Market Conditions Analysis and Time Adjustments Dilemma

[Joe Flacco]

Whether adjustments are necessary or not depends on your subset, your direct comparables. Whether the overall trend is increasing (The check box) can be based on larger sets of data.

It is really important to keep track of the balance in supply and demand. And that will tip you off on what to look for.

 

[Joe Flacco]

You want to study the actual market conditions. That will tell you if there is a possible change in price trends.

 

[NC Appraising]

Fannie Mae has provided an illustration but no information is given on:

• Quantity of data or statistical sample
• Area (subdivision, city, 1 mile radius etc.) it was taken from
• Quality of data (did it only consist of properties comparable to the subject)

In reference to my original illustration, comparable properties in half mile radius of the subject sold in 12 months were less than 10. Any inference from this statistical sample would be useless.
View attachment 98983

I love the illustration!

I will give the GSEs credit where credit is due. The only issue was that it was poorly worded and it freaked people out.

I took it differently. To me it said that appraisers can now make non linear market condition adjustments.

Let's be honest here. A good portion of appraisers were not even making market condition adjustments. The other portion were only making straigh line linear adjustments.

I have never seen a appraiser make non linear adjustments.....never.

I appraise in a seasonal market, so I love the example and it allows me to make non linear adjustments without getting push back from uws....I just copy and paste the graph from fannie

As others noted, if you don't have the data, you don't have the data. Simple as that.

As always, appraisers freaked out over nothing.

Try out aloft, zillow, or Sam in the MLS. Aloft, zillow and Sam in the MLS has month to month data. In Sam, just hoover over for the data point.

If you use alamode, try importing 7-20 that close 0-365 time period sales in the smart adjust, make all of your adjustments except for time adjustments and don't use sensitivity analysis. This is data from within the market area. The adjusted sales should indicate what the market is doing. Screen shot that and put it in your report.

 

[Joe Flacco]

It's a terrible publication. They never should have put it out.

They need to stop trying to micromanage appraisers.

 

[Joe Flacco]

They need to get rid of the appraisal section in the selling guide and defer appraisal development to the profession.

They can have property requirements but they have no business telling appraisers how to develop an appraisal.

 

[NJ Valuator]

Provide both a linear graph to show that the overall market is stable if that is the case as well as a non-linear graph to demonstrate the monthly fluctuations. The overall market trend can be reported as stable despite ups and downs.

 

[Tom4value]

Ahhhhh. I have Said it for, I will say it again. Don’t give them enough to be dangerous!

People (appraisers) are panicking about being called out about “new” guidelines.. There are no new “guidelines”! There is just confirmation that you have to “summarize your work”. You have to put in your report enough information so the reader knows how you arrived at your conclusions. That is a USPAP requirement, not a new Fannie Mae requirement.

If you use the 1004mc addendum or don’t but explain market conditions and how you arrived at them, you are fine! Just throwing in charts and grafts with no explanation doesn’t make you compliant. It just opens you up for someone to question you.

 

[Webbed Feet]

I submitted the following chart (Median Close Price VS Primary Year) for 'Market Condition Analysis'

• Three Miles Radius was chosen to get enough statistical sample (3365 properties)
• Stats of Year 2025 only consist of Jan to Mar & few days of April (based on 116 properties)
  • I find this chart inconclusive
• I based my analysis mainly on Year 2024
  • Price decreased from $485,000 to $480,000
  • $5000 decrease is around 1%
  • This is too small a decrease so I considered it Stable

I get the following Revision Request
There is a conflict, Chart shows 'Market is Declining' whereas appraiser has marked it Stable

I have following questions

1. If such a stringent standard is applied, then no market can ever be marked as stable (even $1 difference in either direction would put it increasing or declining). In the current case, if at the end of 2024 the price was $486,000 then the market is increasing and $484,000 would put it declining
2. How much data is considered reliable.
   1. In the current case 3 miles radius yielded 3365 properties [3249 properties for 4 years (Jan 2020-Dec 2024)] if we exclude the few months of Year 2025

As always guidance is feedback would be appreciated


View attachment 98976

Too much data used that is not relevant to the question at hand. Question: Do the comparable sale prices need adjustment to the effective date of the valuation in order to result in a credible analysis? What does 2020 through 2022 have to do with that??? If your effective date is April of 2025 ... the inclusion of additional historical data is interesting, but just confusing, unless the assignment had a Scope of Work calling for a far longer historical analysis for some reason.

 

[Webbed Feet]

No, i posted the most recent march fannie newsleter where they spelled out exactly what they wanted.

From my view, it took Fannie over 30 years to finally get off their rumps and put out a statement that appraisers could use to put lending clients back where they belong regarding market condition adjustments? Other than that is so ridiculous to have now just finally have done, all of this was bound to happen over and over again because, even after more than 30 years of this, there are still so many residential appraisers that have NEVER checked "Declining" or "Increasing" once in their entire careers (because then they have to do work) that the entire residential fee appraiser profession should be utterly humiliated for itself.

 

[weird_limbs]

Well, Valuation Labs has graphs now to help show market analysis and non-linear adjustments. Super simple to use and none of the fancy, complicated, time-wasting stuff. Still a free tool.

https://valuationlabs.streamlit.app/