"Predominant 1-Unit Housing Value"

[ZZGAMAZZ]

Concerning Neighborhoods

"

Present Land Use​

Fannie Mae’s appraisal report forms provide an area for the appraiser to report the relative percentages of the developed land in the neighborhood when discussing the present land use, rather than simply referring to the zoning classifications. The appraiser must separately report the percentage of developed one-unit sites and two- to four-unit sites. Undeveloped land must be reported in the “Other” field. In addition, if there is a significant amount of undeveloped land in the neighborhood, the appraiser must include comments to confirm that he or she adequately described the neighborhood. If the present land use in the neighborhood is not one of those listed on the appraisal report form, such as parkland, the appraiser also must indicate the type of land use and its related percentage. The total of the types of land uses must equal 100%.

Typically, dwellings best maintain their value when they are situated in neighborhoods that consist of other similar dwellings. However, some factors that are typical of a mixed-use neighborhood, such as easy access to employment centers and a high level of community activity, can actually enhance the market value of the property through increased buyer demand. Neighborhoods may frequently reflect a blend of residential and nonresidential land uses.

When different land uses and property types are present in a neighborhood, that fact should be considered a neighborhood characteristic that the appraiser needs to take into consideration when performing the neighborhood analysis and defining the neighborhood boundaries. To confirm that any positive or negative effects of the mixed land uses are reflected in the sales comparison analysis, the appraiser should select comparable sales from within the same neighborhood whenever possible. If this is not possible, the appraiser may need to make neighborhood or location adjustments to the Sales Comparison Approach adjustment grid for any sales that are not subject to the same neighborhood characteristic.

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This thread does not pertain to (IMO) different "land uses" or different "property types." Rather the topic pertains primarily to various GLA, Lot size, and dates of construction--differences that easily reflect 30% of the selling price.

 

[George Hatch]

I would say that if the reason for treating that one little section of the Neighborhood analysis as the market segment instead of the actual composition of the neighborhood is because Fannie has instructed it, then attributing that action to their instructions becomes entirely reasonable.

Per the instructions for this appraisal report form, the results of the "Predominant 1-unit housing value" as reported above is intended to reflect only the subject's market segment (so as to be consistent with the analysis in the 1004mc addendum). It is not intended to reflect the actual predominant 1-unit housing value of the subject neighborhood. ​

​

For all 1-family properties in the neighborhood as defined above and without regard for their comparability to the subject or its market segment, the predominant values range from $150,000 - $400,000. It appears the subject's market segment comprises a subset of all properties in the neighborhood, which is why the predominant values for the subject's market segment present a much narrower range of $200,000 - $275,000.​

 

[Carnivore]

I would say that if the reason for treating that one little section of the Neighborhood analysis as the market segment instead of the actual composition of the neighborhood is because Fannie has instructed it, then attributing that action to their instructions becomes entirely reasonable.

Per the instructions for this appraisal report form, the results of the "Predominant 1-unit housing value" as reported above is intended to reflect only the subject's market segment (so as to be consistent with the analysis in the 1004mc addendum). It is not intended to reflect the actual predominant 1-unit housing value of the subject neighborhood. ​

​

For all 1-family properties in the neighborhood as defined above and without regard for their comparability to the subject or its market segment, the predominant values range from $150,000 - $400,000. It appears the subject's market segment comprises a subset of all properties in the neighborhood, which is why the predominant values for the subject's market segment present a much narrower range of $200,000 - $275,000.​

I may just be interpreting this all wrong. Then again some Neighborhoods are not easily defined. Urban areas come to mind. Also I rarely get an assignment that is very conforming in style,age etc etc What I do with the 1004mc is use those comparable that are most similar to the subject. these sale also would fit into what the typical buyer would be looking at. I don't see the connection between the Subject and comparable in the 1004mc and the Subject actual neighborhood/market segment.

Recent Stip i received kind of threw me off as it relates to this discussion. They wanted a comment made if the Subject MV deviated from the median more than $5,000 either side. Thats was crazy because $5k either side of median could be a lot of variance or a tiny amount dependent on the Hood.

OK, some s/d's i.e consist of 150-300 FHA on slab vinyl villages. There may be nearby very similar vinyl villages that compete for that typical buyer. Here I can see where the 1004mc is going to make sense. When we don't have enough for the 1004mc we go to Supplemental Statistics. I get that part.

