market analysis conflicts within report

[gbnumbercruncher]

I am getting grilled over an appraisal I did in an area of fluctuating market conditions, which has raised questions regarding lack of consistency between my neighborhood housing trends analysis versus my mc addendum versus my sales grid adjustments. Despite written explanations, they think it is contradictory and are just looking for all the boxes to match perfectly.

One specific question I have is what is the time frame applicable to answering whether neighborhood values are increasing, stable or declining, on page 1 housing trend section of the report. The FNMA/fhlmc guidelines are vague on this topic, apparently intending to leave it open to interpretation. Reading appraisal blogs and guidebooks, I am getting answers ranging from it refers to the value trend over an extended period such as over a 3-6 year neighborhood cycle, others interprete it to mean over the past year, or even past month. I have always filled out the page 1 neighborhood trend boxes to reflect what is currently occurring in the market as of the date of appraisal, based on most current sales, current listings, current pendings, lp/sp ratios, days on market, supply vs demand, bidding wars, over asking price offers, etc. It is focused on what is happening right now. The mc addendum is looking back in time over the past year up to the present and primarily tells where the market has been, but in such a limited and convoluted way it does not necessarily accurately indicate the trends. (Besides, since the mc addendum is limited to neighborhood sales, in most cases in my locations the findings will be inconclusive due to the shortage of data). The sales grid is concerned with bringing the comparable sales value up to date reflecting market value changes since the comps went under agreement. So the three analysis's are reporting different things, the results can be consistent between the three, but often are not. In my case I have positive trends currently occurring in the market and being indicated on the neighborhood market section, though declining values and trends over the past year, so my neighborhood trends does not match my sales comparison adjustments. The median sales trend in the mc addendum does not match my other two analysis's. This is turning into a battle...

 

[ctapraser]

The neighborhood section of your report should match what you do to the comparables as you are reporting what is currently (based on past/present data)going on in your market. The MC addendum is a piece of crap. It is not neighborhood sales, as you posted, but comparables sales. Typically there are few comparables sales in my market so I state the MC addendum may not match the neighborhood section due to the small sample size.

 

[Lee Lansford]

...

The mc addendum is looking back in time over the past year up to the present and primarily tells where the market has been, but in such a limited and convoluted way it does not necessarily accurately indicate the trends. (Besides, since the mc addendum is limited to neighborhood sales, in most cases in my locations the findings will be inconclusive due to the shortage of data). ...

I seldom, if ever, "X" all of the boxes for "overall trend" in the 1004MC because data as to what I identify as COMPS for the subject are usually in short supply in each of the various time-periods and what are there aren't exactly homogeneous. My conclusion is that sparse data are inconclusive for credible support for trend identification.

In such instances--mostly all of the time--I supplement the 1004MC with analysis of other neighborhood data and it is this upon which I rely.

Let me ask: Do you always "X" all of the boxes in the 1004MC? If you do, why?

I see many a 1004MC where the appraiser has dutifully (without thinking, I conclude) X'd each and every box and I am left to wonder what the appraiser is using to support each conclusion.

 

[J Grant]

I usually make a comment on the MC form, which as others said is a part crap, that the data sample is too small to derive a reliable long term trend from, and therefore, although the MC form indicates that sales prices are (declining) this past quarter, overall market conditions and research in subject area and home type indicates prices are stable, therefore, stable is marked on first page of report.

For first report page, declining, stable, etc, I base it on aprox time frame from which we analyze the comps , and the time frame from which we use comps on the report...mainly based on last 6 months but including the past year, with some consideration to where market is heading via listing trends. One can always comment more on addendum, and in slower moving markets, a two year trend instead of one year might be more appropriate.

 

[Tim The Enchanter]

I'll mark the boxes in line with my larger analysis when the immediate hood has insufficient data. I say that's what I'm doing, then they get another set of numbers, and a nice graph.

 

[Joyce Potts]

Scan in a copy of the Appraiser's Larger Data Sampling and tell them to make sense out of it.

 

[Meandering]

So the three analysis's are reporting different things, the results can be consistent between the three, but often are not. In my case I have positive trends currently occurring in the market and being indicated on the neighborhood market section,

though declining values and trends over the past year,

so my neighborhood trends does not match my sales comparison adjustments.

