New market analysis changes.

[Non Sequitur]

A serious question for all of the high horse appraisers:

How long have you been supporting and including nonlinear market adjustments that are sensitized for seasonal influences? What has been the response from underwriters and reviewers when you included 3 different time adjustments in a report? And how many listing are you gridding as support for changing markets?

 

[J Grant]

I can't believe there are appraiser's that think this is some new requirement.
How the h*ll were you determining if a market was stable, rising, or declining before?

I'd assume appraisers were developing support and keeping it in their work file and for UARA work, including the MC addendum. The change is to provide the kind of support that used to be in a work file in the report, or if the work file support was too messy, then develop a readable or visual communion of it for market condition trends .

Seems some appraisers are searching for a short cut or trying to imitate what they think fannie or freddie want to see based on one chart used as an illustration.

 

[alebrewer]

I don't find the statement you referenced therein.

It's from their guidance to lenders (which is why I had to review it).

Freddie Mac Single-Family Seller/Servicer Guide

The new, user friendly Seller/Servicer Guide will make it significantly easier for you and your team to find, understand and share critical information.

guide.freddiemac.com

 

[alebrewer]

A serious question for all of the high horse appraisers:

How long have you been supporting and including nonlinear market adjustments that are sensitized for seasonal influences? What has been the response from underwriters and reviewers when you included 3 different time adjustments in a report? And how many listing are you gridding as support for changing markets?

I don't know anyone who has been applying, and supporting, a non-linear methodology for market adjustments. And, to be honest, I personally don't think they'd ever be applicable unless you're in a HIGHLY cyclical market and/or the market is experiencing rapid change (as was the case in '19-'22.

I think there are quite a few folks on here who consistently track their markets, utilize analysis tools appropriately, and apply adjustments in a manner that is supportable (at least in the context of being compliant with USPAP). Of course, there were/are probably a lot MORE appraisers who haven't been performing the analysis appropriately. So that, you have the folks who have been conditioned their entire careers to look at market changes in a linear manner (which works about 95% of the time), and you have the folks who haven't really been doing much besides basing their analysis on intuition and hunch. Then the 8000 lb gorilla says - "Sorry, linear analysis isn't always appropriate - try a non-linear approach." The folks who've been doing it (for the most part) the way they're supposed to are now scrambling to adopt a non-linear paradigm, and the folks who haven't been doing it all along are scrambling to either: (1) learn regression analysis, or more likely (2) find a tool that helps them through the transition.

 

[Tom D]

If you look at pages 15, 16 on the pdf i posted on FHA/fannie thread, updates there is an explanation. They say you don't need a chart, but it appears, from their example, that you have to explain each time adjustment. I'ts a bit too much. They then say there will be a further update in the next fannie news letter. Their written example of time adjustments looks like a non linear explanation. Not sure it can be done without a program.

 

[alebrewer]

If you look at pages 15, 16 on the pdf i posted on FHA/fannie thread, updates there is an explanation. They say you don't need a chart, but it appears, from their example, that you have to explain each time adjustment. I'ts a bit too much. They then say there will be a further update in the next fannie news letter. Their written example of time adjustments looks like a non linear explanation. Not sure it can be done without a program.

The only way I'd even entertain a non-linear set of adjustments in my analysis is if the grid analysis matches the 'program' analysis. IOW - if I run my data set through AI, or True Tracts, or DataMaster, or whatever, and I'm able to generate a non-linear function, the only way I'd apply it is if it agreed with my grid - (i.e. if application of non-linear adjustments tighten my adjusted sales range).

 

[chad hampton]

I still don’t understand this idea that real estate professionals who work in their markets every day need to develop spreadsheets and charts to know if their market is increasing.

If I ever did a chart that showed my market was increasing I’d have to come to the conclusion that the data was bad and just ignore it.

Give me any market in the country and I’ll provide you a graph that show increasing, declining, and everything in between.

But the GSE’s just love all the junk data they can get their hands on. Probably get a bonus the more of it they collect

 

[shrubberyvaluation]

I still don’t understand this idea that real estate professionals who work in their markets every day need to develop spreadsheets and charts to know if their market is increasing.

