been providing data in narrative and
graphical form in support of their trends
opinions long before the 1004MC was
introduced, so the major change will be
reformatting to meet the form specifics.
Having taught the Appraisal Institute’s
Form 1004MC seminar several times
now, it has been gratifying to “see the
lights come on” in the minds of some
students who have not experienced markets as volatile as we currently see, or
those who haven’t had the opportunity
to receive education on how to complete a proper market analysis. The form
should be a good template as they learn
how researching the information and
presenting it in a logical format can help
them better identify and report trends.
While I understand the need for
standardization in mortgage lending
appraisals, I still would rather have
had the mandate be for appraisers to
provide support of their trends opinions
in their own manner, with the 1004MC
as an option for those who desired a
template.
Karen Oberman,
SRA
Waukee, Iowa
I would say that
the general feeling of
the appraisers I have
talked to is that they
want to continue to
do their jobs well. There is some frustra-
tion that this is just another box to com-
plete that will not be easily understood
by untrained individuals in the lending
industry, which will ultimately increase the
burden on the appraiser with additional
call backs and questions. The prepara-
tion of the form will take additional time
initially, but as with anything, appraisers
will adapt and the process to complete it
will become more efficient.
Conceptually, it’s a good idea. Practically, it’s difficult to create a one-size-fits-all
form for an entire national geographical
area considering the complexities of certain markets and specific properties, and
the data that may or may not be available
at any given time. It’s too soon to tell if
the form will solve the issues it is intended
to address.
Joseph “Jody”
Guerry, SRA
Mt. Pleasant, South
Carolina
While the FNMA
Market Conditions
(1004MC) form
offers the appraiser
a concise format to
display the results of a supply-and-demand
analysis, it has the potential to lead the ap-
praiser to conclusions that lack credibility.
The analyst must be aware of and employ
appropriate analytical techniques including
those that expand beyond the statistics
displayed on the FNMA form.
Appraisers should keep the definition of
market value in mind when selecting data
for median price analysis. As an example,
distress sales generally do not conform to
the definition of market value, and their
inclusion in the analysis may generate misleading results. Conversely, REO offerings
(listings) that would be considered by the
typical buyer of the subject property must
be considered.
In measuring demand, the 1004MC
form calls for the appraiser to utilize the
settled or closed date as the point in
time that the demand occurred. Market
demand occurs when a property is placed
under contract, not when it is closed or
settled. In markets where new construction activity is predominant, and where
many homes are placed under contract
prior to or during construction, reliance
upon settled date will result in an erroneous measure of demand at a much later
point when those homes are completed.
As an example of the potential error,
assume that last year’s demand was
extremely strong, and numerous homes
were placed under contract prior to
construction. In this scenario, assume a
dramatic change in the economy that
resulted in unprecedented declines in
demand in recent months. If the preconstruction sales from last year reach
completion of construction and settle
now, they will appear to demonstrate current demand that no longer exists.
The 1004MC form calls for historical
trend analysis of inventory, median sale
and list price, market exposure (DOM) as
well as list price to sale price ratios. USPAP
