Form 1004MC for a lake front home?

[Peter LeQuire]

I'm with Lee.

The 1004MC gets filled out with whatever appropraite data is available. Lack of similar sales (which would be considered comparables) to use in the 1004MC is a meaningful communication in itself: it tells the intended user that there are not enough similar sales that fit the time constraints (12-months) of the 1004MC within the subject's defined market, and therefore I (as the appraiser) am either going to have to
A. Go further than 12-months back in time, or
B. Go to a competing market.

Obviously, if the 1004MC driven data-collection process yields few results, then the 1004MC's function as providing trend indications for the sub-market isn't reliable. I would supplement the data with other sources (macro, which Marion doesn't agree with, or with trends form competing neighborhoods which are, hopefully, data rich).

The 1004MC gets filled out one-way or another. The sale/active/expired-withdrawn data points may be few or none. That's meaningful information.
The trend conclusions also need to be done: if the data from the 1004MC collection process is insufficient, then supplement it with what you think is the best proxy.


Good luck!

I have to disagree, in part.

The 1004MC should be completed as its instructions mandate - with comparable sales from the neighborhood. The number of sales and listings, by period, needs to be shown.

But, the MC addendum is a statistical form. It is inherently misleading to report inaccurate information, and it is inherently misleading to assert that trends can be indicated from a limited data set.

Before she quit participating, Jacqueline Doty, at the time with FHLMC, affirmed this position and said in this forum that concling trends from fewer than 30 data points was unreliable and misleading.

I don't complete the trends portion of the MC addendum if there isn't a sufficient amount of data: I do populate the fields dealing with sales, listings and prices. I put a statement in the comments why no trends are indicated. On a very few occasions, I've gotten the demand to complete the trends portion, which I've done: in those instances, I put a copy of the demand into the appraisal report, and disclaim responsibility.

That said, in developing and reporting the appraisal, I also extend my search for information beyond the immediate neighborhood in order to develop a sense of how the market - in general - is behaving. But I don't report the result of that extended search on the MC addendum.

I understand scope of work and assignment specific client requirements. But, I'd have to be shown where we're shielded from penalties that attach to providing misleading information or conclusions.

 

[Wm. Hattaway]

I have done similar appraisals where there were no comparable sales or listings within the subjects market. The 1004MC was completed using 0's and N/A's.

 

[TxArmadillo]

The OP didn't note if this was an FHA transaction but here's something from the December 2012 FAQ "Valuation Protocol" that went out:
___________________

Should data on the 1004MC mirror that in the neighborhood section of the appraisal report?

Not necessarily, 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.

_____________________

Hope this helps.

 

[sputnam]

It's going to depend on the client. I've reviewed many appraisals that had zeros entered in the 1004MC. Some clients are okay with that, some aren't. The key is in disclosing the search parameters your 1004MC data is based on. As with any summary statistics, they only have meaning in the context of the parameters.

 

[Lee Lansford]

It's going to depend on the client. I've reviewed many appraisals that had zeros entered in the 1004MC. Some clients are okay with that, some aren't. The key is in disclosing the search parameters your 1004MC data is based on. As with any summary statistics, they only have meaning in the context of the parameters.

I agree.

But, I will guarantee you that many appraisers are silent on this matter (whether by intent or lack of awareness of).

I consider such disclosure to be a part of the normal disclosure of SOW. I wonder when someone can't (or, doesn't) identify what constitutes a "comp", how do they go about their work?

 

[hastalavista]

I have to disagree, in part...

But, the MC addendum is a statistical form. It is inherently misleading to report inaccurate information, and it is inherently misleading to assert that trends can be indicated from a limited data set.

I don't complete the trends portion of the MC addendum if there isn't a sufficient amount of data: I do populate the fields dealing with sales, listings and prices. I put a statement in the comments why no trends are indicated. On a very few occasions, I've gotten the demand to complete the trends portion, which I've done: in those instances, I put a copy of the demand into the appraisal report, and disclaim responsibility.

Peter-

I think the disagreement is more in style than in substance (and, you may disagree with that! :laugh.
I'm thinking that I (like you) will come up with a market trend regardless if there is sufficient information contained within the 1004MC search parameter (to which you and I have no disagreement on how that is supposed to be collected).
In such cases where there is sufficient information, no problem (I go further and reconcile its finding to what my larger market-analysis indicates; usually they are the same... in some cases there may be a difference; hence, I reconcile the difference and make my call).
In such cases where it is insufficient, I use the following statement in the 1004MC:

The quantity of data is too limited to rely upon for meaningful analysis; I have therefore incorporated my larger competitive market research into my analysis. Based on all the data evaluated, this sub-market is best described as "XXXX" at this time.

