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1004mc Industry Update 5-4-09

1004mc Industry Update 5-4-09

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Published by: KnoxGeex on Oct 31, 2011
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David A. Braun, MAI, SRA (Written 2009)Part 1; AND, THEY ARE OFF!
April first has come and gone; and the mandate to use the 1004MC-71 form (MCF) isfirmly in place. Much like in a horse race appraisers are accelerating out of the blocks-with a few still stuck in the gate. The form appears to have been primarily designed byFannie Mae, with some input from Freddie Mac, and the Appraisal Institute. The intentof this writing is to discuss the progress of appraisers to adapt to the form and to begina converging of the various opinions of how the analysis should be completed.The players in this scenario are the designers of the MCF, solution providers,appraisers, and reviewers. My personal expertise is as one of the solution providers,but also as an appraiser and fee reviewer. I have 30+ years of appraisal experience,am a certified USPAP instructor, the author of APPRAISING IN THE NEWMILLENNIUM, Due Diligence & Scope of Work, designed and developed the USLDocumenter II software, and the Regression Plus; for Real Estate Professionals. I didnot help design the MCF, nor have I interviewed those that did.I feel the MCF is too restrictive (perhaps to keep it one page), but otherwise I believe itis a positive progression in the evolution of the appraising industry. Now that mostappraisers have access to spreadsheets they can assemble and analyze hundreds ofrecords at one time. This is a stock pile of raw resources that appraisers can no longerafford to ignore. In fact, appraisers like in every other industry in America must exploitevery asset at their disposal and evolve their research and development to a higherdegree of efficiency. Appraisers should begin to grasp the MCF as a tool to help themand not a hurdle to jump over. In this new millennium...”appraisers must evolve fromform-fillers and template masters to problem solvers.”
At this time most appraisers aresimply trying to fill out the form with little recognition of its potential role in the appraisalprocess. Over time, this will change and appraisers will recognize that when a goodmarket condition analysis is performed, the appraisal is half way complete. In the meantime industry leaders such as instructors, writers, and reviewers should keep poundingthe message that the MCF is a viable tool that can provide significant insight and lead toa credible appraisal. I have found that many appraisers are hung up on how get theirMLS search results exported to a spreadsheet and if necessary converting that data toa standard spread sheet format which will allow for organization of the data and
analysis. This is not to imply that every appraisal market will require the use of aspreadsheet. Many rural markets with few properties will simply be done by hand.Appraiser’s coming out of the gates are like the early stage of a race for a humansprinter; their heads are mostly down right now, but shortly their heads will look up andthey will be searching for points of reference to guide them.These points of reference include books, seminars, automated tools, and the designersof the form. The successful appraiser will have to expend the energies to absorbinformation from all of these sources. Those that ignore this wealth of information andare content to merely fill in each blank on the form will find that the users of appraisalswill intentionally and systematically begin to remove them from their approved appraisallists.Once appraisers make the effort to learn and evolve they will need automated tools inorder to meet the budget constraints that they operate under. Most of the commercialform providers have integrated the MCF into their software packages. But, they havebuilt in little automation. I have been offering automated solutions to appraisers foralmost a decade. But, as an appraiser it is difficult to appraise and develop software. Ihave been delighted to see appraisers besides myself offering commercial report writingsoftware and MCF tools. Many appraisers have developed tools, but most never makeit to market. These efforts represent a significant shift in how automated tools reachappraisers. It is my hope that these appraiser/developers will unite and support oneanother to better provide appraisers with the automated tools they need to do their job.
I have been talking to a lot of appraisers who are getting a little uptight. Consider thatfor most residential appraisers their personal financial position has been deterioratingthe past couple of years because of a decreased demand for appraisals during theheight of the housing crisis. Now, throw in the new requirement to perform a marketcondition analysis (MCA) on the 1004mc-71 form, while the work load is finallybeginning to increasing. The typical residential appraiser is in no position to turn downany work. This scenario has left a good number of appraisers in a state of frustrationand panic as they attempt, but fail, to produce a credible MCA in a reasonable timeperiod. Some have reached the point that they say the heck with a credible MCA, Iwould be happy if I could just get the blanks filled in on the 1004MC-71 form (MCF).What should appraisers do to get over this hump?My suggestion is to begin to think positively. Most appraisers (90% plus) can meet thechallenges of performing a credible MCA on the new MCF. So, most all appraisers arestating a fact when they say, “I can do it!” However, there is a set of skills that has to bedeveloped, each fitting together like the pieces of a puzzle. Let’s talk about a few ofthese necessary skills.The first and most important skill is being able to recognizewhat data should be gathered in the analysis. The secondis how to perform the database searches that arenecessary to gather all of the meaningful information. Thethird step is assembling that information on a spreadsheetfor analysis. The appropriate data to gather is any propertythat was exposed to the market (listing, pending, expired,withdrawn, sold etc.) that potential purchasers of thesubject property would deem competitive to the subjectproperty. Appraisers typically think of pertinent data(comps) in the forms of closed sales and active listings.However, would a property that is very similar to the subject that was actively listed onthe market at $220,000 for over a year and was recently withdrawn by the owners bemeaningful information for the appraiser? Of course it would. A MCA that is based on alot of types of data has some real potential to aid the appraiser in the valuation process.The data-basing term for these different types of comparable properties is a “Record”.What search parameters should be used when gathering these comparable propertyrecords? This is best answered by considering what the appraiser is going to do withthe data. The MCF is basically a trending analysis; but what are we trending? Manyappraisers search for comparables by a sales or listing price range; which is an
method. We are not so much interested in how many properties are offeredand how long they have been on the market in a specific price range. The appraiser isnot trying to trend a price, he/she is trying to trend a specific property type in a specificlocation by price over time.

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