If I ever did a chart that showed my market was increasing I’d have to come to the conclusion that the data was bad and just ignore it.

Give me any market in the country and I’ll provide you a graph that show increasing, declining, and everything in between.

But the GSE’s just love all the junk data they can get their hands on. Probably get a bonus the more of it they collect

Just gridding comps you can tell if the market is increasing, plus all the other tell tale signs, DOM under a week, going way above list price, when gridding comps before making market condition adjustments the older sales will adjust lower etc. The time consuming part is calculating how much its increasing. My issue with providing graphs is they don't show it plainly and can be nit picked. Just because prices are down 1% in one month and up 1% in another doesn't mean prices actually increased or decreased, it could just be a variance in higher end or lower end properties selling. Yes I can explain this in the report, but it just gives more ammo for the bias police to go, oh look he didn't adjust up 1% or for the AMC to stip more.

 

[Non Sequitur]

I don't know anyone who has been applying, and supporting, a non-linear methodology for market adjustments. And, to be honest, I personally don't think they'd ever be applicable unless you're in a HIGHLY cyclical market and/or the market is experiencing rapid change (as was the case in '19-'22.

Good post alebrewer.

And I don't know anyone or have reviewed any appraisal supporting or applying nonlinear market adjustments. And I have reviewed 1,000s of reports in multiple states, not a single one with nonlinear market adjustments. And that isn't surprising considering the concept never existed in residential education, training, or practice before the GSE missive. I disagree with you about not being applicable unless the market is highly cyclical because nearly all markets (or arguably every) experience seasonal fluctuations. Given that and the guidance, the GSEs expect to see them.

I think there are quite a few folks on here who consistently track their markets, utilize analysis tools appropriately, and apply adjustments in a manner that is supportable (at least in the context of being compliant with USPAP). Of course, there were/are probably a lot MORE appraisers who haven't been performing the analysis appropriately. So that, you have the folks who have been conditioned their entire careers to look at market changes in a linear manner (which works about 95% of the time), and you have the folks who haven't really been doing much besides basing their analysis on intuition and hunch. Then the 8000 lb gorilla says - "Sorry, linear analysis isn't always appropriate - try a non-linear approach." The folks who've been doing it (for the most part) the way they're supposed to are now scrambling to adopt a non-linear paradigm, and the folks who haven't been doing it all along are scrambling to either: (1) learn regression analysis, or more likely (2) find a tool that helps them through the transition.

To expand on that, I agree that quite a few (heck I would say most) appraisers track their markets in a way that would be USPAP compliant. But there's more to it than that. This is just another step in the "show your work" mindset at the GSE level. It started with the push to show your work for adjustments, and it isn't stopping with the show your work mandate for market support and adjustments. We are on our way to "show your work" for everything in the report, and most are not ready even if they believe they have been doing "it" all along.

 

[shrubberyvaluation]

Good post alebrewer.

And I don't know anyone or have reviewed any appraisal supporting or applying nonlinear market adjustments. And I have reviewed 1,000s of reports in multiple states, not a single one with nonlinear market adjustments. And that isn't surprising considering the concept never existed in residential education, training, or practice before the GSE missive. I disagree with you about not being applicable unless the market is highly because nearly all markets (or arguably every) experience seasonal fluctuations. Given that and the guidance, the GSEs expect to see them.

To expand on that, I agree that quite a few (heck I would say most) appraisers track their markets in a way that would be USPAP compliant. But there's more to it than that. This is just another step in the "show your work" mindset at the GSE level. It started with the push to show your work for adjustments, and it isn't stopping with the show your work mandate for market support and adjustments. We are on our way to "show your work" for everything in the report, and most are not ready even if they believe they have been doing "it" all along.

Most of the time when I see a lot of fluff and graphs they appear to be just something popped in without much thought and I expect the report to be worse. It is like when someone adds in a 5 page CV with their appraisal but all of the comps are over double the GLA of the subject and adjusted for $20/sf. Agents love those reports and think they are great in my experience.

It is like a CMA, they look pretty, but most of the time it looks like they were pulled in 30 seconds without much thought.