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New Market Conditions Addendum to the Appraisal Report (Form 1004MC)

If you've attended any of Patrick Egger's classes at the "a la mode Regional Appraiser Conventions", you'll know that he's mentioned that Fannie Mae was working on a "one-page Market Conditions addendum" (similar to Wachovia and RELS forms). Fannie Mae has released the 1004MC form as part of Announcement 08-30, which also includes clarifications and amendments to the existing Fannie Mae Selling Guide. Download MCA_Form.png

Key Highlights of Announcement 08-30:

New Market Condition Addendum form 1004MC
Supervisory appraisers must now inspect the subject property
Reporting prior sales and listing history
Appraising a property on sites over 5 acres
Effective age adjustments
Cost approach for insurance purposes

The 1004MC: "Houston, we have a problem"

My initial thoughts, I think we have some bridges to cross here, one of the reasons I started the series on URARS – Uniform Residential Appraisal Reporting Standards. While I believe this is a step in the right direction, the form and instructions appear to be in conflict with other Fannie Mae Appraisal Guidelines, The Appraisal of Real Estate and "generally accepted appraisal practice".

As an example, the 1004MC requires the appraiser to report housing trends based upon "sales and listings of properties that compete with the subject property, determined by applying the criteria that would be used by a prospective buyer of the subject property".The conclusions for those trends (based on properties that are competitive with the subject) are to be "reported in the "one-unit housing trends" area of the URAR.

Click here to continue reading . . .

ALSO . . .See the attached files below

Attachments:

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Replies to This Discussion

Permalink Reply by Bill Cobb on November 15, 2008 at 8:46am

Brian, I attached the draft I was sent in August 08 (the whole page). When looking at all of the detail of this new form, it would take at least 1 hour to fill out just this form. Not to mention that lenders and AMCs have demanded we add more market analysis, 2-3 listings adjusted to list-2-sales price ratios with listing photos, much more commentary on the reconciliation section, etc.. All of these add-ons are adding 1-2 extra hours to complete this thorough of an appraisal report. MY BEEF is that they don't want to pay a dime more for all of this extra work and time.

Attachments:

Draft of Mkt Conditions Form.doc, 114 KB

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Permalink Reply by Brian Davis on November 15, 2008 at 9:05am: Bill - Thanks. I also provided a link to the final document (bottom of original post). I've also uploaded the announcement pdf as well as Fannie's FAQ sheet on the new form.

Over my career, I've seen many of these initiatives. Most often it's a reaction to appraisers not doing what they should have done in the first place.

I can remember when we did not have to include photos of the comps. Why? Because it was presumed that all appraisers were doing their job and were at least driving by them. To make SURE . . . they began requiring photos. It was their insurance that we HAD visited the comp.

There's case after case of that happening. More recently we've been required to report on the historical sales and listings of the subject and comps. YEAH . . . we should have been analyzing that all along . . .but many were not. NOW . . .we're all required to "report" that analysis.

That's what I see in this latest Addendum. Because they feel that many appraisers were not doing the proper analysis . . .we now have to "report" those findings.

I agree . . . It take a LOT longer to "Report" thoses findings than it takes to just do the "Analysis". Primarily beause we have to get it into THEIR format and not just a series of MLS, Assessor, or personal charts and graphs.; ▶ Reply to This

Permalink Reply by Michael M. Villierme on March 8, 2009 at 8:34pm: Don't fret dear friends. We will be doing desk top appraisals, formerly called "comp checks", getting paid $45 a whack and being damn glad to have it. The new 1004MC along with all other required attachments and addenda actually have about made the form report, a narrative. I guess we who were doing at least cursory market analysis and keeping that as part of our file work will no longer have to clog our filing cabinets with all our research and acquired data. We'll just submit it as an addendum or attachment.
It is swell that we will finally be required, all of us, to finally do the research and statistacal analysis we should have been doing all along. Just begs the question, do we all know how to read, then interperet the data?; ▶ Reply to This

Permalink Reply by Peter J. on February 22, 2009 at 4:05pm: AFTER 30 YEARS.......IT IS FINALLY CONFIRMED............
"IT'S ALL BULLSHIT"; ▶ Reply to This

Permalink Reply by Don Ahole on March 12, 2009 at 1:05am: Totally agree 16 years in this Biz and they change rules as it pleases the A-hole bankers. Who is this joke of a guy saying we should interpet the report. The report askes specific questions, but if the there is a lack of data and we place N/A, the underwriters get pissed and tell the rookies just interpert it. JOKE JOKE JOKE!!! I could shread 95% of the appraisers working today. If brought to court they won't know how to answer why they did what they did. The underwriters told me to do it. Everyone knows the way appraisals are supposed to be completed and the way they are, are two different things. I made my money, feel sorry for all of you that think your going to get more money for your work, the AMCs will be paying you less, because uninformed appraisers will do what ever Fannie and Freddie and the banks want you to do.; ▶ Reply to This

Permalink Reply by Nancy Price on March 26, 2009 at 10:04am: What has been the concensus regarding fee to complete 1004MC? I understand that AMC's not willing to pay. Are other appraisers accepting assignments anyways without additional compensation?; ▶ Reply to This

Permalink Reply by D on March 26, 2009 at 1:52pm: I, for one, refuse.
Dusan Varga; ▶ Reply to This

Permalink Reply by Cliff Edwards on April 7, 2009 at 3:38pm: Brian - There is a resource you may find helpful in saving you time and hassle when completing the 1004-mc. It is an online analyzer tool that calculates the 1004mc numbers based on exported information from your respective MLS, which allows you to complete the 1004mc without opening Excel: www.1004-mc.com; ▶ Reply to This

Permalink Reply by Ricardo Small on November 16, 2008 at 8:31am: Brian is 100% in saying: "...we should have been analyzing that all along . . .but many were not..."

