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Neighborhood Dilemma

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KJames

Freshman Member
Joined
Sep 23, 2004
Professional Status
Certified Residential Appraiser
State
Nebraska
For many years I've followed the words on the Neighborhood section on Pg 1 and cited the trends and values of all "One-Unit Housing", which made sense, to give an overall view of the neighborhood. The MC Addendum and FNMA say that this is actually supposed to reflect only "Comparable Sales". But what if this produces a misleading report?

My subject property is in one of our oldest neighborhoods with the lowest property values in town. It is a newer house built on a rare vacant lot a few years ago. While it is at the top of the value range for the neighborhood at about $140,000, the average value in the area is $78,000, the low is about $40,000. Say there was one other similar newer house in the neighborhood, according to FNMA it appears I should show the "Predominant" , "Low" and "High" values for this old neighborhood as all being $140,00.

I assume that the intended user wants to get an accurate sense of the subject neighborhood, how can this happen if the analysis is limited to only "comparable" homes? The same problem would apply for a small older house surrounded by newer larger homes. Citing the trends of similar older homes would tell the reader nothing about the actual nature of the neighborhood and it's effect on value of the subject property. Wouldn't this be misleading?
 

DWiley

Elite Member
Joined
Apr 4, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
While it is true that the One Unit Housing Trends in the NEIGHBORHOOD section should reflect only comparable properties, the other fields (price and age range, for example) should be based on all homes, not just competing homes. The only way for a report to be misleading is for the appraiser to provide misleading content. In and of itself, data that is accurately reported cannot be misleading. It is what it is.
 
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Obsolescent

Senior Member
Joined
Jul 6, 2004
Professional Status
Certified Residential Appraiser
State
Minnesota
There may be a range of housing styles and prices that may not necessarily compete with each other but are in the same neighborhood. That could be the nature of that neighborhood. I've worked in markets that had value ranges from $200,000 to $1.5m and they were located next door to each other, so obviously these are in the same "neighborhood" but attract very different buyers.

They want to know how the subject fits/conforms within its neighborhood. There is likely a range of values within a neighborhood and yours sounds like its at the upper end of the value range. That is a comment and explanation you'll need to address in the report. How does the market react to a newer home in a lower end market; are there others? marketing time for homes at the upper end of the value range vs. the others, etc. The MC form should show only sales that compete with the subject; if there are too few sales that compete directly with the subject then reflect what it is and explain that in the report.
 
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KJames

Freshman Member
Joined
Sep 23, 2004
Professional Status
Certified Residential Appraiser
State
Nebraska
While it is true that the One Unit Housing Trends in the NEIGHBORHOOD section should reflect only comparable properties, the other fields (price and age range, for example) should be based on all homes, not just competing homes. The only way for a report to be misleading is for the appraiser to provide misleading content. In and of itself, data that is accurately reported cannot be misleading. It is what it is.

Where do you find a distinction between the properties cited for "One-Unit Housing Trends", and the ones used for "One-Unit Housing price and age" on pg 1? Using only comps for one and all homes for the other would be even more misleading. The MC says that it's data should support the info shown "in the Neighborhood Section" of the report. This would tell the reader nothing about the neighborhood, only the trends and prices of "comparable" properties, and would often times be misleading.
 

KJames

Freshman Member
Joined
Sep 23, 2004
Professional Status
Certified Residential Appraiser
State
Nebraska
There may be a range of housing styles and prices that may not necessarily compete with each other but are in the same neighborhood.​


Exactly. Like the older homes in my subject neighborhood, that FNMA apparently doesn't want me to cite in the "Price" and "Age" fields on Pg 1. Leaving out the fact that this is a low end neighborhood where average values are much lower than the subject property value, would be misleading.

" The MC form should show only sales that compete with the subject; if there are too few sales that compete directly with the subject then reflect what it is and explain that in the report. "

I agree, but according to FNMA and some clients, this should also apply to Pg 1, which is odd, since it clearly states it includes all "One-Unit Housing", not just comps.
 

Dublin ohio

Senior Member
Joined
Mar 20, 2008
Professional Status
Licensed Appraiser
State
Ohio
FNMA apparently doesn't want me to cite in the "Price" and "Age" fields on Pg 1

I see no reference to age and price in the 1004MC instructions. It specifically states "regarding housing trends and overall market conditions". Now I suppose that you could interpret that as including age and price. But IMHO. That would be somewhat of a stretch.
 

fritzvogel

Senior Member
Joined
Dec 16, 2004
Professional Status
Certified Residential Appraiser
State
New York
While were in the "Neighborhood" section, the term "Growth". What dose it mean to you? I keep getting requests from processors to "Correct" my choice if values are increasing or decreasing....
Am I missing something, this section has NOTHING to do with value trends, that's elseware in the report.
Is growth the physical condition of the neighborhood? The number of new starts, under construction, permits etc. or lack thereof? Slow, Stable, ,Nothing to due with # of actives, sold's or values.
Are they teaching lender staff something new?

BTW, It is getting a bit bothersome to try to match (Or at least narrow the field) the top of page 2, the MC report and make it equal to our statement on page 1 regarding the Market, so that we don't need to go into a full narrative when the whole idea is a summary report. Explain it away seems to be a reason for retirement.
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
While it is true that the One Unit Housing Trends in the NEIGHBORHOOD section should reflect only comparable properties, the other fields (price and age range, for example) should be based on all homes, not just competing homes. The only way for a report to be misleading is for the appraiser to provide misleading content. In and of itself, data that is accurately reported cannot be misleading. It is what it is.

Do you have a source for this distinction for only that part of the neighborhood section? This section reports characteristics of the entire neighborhood in every other part but NOT the one-Unit housing trends? The only situation I can think of now where some houses would be losing value while other houses are gaining in value would be significant gentrification as the smaller/older homes might be losing value as they get closer to land value while the newer homes are gaining in value.

Nonetheless, this would be identified on the top of page 2 and the 1004 MC as those two sections of the report ask for COMPARABLE sales which would exclude the smaller/inferior homes that are experiencing gentrification.

A report submitted with the DECLINING box checked in the neighborhood section while the INCREASING box checked in the 1004 MC would be a red flag for almost any AMC or lender. I am skeptical of your post, but hey, I could be wrong.
 

A K

Elite Member
Joined
Jul 31, 2013
Professional Status
Certified Residential Appraiser
State
Maryland
The first page of the URAR gets the price and age data for all one unit housing in the neighborhood. The top of page 2 in the URAR and the 1004MC match and include the properties identified as comparable in the neighborhood.
 
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