market analysis conflicts within report

[J Grant]

The review appraisers are also pushed to the max and are on quotas and have to review too many reports at warp speed, and thus, often scan read and don't get the meaning, (assuming they are competent)

The whole system is upside down, with everyone pushing for speed and profit with the resulting high losses that come as a result.

Dealing with the losses has spawned an entire industry devoted to foreclosures and short sales. I suppose all the lawn maintenance and clean up crews and loss mitigation depts and legal work has created a number of jobs, so maybe it's not all bad? (sarcasm intended)

As the saying goes, "there's never time to do it right, but there's always time to do it over"

 

[gbnumbercruncher]

The checking of the stable versus declining box for property values is probably the second most important thing the underwriter looks at after the appraised value (and aside from seeing if the report is made as is vs subject to, I doubt whether the rest of the report is even read in many cases).

There are short, medium and long term trends in the real estate market. If I interpret the neighborhood value trends as asking for the neighborhood trend over the past year, in this particular assignment, I will check the declining box. If a graph is plotted with monthly differences in year over year median sale prices is used to report the trend over the past year, if values dropped sharply at the first part of the year, but in the second part of the year have steadily increased, although not back to the level shown at the beginning of the year, the graph would show a declining trend line, and the declining property values box would be checked. If my selected time frame is shortened to six months, the difference in year over year median prices graph would show increasing values. So if the question the form is asking is trend over the past year I would have to say declining and possibly blow up the loan, despite the fact the market is showing clear signs of increasing values in the past six months in yoy figures.

As the other trend indicators in the neighborhood section of the form for supply/demand and marketing time are snapshots as of the effective date, is it wrong to interpret the value trend also as a snapshot of what is happening right now (based on recent sales, listings, lp/sp,dom etc)? Is this open to interpretation?

 

[EDWARD BERRY]

The 1004- Mc (monkey Crap) Does Provide Some Good Info-

The Major Problem Is That If Any Thing Differs From Page One The Reviewer Is Confused And Cannot Understand From The 1004-mc What Is Happening.
Usually There Are Just Not Enough Sales. One Sale Can Skew The Results On Any Under, Say 20.

So, One Has To Show Results And Explain.

Happens All The Time.

 

[J Grant]

I think that the questions on the first page, declining, stable, etc, should be answered in the context of the sales comparison page, re, the market conditions in the exposure date of the comps all the way up to condtions on the effective date (present day conditions)

That way, the two trends are not in conflict. If the last six months is an upward trend in prices, why would an appraiser mark prices as declining ,j if that trend is clearly in the past?

The wording tells the story:

The question : Are prices DECLINING?

The qestion is not: Have prices DECLINED?.

Declining is present tense, which means addressing market activity from relevant past into today with a slight future forecast from listings and pendings

Declined is past tense only.

One can always add historic conditions in narrative, such as, the prices declined over the past two years, then stabilized, and are currently increasing over the last two quarters.

 

[HF Mudd]

The checking of the stable versus declining box for property values is probably the second most important thing the underwriter looks at after the appraised value (and aside from seeing if the report is made as is vs subject to, I doubt whether the rest of the report is even read in many cases).

There are short, medium and long term trends in the real estate market. If I interpret the neighborhood value trends as asking for the neighborhood trend over the past year, in this particular assignment, I will check the declining box. If a graph is plotted with monthly differences in year over year median sale prices is used to report the trend over the past year, if values dropped sharply at the first part of the year, but in the second part of the year have steadily increased, although not back to the level shown at the beginning of the year, the graph would show a declining trend line, and the declining property values box would be checked. If my selected time frame is shortened to six months, the difference in year over year median prices graph would show increasing values. So if the question the form is asking is trend over the past year I would have to say declining and possibly blow up the loan, despite the fact the market is showing clear signs of increasing values in the past six months in yoy figures.

As the other trend indicators in the neighborhood section of the form for supply/demand and marketing time are snapshots as of the effective date, is it wrong to interpret the value trend also as a snapshot of what is happening right now (based on recent sales, listings, lp/sp,dom etc)? Is this open to interpretation?

I think as long as you explain your reasoning, the market trend is whatever your training and experience lead you to believe it is. An appraisal is an opinion, and statistics can be used to support many different opinions. Two different appraisers can look at the same data set and arrive at different, well supported opinions of the market trend.

BTW, welcome to the forum. Thanks for sparking a lively debate.

I think that the questions on the first page, declining, stable, etc, should be answered in the context of the sales comparison page, re, the market conditions in the exposure date of the comps all the way up to condtions on the effective date (present day conditions)

That way, the two trends are not in conflict. If the last six months is an upward trend in prices, why would you mark prices as declining ,just because a graph showed a two year decline?

The wording tells the story:

The question : Are prices DECLINING?

The qestion is not: Have prices DECLINED?.

Declining is present tense, which means addressing market activity from relevant past into today with a slight future forecast from listings and pendings

Declined is past tense only.

One can always add historic conditions in narrative, such as, the prices declined over the past two years, then stabilized, and are currently increasing over the last two quarters.