Lazy, incompetent appraisers, who do not identify market trends or apply time adjustments, fail to report accurate values. Many appraisers STILL are not analyzing market conditions.

Given the power of computers and ready availability of downloading MLS or public record data for relatively easy number crunching in Excel or in other analytical software, it's surprising that ALL appraisers are not incorporating the analyses that the new form requires. FNMA is right to insist on these types of analyses.

There's an excellent training DVD by Anthony A. Young, titled "The Nuts Bolts of Spreadsheets, Graphs and Trend-Analysis for Today's Valuation Expert". Log onto web sites: www.graphthetrend.net and www.thegraphguy.com. I've watched eight of 15 chapters, so far, and have learned a great deal to enhance the graphs I include in every one of my reports. IMO this DVD or something similar should be required for license renewal hours.

Many appraisers with trainees do not know how to complete market condition analyses, so there are thousands of appraisers who have no exposure to the techniques that Mr. Young teaches in his DVD.

I've seen an MAI's residential appraisal report in Tucson that has "stable" checked, while the market data proved a ~2% decline in value per month. So, the supposed cream of the appraiser crop, a designated MAI, didn't know how to or was too lazy to complete an accurate market conditions analysis and apply the results to arrive at an accurate opinion of value.

I think the new form will go a long ways to improving appraiser performance and commend FNMA for creating it.; ▶ Reply to This

Permalink Reply by Brian Davis on November 16, 2008 at 9:08am: Ricardo - Anthony has a "Group" here on the Appraiser's Water Cooler - click here. Folks can also click on the Scoop Gear link in the top navigaton of the Water Cooler to order their CD.

I agree, Anthony Young's DVD is excellent!

What I think is an issue . . . Is that we now have to put our "round" analysis into Fannie Mae's "square" form. By that I mean that we may have access to graphing and charting tools in our MLS, in combination with Excel (or other analysis tools) and the output does not conform or import directly to the Fannie "format".

This means that appraisers (like you) will have to convert your analysis to their "chart" and then develop a way to import the data . . .or manually enter it. That takes time and effects our profitability.

Did many appraisers need to get forced into compliance? Probabaly. I just HOPE that education providers and software developers can come up with a way to EFFICIENTLY convert our "analysis" to fit the Fannie Mae "report".; ▶ Reply to This

Permalink Reply by Ricardo Small on November 16, 2008 at 9:20am: Brian, I should have known you would have included Mr. Young's excellent teachings here. Richard Hagar and his fraud seminars, Anthony Young and his DVD, and you with this and other Internet information, are three appraisers who have contributed more to enhancing excellence in the appraisal profession than 5,000 average appraisers combined.

While I have not gone through the new form with an Excel spreadsheet output in mind, it may be possible in some software packages (alamode?) to download output into the new form. I suspect a macro might be required in Excel to sort MLS or pubilc record data quickly into an appropriate format.

Maybe one or two computer software adepts will create such a macro?; ▶ Reply to This

Permalink Reply by Greg Hartley, SRA on November 16, 2008 at 1:06pm: Brian, I, and several appraisers I know, already include a lot of information that is being requested in this form, just not in this particular format. FNMA has gone, again, way over the top in requiring such voluminous data. Three separate columns of inventory for sales including absorption rate, number of listings, DOM and then the same type of data collection and analysis for foreclosure sales? I estimate that in a market where prices are stable, inventory is stable, marketing time is 3 to 6 months and there are no foreclosures to speak of, this form will take one hour plus. In a market where the opposite is true it may take up to three. This simply cannot be done at current fees and maintain even the sketchiest outline of a current standard of living. Poor Skippy, what is he to do? He'll never be able to figure this thing out and for his $175 fee? Gimme a break.

And what about FNMA's opinion of the cost approach for insurance purposes? What happened to the cost approach as an indicator of value? Do we now do two cost approaches, one as an indicator of value with all forms of depreciation and one for insurance purposes with no depreciation? That is opening the gate for every insurance agent in the US to demand the cost approach on every appraisal. Nobody seems to think it is the insuror's position to supply the insurable value. Just more liability for the appraiser. Better up those E & O limits to $5 mil. Oh, and Skippy, that's Errors and Omissions Liability Insurance. You should check into it.

Back to fees. My opinion of this whole thing is that if we are now working at 1990 fee levels and are being asked to provide 2009 information and analysis, we should be asking for 2009 fees. I agree with the statements that some of this information we should have been providing all along. Some do and some don't. Some do and don't interpret it correctly. Some don't and correctly assess neighborhood trends. However it is or is not done, now is the time to demand an increase, or at the very least, a stabilization of fees. If, in 2008 dollars, I am working for $87.50 an hour ($350/4 hours, I'm being optimistic), I am still making less money than in 1993 when I started in this business on a real purchasing power basis. If it takes me 6 hours to complete an appraisal with the new MC addendum, I will be making $58.33 an hour, all things being equal, and that is before overhead (I know the arguments, don't even start).

The whole point is the nuclear response by FNMA. The amount of data and analysis is untenable and extremely distasteful. The job is difficult anyway, the liability is real, the clients are difficult, homeowners know more than I do, and I have a tendency to step in dog crap. I'm gonna hit it for a fee increase. If it doesn't work, that job at Home Depot is starting to look better everyday. At least the dog crap is easier to spot on a concrete floor.; ▶ Reply to This