 

[George Hatch]

None of this would even be an issue if the form was set up with a separate section that addresses the subject's market segment as being distinct from the neighborhood. Include a checkbox for if/when the two are the same. If they wanted an MC analysis or its equivalent then it should be incorporated directly into the form, AFTER the HBU analysis but prior to the development of any of the approaches to value. That would also be a good opportunity to explain why you did/didn't develop a CA or GRM.

If a reader could read - without having to flip back and forth between the report and the addenda - that THIS is the neighborhood, and THIS is the subject's market segment that distinction would clear up questions about why the appraiser had to go elsewhere for their comparables and other such issues. If/when that's the case.

 

[Terrel L. Shields]

The more telling information would be what is the median price of property in the neighborhood and what is the mean of all property in the defined neighborhood. Ideally, it could be shown graphically by plotting ALL sales in a given neighborhood or market area (even better) by price. The skew of the curve gives us an indication of the "predominate" trends graphically without babbling obvious nonsense. By including the outliers as well, we give a strong indication of whether that "high" or "low" in the range is common or simple unique "out of place" property and allows the reader to judge where the subject property lies in that graph.

 

[ZZGAMAZZ]

The more telling information would be what is the median price of property in the neighborhood and what is the mean of all property in the defined neighborhood. Ideally, it could be shown graphically by plotting ALL sales in a given neighborhood or market area (even better) by price. The skew of the curve gives us an indication of the "predominate" trends graphically without babbling obvious nonsense. By including the outliers as well, we give a strong indication of whether that "high" or "low" in the range is common or simple unique "out of place" property and allows the reader to judge where the subject property lies in that graph.

Seems that the protocol you suggest could easily be "automated" and reported along with results of the 1004MC.

I personally rely on Spark for Appraisers to upload data I select from MLS into my reports. The Spark program also populates the 1004MC, the page 1 predominant values, the top of page 2 neighborhood information, and provides various charts that depict the results. One does, however, have an opportunity to define page 1 different from the 1004MC, although to use the same data for both, e.g., 12 months of competing properties, is VERY convenient, and compliant as well. Appraisers are requied, however, "define" the results in the 1004MC and throughout the report. Not to be overly-crass but the service is a blessing that facilities increased results and productivity as well.

 

[alebrewer]

But the same guidelines indicate the following:

When completing the One-Unit Housing Trends portion of the Neighborhood section of the appraisal report forms, the trends must be reflective of those properties deemed to be competitive to the property being appraised. If the neighborhood contains properties that are truly competitive (that is, market participants make no distinction between the properties), then all the properties within the neighborhood would be reflected in the One-Unit Housing Trends section. However, when a segmented or bifurcated market is present, the One-Unit Housing Trends portion must reflect those properties from the same segment of the market as the property being appraised. This ensures that the analysis being performed is based on competitive properties. For example, if the neighborhood contains a mix of property types not considered competitive by market participants, then a segmented or bifurcated market is present. The appraiser should also provide commentary on the other segment(s) of the neighborhood when segmentation is present.

That's a BIG IF because all of the properties in a neighborhood rarely if ever reflect the subject's characteristics, lessen it's a boring homogeneous builder PUD.

'One Unit Housing Trends' section is different than 'One Unit Housing price/age' section. The section you've cited is supposed to reflect only competitive properties, and that section includes Property Values, Demand/Supply, and Marketing Time.

The One Unit Housing Price/Age Sections are addressed here (cited from the Guide, bold/italics added by me):

Price Range and Predominant Price​

The appraiser must indicate the price range and predominant price of properties in the subject neighborhood. The price range must reflect high and low prevailing prices for one-unit properties, two- to four-unit properties, condo units, or co-op units depending on the property type being appraised and the appraisal form being used. Isolated high and low extremes should be excluded from the range, which means that the predominant price will be that which is the most common or most frequently found in the neighborhood. The appraiser must state the predominant price as a single figure using whole numbers.