JG, in my opinion, the terms increasing, stable and declining are to be defined within the context of the heading which is one-unit housing trends.

Again, as long as you explain your reasoning the market trend is whatever your training and experience lead you to believe it is.

 

[J Grant]

The checking of the stable versus declining box for property values is probably the second most important thing the underwriter looks at after the appraised value (and aside from seeing if the report is made as is vs subject to, I doubt whether the rest of the report is even read in many cases).

There are short, medium and long term trends in the real estate market. If I interpret the neighborhood value trends as asking for the neighborhood trend over the past year, in this particular assignment, I will check the declining box. If a graph is plotted with monthly differences in year over year median sale prices is used to report the trend over the past year, if values dropped sharply at the first part of the year, but in the second part of the year have steadily increased, although not back to the level shown at the beginning of the year, the graph would show a declining trend line, and the declining property values box would be checked.

This shows the limitation of charts and graphs, which tend to average results. Appraising is not supposed to be based on averaging, and appraisers are expected to apply their judgement and experience about a market, not mechanically transcribe results from a graph.

If a graph averaged results and formed a decline plot over the year, yet you KNOW that prices have stabilized mid year, and for the past six months have been increasing, (confirmed by listing and pendings as continuing) re, if you know the true market conditons relevant to your subject but mark the opposite on the front page, that is problematical and could be intrepreted as misleading.

As you noted, it could impact assignment results, such as a loan denial, or perhaps charging a higher rate. Nothing wrong with a negative outcome if it is based on facts, such as an ongoing declining market. But, if it is based on appraiser error, that could be another matter.

If my selected time frame is shortened to six months, the difference in year over year median prices graph would show increasing values. So if the question the form is asking is trend over the past year I would have to say declining and possibly blow up the loan, despite the fact the market is showing clear signs of increasing values in the past six months in yoy figures.

As the other trend indicators in the neighborhood section of the form for supply/demand and marketing time are snapshots as of the effective date, is it wrong to interpret the value trend also as a snapshot of what is happening right now (based on recent sales, listings, lp/sp,dom etc)? Is this open to interpretation?

See above comments

 

[PropertyEconomics]

I personally believe the Neighborhood Section, Page 2, and the 1004MC all seek different data and the data can be in conflict. In our market we have subdivisions that are essentially divided into thirds where there is a different trend for each third.

The real key in these instances is to EXPLAIN and document ... a reader of the report should be able to understand the thoughts and reasoning for the adjustments, or lack thereof, which are reflected in the grid.

Sometimes its not that the data conflicts so much as it is there is not adequate clear explanation in the appraisal report. Trying to explain after the fact makes the matter even more complicated.

 

[Lee Lansford]

...


...trend...

...Is this open to interpretation?

A couple of years ago, during a period when it was clear that most all of the local markets were experiencing declining prices, an appraiser (who worked for a lender) told me that a few of the folks who worked on the lending-side suggested that if prices were not declining at THIS EXACT MOMENT, then prices were stable.

So, yes, identification of a trend is open to some interpretation.

Identification of a long-time and continuing trend is relatively easy. It's when the market is in the early stages of change when the identification becomes a bit more iffy.

 

[Meandering]

As the other trend indicators in the neighborhood section of the form for supply/demand and marketing time are snapshots as of the effective date, is it wrong to interpret the value trend also as a snapshot of what is happening right now (based on recent sales, listings, lp/sp,dom etc)? Is this open to interpretation?

That depends.

In a market that regularly sells 30-50 homes a month year over year, is in the last 3-5 months selling 5-10 homes a month, the prices of those sales might be high if the low end has stopped selling and visa-versa. So because the Price line trend has moved, the sale volume has dropped way off. Is your market declining or stable or increasing? Well what happens 6 months from now when there is only 1 sale in the neighborhood and it's the "best" house in the neighborhood and sold way above historic prices, is the market increasing?

What is more important in your analysis? Volume (supply/demand), price and marketing time are inter-related. Each colors the other. And need to be separately analyzed and then reconciled to each other to indicate the over-all market condition.

Standards Rule 1-3 When necessary for credible assignment results in developing a market value opinion, an appraiser must:
(a) identify and analyze the effect on use and value of existing land use regulations, reasonably probable modifications of such land use regulations, economic supply and demand, the physical adaptability of the real estate, and market area trends; and

USPAP is very clear in it's wording and while referencing the need for appraisers to analyze market conditions for every type of report in the standards, it never says analyze prices, only to analyze economic supply and demand.

.

 

[J Grant]

Data can conflict, and in changing markets there is often conflicting data.

The appriaser's job is not merely to report that there is conflicting data, the appraiser's job is to put it in context ( a person can get the data over the internet, but it lacks context ) . The context is explaining which data impacts the subject value, and why.

The appraiser needs to separate out which data is relevant to subject, apply it, and explain the process.

All explanations should be market supported . If an appraiser states that the general market trend is stable, but due to subject subdivision being in high demand with low inventory, the subject subdivision prices are increasing, the support has to be in report or workfile (preferably both)