Predominate Value (on form)

[residentialguy]

something changed from 2002 to 2005

XI, 403.04: Price Range and Predominant Price (11/01/05)
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 residential properties that are comparable to the property being appraised (one‐family properties, two‐family to four‐family properties, condominium units, or cooperative units) and, in some cases, for competing properties (one‐family properties when the property being appraised is a two‐family to four‐family property or a condominium unit, or condominium units when the property being appraised is a cooperative unit). 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 may state the predominant price as a single figure or as a range (if that is more appropriate). When the subject property has a sales price (or value) that exceeds the upper price range, the property is considered as an “over‐improvement” for the neighborhood. The property is considered as an “under‐ improvement” if its sales price (or value) is less than the lower price range. If the subject property is an over‐improvement, the mortgage terms generally should be more conservative because the property may not be acceptable to typical purchasers. The appraiser must explain why the property is an over‐improvement or under‐improvement and comment on the adjustments that were made in the “sales comparison analysis” adjustment grid to reflect that condition.The lender should consider whether a property in an urban area is among those being renovated. Since demand for this type of property can be strong, the property should not be regarded as over‐improved if there is a strong market interest, which is indicated by the existence of comparable properties.

Fannie is wacked in so many ways. What if it's the highest or lowest property...does that mean it is an over or under-improvement? That's what they are saying. What if there are no comparables in neighborhood? Maybe it's an over or under-improvement...maybe it's a mixed bag of homes in the cluster flux subdivision.

Besides, the value range is not for comps, it's for all 1-unit properties.


If it is an over or under-improvement, the appraiser should recognize it and explain it - that's just appraisal 101. Why FNMA likes to box appraisers in a confines of their interpretations is beyond me. I think FNMA just like hear themselves talk shop because they like to smell their own rear breath. Start hiring appraisers that don't need to be told how to appraise.

 

[USPAP101]

So much for appraiser independence and no one is supposed to influence your report.
Let's see, were the AMCs supposed to be hired to PRESERVE appraiser independence and not to influence your report????

Every assignment an appraiser receives from a client influences the appraiser's "report". If the appraiser is asked to complete a 1004 or a 2055, unless this request keeps the appraiser from providing a credible analysis, the request for that report is granted.

Appraisal independence and "influence" are concerning the appraiser's ability to provide a "credible opinion". It does not mean the appraiser can't be asked to clarify language or remove language that is confusing. If this were not true, then the UAD would be a violation of appraisal independence. Remember, credibility is within the context of the intended user and intended use.

Therefore, if the client or client's agent is asking to add or remove something that may have an impact on the opinion of value, or would cause the intended user to be mislead, then the appraiser should decline those requests and provide a professional explain as to why. But that is USPAP issue, not appraisal independence issue.

I don't recall the original poster even stating specifically what they were asked to remove. How do we all know it may be poorly worded and say something different than what the appraiser intended to say? If so, is it not feasible for the client to make such a request?

 

[Scott R Marshall]

Median price would seem a good stand in for predominant value.

This is what I do. In general terms, the "oddballs" are only an issue when utilizing an average. Utilizing median only becomes an issue when the data is severely limited.

 

[residentialguy]

Our MLS has a great tool. It breaks down all the sales and listings into small price ranges and how many homes fall into that particular range. Median price does not mean predominant. Mode of small ranges shows predominant. Then you can use the median of that prodominant range.

The predominent for the example below would be easily justified at 240K. (there were 81 homes that were between 200-300k with a median of 242k). But the house that sold for $500k or even $700k is not over-improved for this area. Same goes with year built.

 

[Motown Matt]

This has long been an issue with me, until a friend of mine took a recent class and informed me what he learned (which makes great sense):

When you do your MC research for COMPARABLE properties, you will have all the information you need to fill out this section. Even though it does not state "comparable" on page one, and I can find no guidance on this anywhere, the report "flows" properly when all of the information in your MC matches the information in the neighborhood section, as well as the top of page 2 (comparable sales and listing ranges). The information you report on the MC page should match what you report in your neighborhood section - that is why a competent underwriter will stip you if your value does not fall within this range, or is significantly off of the predominant figure. Another way to think about this - the fields directly to the left for housing trends should be supported by your MC page data. I have struggled with this concept, too, but after doing it this way, as taught in a class, the reports look a lot better, and if you feel the need to add a paragraph in your report to explain that these numbers are for comparable properties and not all properties in the area (and these numbers are NOT reconciled for differences to the subject) to feel better about it, then just do it.

 

[residentialguy]

This has long been an issue with me, until a friend of mine took a recent class and informed me what he learned (which makes great sense):

When you do your MC research for COMPARABLE properties, you will have all the information you need to fill out this section. Even though it does not state "comparable" on page one, and I can find no guidance on this anywhere, the report "flows" properly when all of the information in your MC matches the information in the neighborhood section, as well as the top of page 2 (comparable sales and listing ranges). The information you report on the MC page should match what you report in your neighborhood section - that is why a competent underwriter will stip you if your value does not fall within this range, or is significantly off of the predominant figure.

I'm sorry, but that is just incorrect. The neighborhood section is just that "the neighborhood". Comps are not the neighborhood. It states "one-unit housing trends". Just because you don't find other "guidance on this anywhere" doesn't mean you can ignore what the form says. The is no other guidance saying that the state of the subject means state of the subject...but that doesn't allow you to put in a different state. The MC specifically states "Comparables" and pg one specifically states "Neighborhood" and "One-Unit Housing"

If you get stipped, you correct the phone monkey and laugh at him. Don't base your appraisal on stips. Do it correctly and explain it enough so that you don't get stipped.

 

[VolcanoLvr]

Here's why my OP was put out to the masses:

Report completed in September '11.

Mid-Nov, I get an 'e-mail' (not a formal QA Notice) from the original AMC client passing on a request from the lender, which states:

"Appraiser to comment if subject is considered over improvement due to value exceeding predom value."

The report looks like this for One-Unit Housing (no "000" in report):
Low Price = $340,000
High Price = $575,000
Pred. Price = $480,000

Appraised value = $500,000

It seems pretty clear to me that the 'checkbox' review form the lender uses shows that the AV must be the same as the Pred. Price, otherwise they expect a comment in the report.

And by the way.....you folks who have been posting the info from the Sellers Guide are using info that is now out of date. The Sellers Guide was reformatted in 2009 or so, with different paragraph numbering conventions and revised content.

When updated Mortgage Letters are issued that affect content, the web site version of the Sellers Guide is updated. Therefore, we cannot rely on a printed version that was printed months or years ago.

I have not yet found in the 'new' Sellers Guide the same or similar info that was used in prior versions, but admit to doing only a quick scan to see if I could find it. Content relating to appraisals is in Section B.

 

[CANative]

Suggested response:

"How could it be an over-improvement if it's inside of the range?"

 

[hastalavista]

Suggested response:

"How could it be an over-improvement if it's inside of the range?"

That is excellent! :laugh:

 

[residentialguy]

If another house in the neighborhood has the similar or greater super-adequacy, does it no longer suffer from super-adequacy?