But, I wouldn't argue with one who leaves it blank or puts "N/A" (however, apparently some clients do ).

Denis

 

[Peter LeQuire]

Peter-

I think the disagreement is more in style than in substance (and, you may disagree with that! :laugh.
I'm thinking that I (like you) will come up with a market trend regardless if there is sufficient information contained within the 1004MC search parameter (to which you and I have no disagreement on how that is supposed to be collected).
In such cases where there is sufficient information, no problem (I go further and reconcile its finding to what my larger market-analysis indicates; usually they are the same... in some cases there may be a difference; hence, I reconcile the difference and make my call).
In such cases where it is insufficient, I use the following statement in the 1004MC:


But, I wouldn't argue with one who leaves it blank or puts "N/A" (however, apparently some clients do ).

Denis

I hadn't thought about parsing our exchange to determine whether our disagreement is a matter of style or of substance: I think we take different boats to arrive at the same port at the same time.

 

[Alpine]

I don't complete the trends portion of the MC addendum if there isn't a sufficient amount of data: I do populate the fields dealing with sales, listings and prices. I put a statement in the comments why no trends are indicated. On a very few occasions, I've gotten the demand to complete the trends portion, which I've done: in those instances, I put a copy of the demand into the appraisal report, and disclaim responsibility.

I'm intrigued to read this, as I hadn't considered that option before. Of course, the 1004MC is a form which is shoved down our throats regardless of its limits and relevance with certain properties, so I have to wonder how many of my clients (read: sadly, too many AMCs) would accept reports without the trends boxes checked. Your approach supports my conviction that, at a minimum, the 1004MC should be modified to include a fourth box, viz. "Inconsistent" or "N/A", which would allow us to fill in the Inventory Analysis figures regardless of how all-over-the-map they are, but not have to sit perplexed over which box to check when that is the case.

My other conviction is that the sale periods should be expanded to: "Prior 12-24 months", "Prior 7- 12 Months", and "Current - 6 Months". Aside from a very unique period of market crash (2008-09, depending on geography), and mostly in the mass subdivisions of markets like Vegas, Phoenix, parts of CA, etc., for many of us in smaller, rural, lower-volume, more-stable-in-decline/appreciation markets, slightly expanded periods of data comparison would make the difference between the 1004MC being a valuable, applicable tool or not. Or perhaps give us a choice to use wider time parameters via a second form option more applicable to our local market and trends.

The Market Conditions Addendum principle is a good one, and the 1004MC forced many appraisers who weren't actually doing market analysis to at least perform the semblance of one. But we've test-driven it long enough to warrant its overhaul and expansion, and as I stated, start with giving me a fourth box...

 

[Terrel L. Shields]

I only know of one MLS that allows searching by "Lake front"

 

[Vermonter]

I'm intrigued to read this, as I hadn't considered that option before. Of course, the 1004MC is a form which is shoved down our throats regardless of its limits and relevance with certain properties, so I have to wonder how many of my clients (read: sadly, too many AMCs) would accept reports without the trends boxes checked. Your approach supports my conviction that, at a minimum, the 1004MC should be modified to include a fourth box, viz. "Inconsistent" or "N/A", which would allow us to fill in the Inventory Analysis figures regardless of how all-over-the-map they are, but not have to sit perplexed over which box to check when that is the case.

My other conviction is that the sale periods should be expanded to: "Prior 12-24 months", "Prior 7- 12 Months", and "Current - 6 Months". Aside from a very unique period of market crash (2008-09, depending on geography), and mostly in the mass subdivisions of markets like Vegas, Phoenix, parts of CA, etc., for many of us in smaller, rural, lower-volume, more-stable-in-decline/appreciation markets, slightly expanded periods of data comparison would make the difference between the 1004MC being a valuable, applicable tool or not. Or perhaps give us a choice to use wider time parameters via a second form option more applicable to our local market and trends.

The Market Conditions Addendum principle is a good one, and the 1004MC forced many appraisers who weren't actually doing market analysis to at least perform the semblance of one. But we've test-driven it long enough to warrant its overhaul and expansion, and as I stated, start with giving me a fourth box...

I do the same as Peter if the trend cannot be determined on the MC form.

Fourth box "Year to date". With seasonal fluctuations, it's the only reliable indicator here.