Market areas and Market Trends

[TerryRohrer]

I have never made an adjustment, zero or otherwise, that I couldn't support. That was not the question posed, though.

 

[sputnam]

If contracts take 1-3 months, shouldn't make much of difference.
However if 6 months, then that should be address and analyzed if affected sales price. Taking so long addresses another issue that could affect sales price.

As always, the answer is supposed to come from the appraiser's analysis of market data that is relevant to the assignment. Not rules of thumb. Not 'wisdom' from the elders. And definitely not, directives from the Client or the Client's Client.

 

[CGinMN]

I have never made an adjustment, zero or otherwise, that I couldn't support. That was not the question posed, though.

If that is true, then you should be able to answer your own question.

 

[Tom D]

The new form and fannie want more provable adjustments, show us the beef as to how. Maybe this will force some, we're still too many appraisers, to just leave the profession.
Although, if the new from is too annoying i'm out of here. Cause marking more money now doing something else.

 

[TerryRohrer]

I’ve never not been able to support a market conditions adjustment, that includes when I conclude it is 0%. As to the second part of your question, it sounds like Fannie is giving you an out. “Comparable(s) sales with a contract date that is recent in relation to the effective date of the appraisal will likely not have a time adjustment given the inability to identify a change in the market.”

If that is true, then you should be able to answer my question.

Where does FNMA define "recent in relationship to the effective date of the appraisal"?

 

[CGinMN]

Let’s get specific. I have many methods, and which one I use depends on what’s available: a simple linear regression of the segment, if that’s not sufficient analyzing an historically similar area, or expanding to include a larger pool of not directly competitive data, multiple linear modeling, grouped data comparisons, sales and resale activity, analysis of actives/pendings/expireds, MSA level HPIs, agent interviews, analysis of cost indices, etc. Analyzing the underlying fundamental helps supports the conclusion especially if I’m using a weaker source. This includes DOM, supply, price to sale ratios, the presence of concessions, etc. Do some of these sources suck? You betcha. But they are better than nothing and I can still analyze them and conclude the market supports making a 0% adjustment. Now, I’m sure none of these methods will meet your high standards, and we can both pick apart their weaknesses, but rather than continue to hide behind criticisms I ask your question back to you: what do you do?

Fannie does not define “recent” so that is open to interpretation of the appraiser, underwriter, and the ultimately the GSE. IMO interpreting “recent”depends on how far back the comps sold and the availability of data since. It wouldn’t make sense to conclude no adjustment because no data, when if fact there is data to analyze. The validity of that data analyzed is open to interpretation as well. You seem to take a more strict view, and I take a broad view so long as the most credible source is given most weight.

 

[TerryRohrer]

I’m sure none of these methods will meet your high standards

Care to point out where I revealed those?

 

[CGinMN]

Ok, I guess you don’t.

If you want to have a discussion then participate. If you want to play games, I’m not really interested.

 

[Terrel L. Shields]

I’ve never not been able to support a market conditions adjustment,

How big is your market? I mean the problem is that by its very nature, real estate sells within a range. It's really not a point value issue. So, in an imprecise market (like real estate as opposed to stock prices or gold prices), There is a natural margin of error. Since the margin of error is often as high or higher than the variability of prices over time, you cannot reliably estimate market condition changes unless you have sufficient sales. And for rural appraisers who may have as few as 10 or less sales over the entire year that are reasonably similar to the subject, then the margin of error far exceeds any change in prices.

To make a time adjustment would require you to go outside the entire market area or to use nearby urban sales as an indicator of change. This is not going to be a very accurate market conditions adjustment. You might have that outlier sale that is low right in the middle of the spring selling season, or the highest sale occurs in December when you intrinsically know is a period of lower sales volumes and usually prices. Do you use Redfin data? Maybe the best you got but then you still end up with nonsensical adjustments if not careful.
What does the chart for Tulsa County vs Adair County (one of the poorest in the state and very sparsely populated) look like. Tell me you can extract a time adjustment from the Adair county sales - this is all residential sales.

Now this is the number of sales and lack of seasonality in Adair County vs Tulsa where the spring bump is obvious

 

[CGinMN]

You work with what you have, and you always have something. In the end if you analyze that something and conclude no adjustment, then so be it. It is that simple. What you don’t do is punt on 1st down.