Age Range and Predominant Age​

The appraiser must indicate the age range and predominant age of properties in the subject neighborhood. The age range should reflect the oldest and newest ages for one-unit properties, two- to four-unit properties, condo units, or co-op units depending on the property type and the appraisal form being used. However, isolated high and low extremes should be excluded from the range. The predominant age is the one that is the most common or most frequently found in the neighborhood. The appraiser must state the predominant age as a single figure using whole numbers.

When the age of the subject property is significantly different than the predominant age range, the appraiser must explain why the age is outside the range and comment on the marketability of the property and the adjustments that were made in the Sales Comparison Approach adjustment grid to reflect that condition.

The One Unit Housing Price/Age' section is to reflect ALL properties in the neighborhood, sans high and low extremes.

 

[ZZGAMAZZ]

'One Unit Housing Trends' section is different than 'One Unit Housing price/age' section. The section you've cited is supposed to reflect only competitive properties, and that section includes Property Values, Demand/Supply, and Marketing Time.

The One Unit Housing Price/Age Sections are addressed here (cited from the Guide, bold/italics added by me):

Price Range and Predominant Price​

The appraiser must indicate the price range and predominant price of properties in the subject neighborhood. The price range must reflect high and low prevailing prices for one-unit properties, two- to four-unit properties, condo units, or co-op units depending on the property type being appraised and the appraisal form being used. Isolated high and low extremes should be excluded from the range, which means that the predominant price will be that which is the most common or most frequently found in the neighborhood. The appraiser must state the predominant price as a single figure using whole numbers.

Age Range and Predominant Age​

The appraiser must indicate the age range and predominant age of properties in the subject neighborhood. The age range should reflect the oldest and newest ages for one-unit properties, two- to four-unit properties, condo units, or co-op units depending on the property type and the appraisal form being used. However, isolated high and low extremes should be excluded from the range. The predominant age is the one that is the most common or most frequently found in the neighborhood. The appraiser must state the predominant age as a single figure using whole numbers.

When the age of the subject property is significantly different than the predominant age range, the appraiser must explain why the age is outside the range and comment on the marketability of the property and the adjustments that were made in the Sales Comparison Approach adjustment grid to reflect that condition.

The One Unit Housing Price/Age' section is to reflect ALL properties in the neighborhood, sans high and low extremes.

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Gotta admit that your perspective seems to be as good as gold, just weird that data reported in adjacent sections of a form report. within the same "Neighborhood" section, would pertain to what presumably will usually be a different set of data. But thanks for taking the time to clarify, presumably for the edification of lots of readers.

 

[Carnivore]

In the end it helps explain why FNMA no longer requires the 1004mc. Apparently not everyone was using it in the same way. I raise my hand I am one of them. I do only use sale that are reasonably similar to the subject.

I think GH's comment that this should have been a separate analysis not hooked so to speak to page one is spot on. Example would be small town usa. Population whatever. Dallas NC 2019 population 4,797 is a good example.How do you define the subjects property hood. Can't do it by Subdivision name, even though the Legal will describe some long forgotten subdivision title or the builder name. All through that small town is mixed use and all over that town you will go to get something comparable to your Subject. You could describe the neighborhood boundaries as everything inside the city limits of the Town of Dallas. 1950's style two and three bedroom bungalow are very common. So are old 1920's style mill houses. Now because of demand new construction In-fill is taking place.

So then tell me how do i describe that market? What do I put in the Neighborhood Range of pricing? I know what sale I would use in the 1004mc? Thats the easy part. BUT Its not that easy because the sale are so varied in this town that it won't make any sense at all.

The 1004MC is useless in that town. Unless you broaden the definition of what a comparable actually is! I always use supplemental Statistics in that town.

What am I saying wrong above?

 

[George Hatch]

I think separate analyses of neighborhood vs market segment is crucial. Even if that market segment analysis only amounts to checking a box saying the entire neighborhood also comprises the entirety of the subject's market segment. When that's the case.

There's a world of difference between saying the subject's neighborhood consists of a 400 unit residential subdivision that was built out by the same developer with 3 floorplans ranging from 1620-2300sf; vs saying the subject's neighborhood was originally built out in the 1920s -1930s and then has been going through a redevelopment phase since 1990, out subject being one of these newer infil homes. Using comps from the subdivision 3 blocks away and which share the neighborhood homogeneity might look okay WRT age and size and such, but in real life those may not be the most similar comps if there are other infil homes nearby of similar age/size.