The median sales trend in the mc addendum does not match my other two analysis's. This is turning into a battle...

Easily fixed.

But understand that Fannie Guidelines say that underwriters should check larger reporting sources to determine market conditions so while you may be analyzing the neighborhood and the submarket for the comps. The underwriter is verifying it with the county or state.

You need some addenda such as below:

1. Page one of the URAR contains analysis of all sales of all property types in the neighborhood and may or may not be a reliable statistical analysis of any trend due to an insufficient number of data indicators or a wide range and variance between data indicators.

2. The 1004MC is reliant on only comparable sales in the subject neighborhood. It is not considered to represent any “trend” as 1, 2, or 3 data points are not trends but reflect the intentions of very specific individual buyers and sellers.

3. The comparables were or were not adjusted for market conditions because of : Pick something:
(their recent sales in relation to the effective date, that they did not appear to be impacted by any change in market which may or may not be seen on page 1 of the URAR which incorporates properties of vastly varying sizes, age and condition, or No market condition could be extracted from the market in accordance with GSE guidelines and acceptable appraisal practice as it appears that the comparables were not impacted by a market that may or may not be changing.)


End of story.


.

 

[Meandering]

Or you could just call everything stable, because as of the day, nothing was happening.

:Eyecrazy:

 

[coolhandluke]

Good call Marion

Or you could just call everything stable, because as of the day, nothing was happening.

:Eyecrazy:

Good call MR-this is what a majority of 'appraisers' (lower case a) are stating in their reports daily, why? Because they don't want to go to the trouble of doing a true market analysis.

BTW-the MC form is not really 'crap' if you expand your interpretation of 'Comparable' to include ALL those sales and listings that the mythical typical buyer would have considered in a hypothetical purchase....Would he have considered homes of a different style, but similar size? Would she have considered homes in a nearby bordering and similar town and/or neighborhood? Would they have considered homes in a lower and/or higher price range than that from which they eventually settled upon? Or did they narrow their presumptive search down to 3 BR Ranches built on a slab with a 1 car garage in Mediocresville with a corner lot on the comely cul-de-dac of Primrose Lane????

See the BIG picture.. macro inclusive is more comprehensive than; "There are only 3 sales and 2 listings in the past 12 months that I, your holier than thou market interpretarian have deemed sufficiently comparable to include in my ultra-flawed 1004MC......'analysis' ? Therefore by the power vested in me and based on 5 MLS listings.... I declare the MARKET to be.........(what else) STABLE and...IN BALANCE.....Marketing Times (whatever that means) are Average/Typical and these conclusions are the SAME as I reported them to be in 2007-2008, just before and during the deluge of foreclosures and short sales that caused the largest economic decline since the Great Depression....???? Where is (was) the critical thinking? ... Where is the pride in Profession?...Where is the curious mind?.....Why do we continue to denigrate ourselves by refusing to do a minimal Market Analysis for our appraisal reports????? Is cutting that corner really worth the 5 minutes of time it would take to DO that analysis??? But I digress....70% of all the reports I see include NO MEANINGFUL MARKET ANALYSIS.....YET appraisers universally decry that we are NOT PAID WHAT WE ARE WORTH........Au contraire....most of us are OVERPAID....

 

[TJSum]

In my case I have positive trends currently occurring in the market and being indicated on the neighborhood market section, though declining values and trends over the past year, so my neighborhood trends does not match my sales comparison adjustments. The median sales trend in the mc addendum does not match my other two analysis's. This is turning into a battle...

If I read this correctly, your MC Addendum is showing a declining market during the past year, and your sales grid has positive time adjustments. Is this correct? If so, I would be asking some questions too.

We all agree the MC form is total crap, but I would want to see the appraisers personal market study to support those postive time adjustments, with adequate support.

When dealing with the checkboxes on page 1, I usually check those boxes on a yearly comparison basis, because one or two quarters is not enough for me to confirm the change in trend is not just a typical up/down in the market that may or may not be a major shift in the long term trends. Some markets are very seasonal, so it is better to compare year to year instead of quarter to quarter, etc.