Killing the 1004MC

[William K]

My problem has always been that in this form Fannie and Freddie decide to use the term "Compete" as opposed to "Comparable".

"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"

I was speaking with a real estate attorney who said ( in regard to the above statement) the determining factor provided is far to broad without any real limitations as to comparability to the subject.

The #1 "CRITERIA" used by 99% of prospective buyers is price. ( How much can I get for this price?)

Say the subject is a 1000 sqft ranch in Average condition which is 35 yrs old and has a market value of $150,000.
Does a 2 yr old 2 Story with 2000 sq ft and in good condition which Sold at $151,000 "Compete" with the subject?

All properties Compete with each other however not all properties have similar Comparable features.

 

[residentialguy]

My problem has always been that in this form Fannie and Freddie decide to use the term "Compete" as opposed to "Comparable".

"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"

I was speaking with a real estate attorney who said ( in regard to the above statement) the determining factor provided is far to broad without any real limitations as to comparability to the subject.

The #1 "CRITERIA" used by 99% of prospective buyers is price. ( How much can I get for this price?)

Say the subject is a 1000 sqft ranch in Average condition which is 35 yrs old and has a market value of $150,000.
Does a 2 yr old 2 Story with 2000 sq ft and in good condition which Sold at $151,000 "Compete" with the subject?

All properties Compete with each other however not all properties have similar Comparable features.

The problem with this is that you are using only one of the terms. Yes, the 2 story price right can "compete" with a rambler...just as a comparable can "compete" in terms of price. BUT the grid specifically narrows the competing properties to "comparables". Had it said "competing sales", then you could make an argument that it can be that broad of a brush...but it narrows the competing properties down to "comparable sales & listings"

 

[David Mescon]

The MC form is about as useless as can be. I used to populate it with as much data as possible, which in my neck of the woods, was never very much, and, what little data did exist was usually highly disparate. For the grid, I usually just used absolute interpretation, and specifically noted such in the comment section, along with verbiage explaining my rationale for doing so. Then, citing the extreme paucity and diversity of data, I explained that the analysis was essentially useless and that it was given little or no consideration. THEN, I explained how I actually did determine price trends and why I did what I did. Never had a problem with this.

 

[Bearslide]

The MC form is about as useless as can be. I used to populate it with as much data as possible, which in my neck of the woods, was never very much, and, what little data did exist was usually highly disparate. For the grid, I usually just used absolute interpretation, and specifically noted such in the comment section, along with verbiage explaining my rationale for doing so. Then, citing the extreme paucity and diversity of data, I explained that the analysis was essentially useless and that it was given little or no consideration. THEN, I explained how I actually did determine price trends and why I did what I did. Never had a problem with this.

What he said. Which is exactly what I was doing BEFORE the 1004MC.

As to contacting Fannie - I did, and so did others - on both the 1004MC and the UAD. Not even the courtesy of a reply. Anyone who thinks Fannie gives a rats patootie what appraisers think is smoking some pretty potent stuff.

 

[Cob]

The only way the form would make sense to me is if you were/are comparing one calendar your to the previous year or 2 years, you compare the data from May, June, July and August from this year to May, June, July and August of last year. Taking a 12 month period and breaking it down in three segments is not going to provide good data.

Everyone should have their house appraised on Sept. 1st, then the past 3 months in the 1004MC will look great and will always look like it's increasing since that's when most real estate activity takes place. Don't get your house appraised on Feb. 1st, because the previous 3 month period will be Jan, Dec and Nov, so it will look bad. That's why this form is useless to me.m2:

 

[Joyce Potts]

Speaking residentially --

As usual as I disagree. What form or poll isn't flawed? What appraiser isn't flawed or biased to some extent? Except me, of course.

The purpose of the 1004 MC is to try and reconcile the appraised value via the Sales Comparison Approach with a statistical average and/or median price RANGE in that market--as defined by the MARKET and interpreted by the appraiser. Which is a key factor as well.

The better question is why is the 1004MC now SOP? Because too many appraisers cherry picked three high sales, backed into the perception of Fannie Mae guideline compliancy and thought he/she was all that and a bag a chips while that borrower now is probably underwater and short selling. <here it comes>

Residential real estate is highly driven by far more emotion that commercial real estate. While it can be quantified and statistically isolated it's not the saving grace--I give you AVM's and their spiffy Al Gore Rhythms.

I think most appraisers make too much of the 1004MC. My MLS has a feature in the statistical section to create a 1004MC that is either MLS generated if the property is listed OR those search parameters can be changed out by the appraiser. Again, simply disclose what you're providing. Not an appraisal goes out of my office that I don't have some kind of Market Conditions or Market Analysis Report - MLS Generated and with the search criteria provided. Sometimes I tweak it, sometimes I don't, but whatever I do is disclosed.

All the 1004Mc is people -- is for the quality/risk control to try and match or compare the appraisers' final work product against the overall statistical data. Some properties reconcile nicely, while others are never going to fit the mold, so stop beating yourselves up and don't throw out the entire concept because you're uncomfortable with it. Some properties are simply not typical or optimal candidates for statistical sampling approaches.

Chill. Use it to you advantage or take some Appraising Statistical courses and learn some basics for no other reason that you might feel more comfortable with it. If your Sales Comparison Approach doesn't jive with the statistical analysis, regression/Excel spread sheet, just explain WHY NOT.

 

[NC Appraising]

http://www.appraisalinstitute.org/education/einfo.aspx?id=23130


Here, see yaw there!!


I like the 1004mc. I wish they would add a line for pending sales, as it would further demonstrate how the market is moving.

Also, it should include another section for the market or a area that is large enough to gather enough data to produce reliable results.

 

[Joyce Potts]

http://www.appraisalinstitute.org/education/einfo.aspx?id=23130


Here, see yaw there!!


I like the 1004mc. I wish they would add a line for pending sales, as it would further demonstrate how the market is moving.

Also, it should include another section for the market or a area that is large enough to gather enough data to produce reliable results.

Don't fall over, but thanks! That's a great webinar and I'll try to attend. From what I'm seeing, Fannie Mae is making great strides at manipulating the REO's--so with major reductions in inventory--I'm seeing stable to INCREASING trends in some Central Florida markets.

I also think the 1004MC run different ways is great support to keep in a workfile and even though it may not support the Sales Comparison Approach results, it's great evidence of due diligence for the market trends.

Now go clean your glasses. They're dirty.

 

[George Hatch]

First off, I would never use the 1004mc as an indication of value. The only thing I would use it for is trend analysis.

The big problem with these is that is assumes you're tracking trends involving the prices of apples. But like any other mode of analysis the more variables you have in play the more data it takes to get a result you can trust. This is especially true in a really dynamic market where there are REOs and Shorts mixed with the so-called traditional sales. If you were only tracking one type of sale you might get a really different answer than if you're tracking 3 different kinds of sales.

Data distribution is a big deal.

 

[Joyce Potts]

First off, I would never use the 1004mc as an indication of value. The only thing I would use it for is trend analysis.

The big problem with these is that is assumes you're tracking trends involving the prices of apples. But like any other mode of analysis the more variables you have in play the more data it takes to get a result you can trust. This is especially true in a really dynamic market where there are REOs and Shorts mixed with the so-called traditional sales. If you were only tracking one type of sale you might get a really different answer than if you're tracking 3 different kinds of sales.

Data distribution is a big deal.

I'm not arguing the finer points, George. My biggest point is why it's being used as a risk/quality tool for some to red flag appraisals that are outside the normal SDV. As much as I ditch AVM's and other hybrid products, I think there's a place for them if used and understood properly, just not as sole value indicators.