Market areas and Market Trends

[TerryRohrer]

Uh oh! Some are going to have to conduct some analysis for a change!

Appraisal market areas
To promote consistency and transparency in appraisal reports, Fannie Mae, in collaboration with Freddie Mac, is updating requirements related to the Market Area analysis of the appraisal report and implementing standardized definitions for the terms “Neighborhood” and “Market Area.” The Selling Guide is being updated to include these new definitions in the Glossary. Additional guidance and requirements are provided for the following:
• Selection of comparable sales;
• Establish a minimum timeframe of 12 months from which the overall market trend must be derived;
• Identify that the overall market trend may be different from the adjustments applied to individual comparable sales;
• Include an illustration of the methodology used to determine specific comparable sale time adjustments for changes in market conditions; and
• The appraiser must report the market analysis that supports both the indicated overall market trend and market derived time adjustments for changes in market conditions.

Effective: Lenders are encouraged to implement these policy changes immediately but must do so for loans that require an appraisal with applications dated on or after Feb. 4, 2025.

https://singlefamily.fanniemae.com/media/40811/display

 

[Non Sequitur]

This has been coming for a long time. Fannie/Freddie have been screaming that they aren't seeing time/market condition adjustments. Now they are demanding them and you will make time/market condition adjustments in the near future or write a book as to why not. This is one more step to removing any judgement from the process, then removing us.

 

[alebrewer]

As far as I can tell, from reading through the 'updated' guides, is that they've added a couple of definitions and expanded some commentary in the guides. No real procedural changes.

 

[djd09]

current market sales reflect market trends...no adjustments were made due to the lack of verified market data and or conflicting data...what's the problem is the borg confused?

 

[sputnam]

Uh oh! Some are going to have to conduct some analysis for a change!

Appraisal market areas
To promote consistency and transparency in appraisal reports, Fannie Mae, in collaboration with Freddie Mac, is updating requirements related to the Market Area analysis of the appraisal report and implementing standardized definitions for the terms “Neighborhood” and “Market Area.” The Selling Guide is being updated to include these new definitions in the Glossary. Additional guidance and requirements are provided for the following:
• Selection of comparable sales;
• Establish a minimum timeframe of 12 months from which the overall market trend must be derived;
• Identify that the overall market trend may be different from the adjustments applied to individual comparable sales;
• Include an illustration of the methodology used to determine specific comparable sale time adjustments for changes in market conditions; and
• The appraiser must report the market analysis that supports both the indicated overall market trend and market derived time adjustments for changes in market conditions.

Effective: Lenders are encouraged to implement these policy changes immediately but must do so for loans that require an appraisal with applications dated on or after Feb. 4, 2025.

https://singlefamily.fanniemae.com/media/40811/display

About time.

 

[Non Sequitur]

 

[Non Sequitur]

The prior post is what Fannie wants. So before giving a thumbs up, study up.

 

[TerryRohrer]

View attachment 93406

This is a perfect example of how much easier it is to make up illustrations than it is to analyze actual data with actual methodology. It is simply a fantasy to believe you can identify 5 inflection points within a 5 month period and measure reliable rates of inflation and deflation between each. Of course, there is no discussion pertaining to how the results depicted in the illustration are derived. If anyone has a method they believe provides reliable measures of inflation during the trailing 90 or 180 days, please share it! Also, say your last reasonably comparable/relevant data is 90 days old. How to you support the projections of market conditions into the future?

 

[shrubberyvaluation]

This has been coming for a long time. Fannie/Freddie have been screaming that they aren't seeing time/market condition adjustments. Now they are demanding them and you will make time/market condition adjustments in the near future or write a book as to why not. This is one more step to removing any judgement from the process, then removing us.

Sounds like skippy is gonna use this to just cherry pick rather than use necessary adjustments as usual.

 

[Non Sequitur]

This is a perfect example of how much easier it is to make up illustrations than it is to analyze actual data with actual methodology. It is simply a fantasy to believe you can identify 5 inflection points within a 5 month period and measure reliable rates of inflation and deflation between each. Of course, there is no discussion pertaining to how the results depicted in the illustration are derived. If anyone has a method they believe provides reliable measures of inflation during the trailing 90 or 180 days, please share it! Also, say your last reasonably comparable/relevant data is 90 days old. How to you support the projections of market conditions into the future?

It's crazy to think adjusting comps 1% and 2% makes any kind of sense. But the trend is, and I have said it before, in the near future we will be adjusting for everything whether we like it or not. Every software vendor is baking in artificial intelligence for photo recognition that will not only evaluate the report's photos but will scan the internet for the comps' photos and compare them. I have heard multiple times how the software is able to point out granite vs quartz, backsplash vs no backsplash, 1990s painted cabinets vs 2010 shaker cabinets, 10x15 patio vs 15-25 patio, brick vs stucco vs hardy board vs vinyl, etc. Every physical data point will be scanned by the AI software, and to the extent photos for comps are available on the internet (or from prior reports in a database-think appraisal portals scanning and keeping photo info for future use) those will be scanned too. The expectation is appraisers will have to acknowledge every difference and adjust, or as the "A zero adjustment is an adjustment" crowd has been pounding on we will have to explain the lack of an adjustment.