Time Adjustments

[Artemis Fowl]

I used to include a 2yr overall trend to account for seasonal fluctuations. I could then identify any relevant subtrend if needed.

 

[alebrewer]

Assuming you were doing P1 based on the neighborhood trend instead of what Fannie wants, which is just comparable properties, it would actually not be misleading. What if you have a submarket in the neighborhood that is appreciating, which is what your subject is part of, while the neighborhood as a whole is declining?

A flaw in the form, no doubt. I've never liked the 'neighborhood' section - it should be 'market area' IMO. It's funny - when I mention doing macro analysis, folks say they don't care about that. But then they get hung up on whether or not 'neighborhood' metrics are different than market metrics. SMH. And while I agree that phenomenon can, and does, happen, market areas tend to correlate with neighborhood metrics fairly well.

 

[Basically Rectangular]

It depends. I have seen where market conditions increased 8% over the first six months, but stabilized over the last six months. In that case I call the market stable on the MC form, and apply the adjustment for any comps over six months.

If I have comps older than one year, I apply the market adjustment based on the variance in the median sales prices for the month of the comp relative to the median sales prices of the current month.

The formula -using median sales prices- is: (Current - Past Date) / Past. So if current median sales prices are $500 and the median sales prices at the time of your comparable contract date are $425 then $500-$425 = $75. $75/$425 = 17.6%. I apply the percentage adjustment to the relevant comparable sale and explain, usually with a chart or graph.

 

[ZZGAMAZZ]

The forms should be made more consumer friendly if they are being provided a copy of the appraisal.

Is the Intended User being changed because the borrower is provided a copy of the appraisal?

 

[Michigan CG]

Yeah - it can get hairy. I tend to use straight line over a particular time period. Say the market fluctuated up for 6 months at 1%, 2%, .5%, 3%, 2%, 3%, but then was stable for 3 months. Comp 1 contracted 6 months ago, comp 2 contracted 2 months ago. The 9-3 month period shows a average appreciation of ~ 2%/month, with the 3-0 month period being stable. I'd adjust comp 1 at 6% (2%/month for 3 months, and 0% for the current 3 months), and Comp 2 at 0%. Remember, too, that concessions and market adjustments are the only two that are absolute - IOW, they're not relative to the subject. IMO, that makes them the easiest adjustments to extract/apply.

That's just me, though.

I agree with what you are doing.

 

[ZZGAMAZZ]

I agree with what you are doing.

Towards that end, quarterly adjustments for competing properties can easily be lifted from results of the 1004MC; and the corresponding respective quarterly adjustments are easy to apply to several comparables, and also to describe in the SCA narrative, IMO.