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Appraising Is Challenging Enough Without Having To Figure Out The 1004MC |
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While the recently required 1004MC appears to be a step in the right direction for addressing a standard for measuring trends, the concern of unintended consequences may actually overshadow any of the 1004MC's potential benefits because the data analysis and format of the 1004MC is such that the numbers may actually be misleading. The statistics reported in the 1004MC might work well under balanced market conditions, but the reality is that the market is rarely in balance. Real estate is highly dependent on the influence of market forces, especially employment, migration, credit availability and consumer confidence, none of which are factored into the 1004MC's overall trends. The accuracy of the 1004MC's overall trends is suspect because there has been a serious lack of readily available information to the appraisal industry, since most of the required data was not even collected prior to the new mandated market condition requirement. Even if the appraiser's reporting of 1004MC information is deemed to be accurate and in complete compliance with industry regulations, there remains an even larger obfuscation that is created by the 1004MC's unequal comparison of 0-3 month and 4-6 month activity to that of the prior 7-12 months. For example, the 1004MC could suggest that the market trend is stabilizing (by its combination of results in two consecutive three month periods and their comparison with the results of the combined previous 7-12 month results), while the actual market trend may actually be in decline. The industry standard which limits market comparisons to a 12 month period also contributes to this misrepresentation as the 12 month view is continually moving forward with time and completely ignores the previous market influences affecting the overall trend. Case Study: An appraiser was contracted to perform a peer review of a valuation that was performed on a condominium unit in Lynnwood, Washington. The appraiser employed accepted methods of researching and entering data into the 1004MC form. The data showed that median sale prices had been increasing for the past year in the market, and this was the conclusion reported by the appraiser. The review appraiser accessed a Valyootrends Market Condition Report to assist in understanding market trends in this specific market, in order to accurately review the quality of the original appraiser's work. While the charting in the Market Condition Report confirmed the appraisers observations of a year of increasing prices, it showed that the median list price had dropped below the median sale price and the review appraiser realized that the market was actually starting to decline. A quick reference to the sale and list price charting showed that this same occurrance had taken place twice in the previous 27 months. The charting showed that in both cases where the list price had fallen below the median sale price, the 3 month period that followed experienced a 9-10% decline in median sale price. By reading the Market Condition Summary, the reviewer was able to see that the sudden drop in list prices directly corresponded to a sharp rise in unemployment in the preceeding 3 months as well as a dramatic upward climb in the rate of foreclosure in the market. Without having access to the data and information obtained from ValyooTrends.Com, the review appraiser would not likely have had reason to look further in verifying the reported increasing sale price trend and he would have increased his own liability and would have failed to protect the interest of his banking client who had employed him to protect their financial interest. ValyooTrends Market Condition Summary Reports provide an extended 24-27 month view of the marketplace and the data is cross referenced and verified with other real estate and economic information as a means of providing a realistic view of market conditions. Implementation of ValyooTrends Market Condition Summary Reports and the 1004MC is one sure way to reduce an appraiser's liability and when used in conjunction with your own market research, it's probably the cheapest "insurance" an appraiser can buy. |
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Specially Priced For Professional Use ($19.95 Retail Value) |
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We know value and are dedicated to providing reliable market condition data, unbiased real estate appraisals, appraisal review and value opinions to the lending, legal, insurance, real estate and financial services industries. |
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