Appraiser CooperativeAlternative To Appraisal Management Companies

Mortgage risk, in any market, is inherently defined by the interaction of economic factors within the housing and mortgage markets. Driven by financial market disruptions, worsening economic conditions and the declining of real estate values, mortgage risk becomes a self-propelling downward spiral of lower prices that lead to defaults and excess inventory, which in turn causes demand to decline and prices to fall further.

Underwriting a mortgage loan is a complex proposition and the underwriter has the crucial responsibility to evaluate credit, capacity and collateral quality; along with other associated risks relative to market value, while assessing the probability of early payment default.

Presently, there are a variety of real estate price-data and forecasting tools available to help underwriters make informed decisions but most of these employ methods that only offer a historical perspective and few, if any, have the data and understanding required to offer an educated guess about the probability of future values.

ValyooTrends Market Condition Summary Reports are far more extensive and specific in reporting historic activity and the probability of future market trends than can be obtained from a Broker's Price Opinion (BPO), an Automated Value Model (AVM) or from other nationwide data companies. Because we employ methods that analyze both historic AND current real estate and local economic information, we are able to report market trends and forecast with great accuracy what market activity is likely to occur in the near future.

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 appraiser's 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 occurrence 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 preceding 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.

So, whether you are underwriting a loan proposal or performing due diligence on a collection matter, ValyooTrends' Market Condition Summary Reports provide an affordable and sensible solution for researching or validating the value of your collateral.

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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.