formula for time adjustments

[KenRossman]

I don't know how much the 'amount' or 'type' of data factors into the decision to use contract dates. I do know what FNMA requires:

XI, 406.03: Adjustments to Comparable Sales (06/30/02)

"Comparable sales must be adjusted to the subject property—except for sales and financing concessions, which are adjusted to the market at the time of sale. The appraiser must make appropriate adjustments for location, terms and conditions of sale, date of sale, and the physical characteristics of the properties. "Time" adjustments must be representative of the market and should be supported by the comparable sales whenever possible. The adjustments must reflect the time that elapsed between the contract date (or the date of the "meeting of the minds") for the comparable sale and the effective date of the appraisal for the subject property."

Fannie Mae guideline or not, the beginning date or the ending date for a market condition adjustment could be the contract date of the comp or the effective date of the appraisal, however if market conditions changed subsequent to the contract date or prior to the effective date, the beginning date or ending date (or both) could be the time of the change.

IE. The market has been increasing or decreasing at a steady pace, then an event happens to trigger a change (stock market crash, large fed rate hike or drop, major employer shutdown or plant opening, etc., etc.).

The market condition adjustment would be calculated from the contract date of the comp to the approximate date of the change in market conditions or from the approximate date of the change in market conditions to the effective date of the appraisal or sometimes between two different changes in market conditions.

 

[hastalavista]

I would say "it depends" on how data and how it is analyzed.

I don't know how much the 'amount' or 'type' of data factors into the decision to use contract dates. I do know what FNMA requires.

(BTW, I mistyped in my original quote; I meant to say "What type of data and how it is analyzed.).

Jim-
I'm not disputing Fannie Mae (at least, not on this!). What I said in my first quote was that in my market, when I analyze the difference between the contract dates and COE dates, I find an insignificant difference. In essence, the contract dates, when the sampling is large enough and one is not trying to figure out new construction, is equivalent to the COE dates.

Only one of my MLS systems provides a statistical analysis on contract date median sale prices; and the rest of its statistical analysis functions are not so good. The others I use have much better statistical analysis functions, but will not track pending prices over time (once a property moves to "sold", that's how it is tracked).

So, when I say "type" and "how" the data is analyzed, I mean there is more than one way to come up with a market-supported time adjustment that meets the "reasonable" test given the intended use of a typical mortgage finance transaction (and, this was my point when first responding in this thread).

But what I am going to do (thanks to your point) is to make sure that I add in my comments that the closed sales trend is reflective of the changes since the contract price dates for my comps for my particular assignment (assuming, of course, I verify that's the case!):new_smile-l: .

 

[Fred]

∑©◄♣♫
For those who are curious, one way to accomplished it is by writing your post in MS Word and insert a symbol. Then cut and paste to the forum.

"When you are strong, appear weak."
Sun Tzu
The Art of War

Are you still worried about posting symbols? You know, Dennis, my last post mentioned poker, and acting weak when they have strong hands is exactly what most people do. Sun Tzu also said something about war being based on deception. Well, it sounds to me like old Sun was accustomed to deceiving some pretty simple minded adversaries.

 

[Dennis J. Black ASA IFAS]

Worried?

Worried, no. Tinkering around on a Sunday morning, yes.

 

[Jim Shoe]

Fannie Mae guideline or not, the beginning date or the ending date for a market condition adjustment could be the contract date of the comp or the effective date of the appraisal, however if market conditions changed subsequent to the contract date or prior to the effective date, the beginning date or ending date (or both) could be the time of the change.

IE. The market has been increasing or decreasing at a steady pace, then an event happens to trigger a change (stock market crash, large fed rate hike or drop, major employer shutdown or plant opening, etc., etc.).

The market condition adjustment would be calculated from the contract date of the comp to the approximate date of the change in market conditions or from the approximate date of the change in market conditions to the effective date of the appraisal or sometimes between two different changes in market conditions.

It sounds lke we are saying pretty much the same thing. If buyers are paying $100,000 for a Plan A in January, $105,000 in Feb, $110,000 in March, then prices remain stable until the effective date of your report in May; it sounds like you would report the $10,000 change in market conditions from January to March. The math would be accurate; however, FNMA would want to see a that this adjustment reflects all changes in the market from Jan to May. In other words, that prices did not DECLINE from $110,000 in March to $95,000 in May. In this case, the January comp would warrant a $5,000 NEGATIVE adjustment. (-$10,000 for the Feb comp... -$15,000 for the March comp) Of course, this all assumes that these comps accurately reflect a true change in market conditions.