Market areas and Market Trends

[Terrel L. Shields]

market data that is relevant to the assignment.

Define 'relevant' in the context of rural property where few sales occur compared to urban areas. I still argue that FNMA discriminates actively against rural properties and the appraisers that do them. I can comply mechanically with FNMAs rule which in the charts above might mean making a 20% adjustment for a sale in August and a -3% adjustment for the very next month. We need to be cognizant of the weakness of minimal data quantities. Stats (and time adjustments are statistical in nature) require a minimum number of data points to be valid.

 

[Terrel L. Shields]

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.

The question does a lack of sales mean "no adjustment"? Or, simply that we cannot figure out what the "right" adjustment is? The absence of evidence is not the evidence of absence. The change may be there, but we cannot define it. That does not mean it does not exist.

 

[CGinMN]

Appraisals are measured on credibility, not whether the adjustment is “right,” although that should be the goal. Again, I made the decision long ago, probably hammered into my head from my supervisor, that saying “I can’t figure it out” is not an option. We are paid for our opinions.

GSEs have also made it clear that market conditions adjustments are required, and appraisals that punt on market conditions do not comply with their standards.

The appraisal report must include market condition adjustments to reflect changes in market conditions over the period analyzed. This is required to determine a credible market value for the subject property. Market condition adjustments reflect market condition changes from the time a comparable sale went under contract to the effective date of the subject property appraisal. Tools or information that may be relied upon to support market condition adjustments include, but are not limited to, market data (e.g., analysis of comparable listings, pending sales or closed sales); home price indices; multiple listings services; public records; and commercial services, models and data. The appraisal report must include commentary describing the market analysis the appraiser performed.

 

[Terrel L. Shields]

The appraisal report must include market condition adjustments to reflect changes in market conditions over the period analyzed.

Even when impossible. gotcha. Like Louden said above - "Cheat like they do as West Point..."

Yes, I have put in a report, "There is insufficient data to estimate an adjustment for ..." but FNMA is trying to force the issue. And why? In many markets it isn't going to change the value by 1% nor the final estimate of value at all.

 

[CGinMN]

They are trying to force the issue because only 10% of appraisals have a market conditions adjustment.

 

[Mejappz]

They are trying to force the issue because only 10% of appraisals have a market conditions adjustment.

Well, remember the appraiser on the forum who publicly said that adjustments are less important than drawing the interior lines on a sketch? So???? I called this out years ago. Fannie has finally caught up. I guess I've been proven right again.

 

[Joe Flacco]

View attachment 93406

This is pretty stupid. They should put names on these things so we know who the genius is that thinks this is a good idea.

 

[Terrel L. Shields]

because only 10% of appraisals have a market conditions adjustment.

I'd thank that was about right. 1 in 10 might use a sale so old that it justifies one. Again, wild gyrations that are the result of an imprecise market are not "market conditions" material.

 

[chad hampton]

I'm convinced no one at the GSE's know anything about real world appraising.

Just did another one today where there appears to be a clear outlier on a damn near model match on a conventional purchase. About 20% high IMO. I have to wonder if a waiver was done. Now my borrower who is refinancing will undoubtably have seen this. So now I have 1 sale 20% high and 2-3 other sales more in line with what the market really is. The data cancer that the GSE's have created are really screwing this market up.

I see this on about 1/4 of the appraisals I do.

As far as that idiotic graph they posted - imagine the heads exploding where you have positive and negative time adjustments on the same damn appraisal. Again, they are looking for a level of precision that is not possible. I can only hope the swamps that are the GSE's are really drained this time. I'd prefer a few be thrown in prison, but that's just wishful thinking.

I've always used market condition adjustments when markets are increasing (not sure I've ever used a decreasing adjustment - back in 2010, the adjustment was already built into the recent sales - homes were being dumped, so you always had 3 sales in the last 1-2 months). Markets increase when there are limited listings, you can't avoid using dated comps.

 

[djd09]

fannie has alot more to worry about then 'time' adjustments...