"growth" Checkboxes On Gse Forms

[TRESinc]

Competing is for the active listings.
Comparable is for the sales.

.

read it again...

Sales and listings must be properties that compete with the subject property, determined by applying the criteria that would be used by a prospective buyer of the
subject property

competing is not the same thing as comparable.

 

[DWiley]

The data points on the MC rarely are populous enough to be a reliable indicator of trend and often do not line up correctly with the overall trend.

True - but as you pointed out in your prior post, the overall trends don't have to be based on the data grid in the 1004MC. For some reason many appraiser just cannot seem to grasp that the data grid is just a small part of the 1004MC. If there isn't enough data in that grid, then add data elsewhere (like the big blank space in the middle of the 1004MC or on an addenda to the 1004MC ) Either way, the trends will still match, if done correctly.

 

[VolcanoLvr]

We're going off track again, which so often happens on this forum. My initial post concerns form page 1, Neighborhood section, "Growth" checkboxes. Let's focus on that.

There have been 65 'reads' to this post (at the time I started this message), and only 6 responses, 2 of which are not related to this initial post....so a net of 4.

That tells me appraisers really don't think about what this part of the form concerns, and what should be reported. It's my contention most appraisers just check "Stable" without really understanding why or what that reflects. It may be an incorrect response.

Marion and I have a symbiotic, distant relationship, both privately and publicly, which I enjoy and appreciate. She is the only one who has posted what I consider to be mostly correct information. On a couple of points (her first & second) I will respectfully disagree.

My 'take' on this part of the form is pretty simple: The "Growth" checkboxes reflect population and new home building, in the Neighborhood YOU have defined in the report.

If your subject property is in a Neighborhood fully built-out, with no new construction, and no significant population gains, the 'Growth' would be SLOW, not 'Stable.' (I've been defining and reporting this for many years now, with no one questioning it.)

If your subject property is in a Neighborhood where new homes are being built at a consistent, though moderate, amount, and new people are moving in at the same pace, the 'Growth' would be STABLE. (I have some Neighborhoods like this.)

If your subject property is in a Neighborhood where new homes are being built rapidly, with corresponding increases in population, the 'Growth' would be RAPID. (I have NO neighborhoods like this in my service area.)

Gentrification, or updating of the Neighborhood, is related to the above. But I don't believe that just because a home is vacated, then torn down, and a new home built in its place makes that 'Growth' Rapid, or even Stable. The overall Neighborhood 'Growth' can still be SLOW. If an entire Neighborhood is torn down, burned out, or flooded out, then replaced, an appraiser can analyze the 'Growth' pattern as noted above, and report what is observed.

I don't think these checkboxes are just opinion categories. And they have nothing to do with national, state, or region trends. Instead, they are relative to observations we appraisers see when driving the Neighborhood....which is something we are obligated to do when we complete a GSE form assignment. They can also relate to census (population) analysis, but it's doubtful most appraisers dive that deeply when churning and burning assignments.

 

[DWiley]

My 'take' on this part of the form is pretty simple: The "Growth" checkboxes reflect population and new home building, in the Neighborhood YOU have defined in the report.

If your subject property is in a Neighborhood fully built-out, with no new construction, and no significant population gains, the 'Growth' would be SLOW, not 'Stable.'

Another take - If there is no potential for additional growth, the most proper response is STABLE, because the area has stabilized at its maximum capacity. One would only check RAPID or SLOW if there was the ability for future development.

The forms are shortcuts to help lenders make risk decisions. An indication of "SLOW" is designed to be a quick way to identify a negative factor. Being fully developed is not a negative.

 

[djd09]

They need an unstable box.

 

[djd09]

How about a market condition rating system? MC1 good MC2 average MC3 poor

 

[Michael S]

When analyzing neighborhoods I typically look at population and household growth and comment on those factors. Most areas I work in both are around 0% to 1%. In smaller towns they're often negative. On the edge of the city where all the new apartments and subdivisions are being built it could be 2% or more, though I rarely see it that high anymore since the whole state is pretty much flat in terms of both.

Generally anything under 0.5% I'll comment that it's stable. More than that and I'll indicate there is minor growth or maybe moderate growth. There's not a whole lot of rapid growth anywhere in New Mexico, at least not in the last 5-10 years.

 

[Ahhhh Yeahhhh]

As is so often the case with these blasted checkboxes and no guidance on what they mean... IN order to remain compliant with USPAP you must include your definition and why you selected a particular box. It doesn't matter what your rationale is so long as you disclose your rationale. The reason for this is that there is no industry standard and no guidelines from FNMA or anyone. So if you check a box, describing the market as slow, stable, or rapid... Then provide discussion on why you consider it so.

Its a USPAP requirement that virtually no appraisers are complying with.

 

[jay trotta]

Another take - If there is no potential for additional growth, the most proper response is STABLE, because the area has stabilized at its maximum capacity. One would only check RAPID or SLOW if there was the ability for future development.
Agreed
The forms are shortcuts to help lenders make risk decisions. An indication of "SLOW" is designed to be a quick way to identify a negative factor. Being fully developed is not a negative.

I disagree the forms are shortcuts

 

[hastalavista]

We're going off track again, which so often happens on this forum. My initial post concerns form page 1, Neighborhood section, "Growth" checkboxes. Let's focus on that....

This is a good question; I don't remember this being discussed recently.

A Neighborhood's life cycles are identified as:
1. Growth
2. Stability
3. Decline
4. Revitalization
(see Appraising Residential Properties, 4th ed., p. 41-45)

In sum...
- Growth is defined when there is new building on previously unimproved land or when properties are converted from a different land use.
- Stability begins when growth ends (it is no longer possible or profitable to build). Neighborhood stability is characterized by an absence of marked growth or decline. Demand for new and existing units is generally balanced with supply.
- Decline occurs when a neighborhood can no longer compete with comparable neighborhoods. Maintenance costs may increase due to the age of the building or (per the text, "more likely") the decline is due to the location, style, and utility of residences losing their appeal.
- Revitalization is effectively a process that leads to Growth (the circle is complete and the cycle starts again). The decline in values that occurred previously ceases; buildings in disrepair are renovated or torn down and converted to a more intensive use. Gentrification is a form of revitalization.
Since "revitalization" is not a check-box choice, this condition would logically occur at the end of the decline or at the beginning of the growth stages. Check the logical choice and explain.


By understanding this pattern, a competent appraiser can evaluate and conclude the appropriate stage of the neighborhood's life cycle... and address the question in the form in a credible and appropriate manner.