data. Do NOT add additional properties just so there is data. That is misleading and not the purpose. Just state do to the lack of data there is no evidence that supports an increasing trend for the subject as page 1 implies.

That is what I have been doing and guidance I have gotten and how it makes sense as we can not be misleading. Adding in additional data that are non comparable sales to the MC form to get enough dtat to "match" the trend page on p 1 is misleading, it does not paint a true picture of the actual subset of properties competing with subject which indeed may not be following a larger trend. If it were that conforming in the market Zillow could indeed value every property in a nano second.

 

[DWiley]

...Why???? ...Don't let stupid people make you do stupid things.

There is a simple reason, and it is certainly not stupid. It is all about credibility.

USPAP says that credibility is achieved via support by evidence and logic. Well, the 1004MC form should contain the evidence and logic that supports the trends that have been indicated in the neighborhood section.

The reason we now have the 1004MC is the fact that so many appraisers were just checking boxes without looking at any data or doing any analysis. As a result, they missed big market changes, or were very late to see (and report) them.

 

[J Grant]

There is a simple reason, and it is certainly not stupid. It is all about credibility.

USPAP says that credibility is achieved via support by evidence and logic. Well, the 1004MC form should contain the evidence and logic that supports the trends that have been indicated in the neighborhood section.

The reason we now have the 1004MC is the fact that so many appraisers were just checking boxes without looking at any data or doing any analysis. As a result, they missed big market changes, or were very late to see (and report) them.

I'll agree with the last part about prior report analysis.. But regarding credibility, the mc form and neighborhood section ask for two different sets of information ( and to be credible appraisers should clarify about each )

The first page addresses neighborhood and trends of subject neighborhood, do you agree neighborhood addresses the relevant location boundaries where subject is located and those boundaries may include properties not similar to subject? The neighborhood trend asks about activity of sales and inventory in subject neighborhood, which includes sales and listings of properties not comparable to subject but located in location neighborhood boundaries.

The MC form asks about only sales of listings of properties similar to subject that could be considered as comps for subject for use in report. These comps may be in neighborhood or located out side of it. There are typically fewer comps for subject, and the trend of sales /listings similar to subject may differ from trend of neighborhood property sales/listings unlike the subject.

The appraiser has to be credible for both sets of information and explain that they can differ, because it can tie in with other elements of the report. If subject is a luxury home of 6000 sf in an neighborhood boundary that includes mostly smaller less costly homes of 2000 sf, after gathering 6000 sf range home comps from beyond neighborhood, appraiser may conclude subject size makes it an over improvement, for example. If appraiser gave results of trends from MC form of 6000 sf comps selling for 800k and put them in neighborhood trend where the predominant homes are selling for avg of 450k, it would be misleading and make subject look like it conforms to neighborhood while in fact it does not. The prices of smaller surrounding neighborhood homes may be rising, while prices for large luxury homes are stable (or vice versa) .

We can't over correct for problems of the past by asking for a degree of conformity now that makes reports actually less credible, while giving the appearance of being so by making everything match up neatly on report.

There were appraisers in the past who did analyze and report neighborhood trends as they actually were...only many mtge brokers or loan officers threw their appraisals in the garbage and ordered an appraisal that reported neighborhood trends that looked good on paper and made the deal work. One cause of problems seen in appraisals arise from what lenders accept and who they choose to use.