"growth" Checkboxes On Gse Forms

[hastalavista]

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.

Alternatively, one can improve one's understanding of appraisal principles and then cite the recognized texts as the basis for conclusions in the report.

 

[Meandering]

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.

That's what I write.

Stable at zero.

 

[VolcanoLvr]

Danny....if you would be so kind, please provide chapter and verse from the Selling Guide to back up your 'take' ... so I can go look it up. I'm not challenging you, but do want explicit info if I am to change my 'take' and position on this topic.

Denis....while your information is based on appraisal textbook meanings, "Rapid" is on the form and is not one of the appraisal principals you cited. (I'm not disagreeing with what you wrote in the context it is written, and how those apply, but those items don't directly correlate to the forms.)

Another poster mentioned that far too frequently, there are reporting items on the ancient (and somewhat poorly designed) forms we use that have no definitions provided by the form creators (the GSE's). Agreed.....that leaves appraisers speculating and twisting in the wind about how to "check a box", etc.

When I cite "SLOW" or "STABLE" as the 'Growth' in the Neighborhood, I define why I do that - on the form and Addendum. Most appraisers don't define those check boxes, and just blow through them without really thinking about what they mean, or what they are asking. 'Stable' becomes the de facto safe response, although it may not be accurate.

 

[hastalavista]

Denis....while your information is based on appraisal textbook meanings, "Rapid" is on the form and is not one of the appraisal principals you cited. (I'm not disagreeing with what you wrote in the context it is written, and how those apply, but those items don't directly correlate to the forms.)

I hear you.
I'm not troubled by making the association. if one reads the the full discussion and description of the various life cycles, and consider that the questions within the form are part of the neighborhood analysis, I see no real leap of faith needed to link the basic principles to what the form is asking.

But here is an oldie but goodie from another source: Using the Residential Appraisal Report Forms, AI, 2005.

In regard to the three boxes: "Growth: Rapid Stable Slow":
"These check boxes help describe any change in the area. The term "growth" is interpreted by most to be the rate at which the area is building up with improvements. An established neighborhood would have a stable growth rate if the line were interpreted to mean the rate at which development occurs. If 100% of the land in a neighborhood is developed, the growth rate is "0", and it will be the same the following year and the year after that.

The meaning of the term "growth" is difficult for many appraisers to agree on. The Dictionary of Real Estate Appraisal defines the term as a stage in a market area's life cycle in which the market area gains public favor and acceptance. The definition refers to the lifecycle of a market area, which includes the following stages: growth, stability, decline, and revitalization."​

Two sources pointing to the same general concept.

 

[DWiley]

Danny....if you would be so kind, please provide chapter and verse from the Selling Guide to back up your 'take' ... so I can go look it up. I'm not challenging you, but do want explicit info if I am to change my 'take' and position on this topic.

Denis....while your information is based on appraisal textbook meanings, "Rapid" is on the form and is not one of the appraisal principals you cited. (I'm not disagreeing with what you wrote in the context it is written, and how those apply, but those items don't directly correlate to the forms.)

Another poster mentioned that far too frequently, there are reporting items on the ancient (and somewhat poorly designed) forms we use that have no definitions provided by the form creators (the GSE's). Agreed.....that leaves appraisers speculating and twisting in the wind about how to "check a box", etc.

When I cite "SLOW" or "STABLE" as the 'Growth' in the Neighborhood, I define why I do that - on the form and Addendum. Most appraisers don't define those check boxes, and just blow through them without really thinking about what they mean, or what they are asking. 'Stable' becomes the de facto safe response, although it may not be accurate.

I will do that as soon as you do the same.

I suppose that you know as well as I that the Selling Guide does not address the matter, but I post that observation for the benefit of those who might not know how to word search the Selling Guide

 

[VolcanoLvr]

So if 'growth' is ZERO, can't that also be interpreted to mean "SLOW"? Especially when that term is defined by the appraiser in the report saying that either no or limited new construction resulting in population increase is taking place in the Neighborhood?

Another way to examine this is to try to figure out what SLOW means if STABLE = Zero. Seems to me that SLOW would then be 'less than zero' GROWTH.....which does not make sense - in terms of new construction. But it does in terms of population, as I previously explained. (Think Detroit, when thousands of people abandoned homes in many neighborhoods about 8 years ago.)

The textbook meaning provided by Denis is what I have also mentioned: "The term "growth" is interpreted by most to be the rate at which the area is building up with improvements." But oddly, the textbook does not mention POPULATION.

In short, the GROWTH check boxes on the forms designed by the GSE's really don't do justice to provide meaningful information to the reader.....unless the appraiser defines what the 'checked box' means in the context of the report's intended use.

 

[Howard Klahr]

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

Really, which requirement is that, specifically?

they are relative to observations we appraisers see when driving the Neighborhood.

You are correct but relative to what?

And they have nothing to do with national, state, or region trends.

This is what you are not understanding. This is exactly what your observations are relative to! What the checkboxes are asking is how the conditions in the neighborhood (in this case the growth rate) is compared those of the overall city, metro, county, region

 

[hastalavista]

But oddly, the textbook does not mention POPULATION

Population is certainly a factor the deeper one goes into the market analysis.
For most GSE work, we do a Level A or B analysis (I rarely see "B", although I think that is what I do); these are inferred analysis using historical data to draw conclusions. The next step is fundamental (C and D) which uses the basic components of the market forces (including population) to make forecasts.
But population is typically translated into household size. Recently, we've seen household size increase as adult children have come home; population could increase yet housing demand decrease in such a scenario.

As I said, I think the question you ask is a good one worthy of discussion. I don't have much of a concern regarding the risk of mischaracterizing a market in terms of its life cycle status (or growth trend). I think most appraisers can differentiate between the market characteristics if they think about it. Some appraisers don't think about it, and that is what gets them into potential trouble.

Here is a short reference source. It doesn't provide specific answers but it does provide guidelines to think about: http://www.appraisalinstitute.org/assets/1/7/guide-note-12.pdf

 

[DWiley]

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 ....

Line number from USPAP to support that assertion?

 

[residentialguy]

Line number from USPAP to support that assertion?

line 2303. Come on, this is Appraisal 101 stuff.
http://www.USPAP.org/#84/z