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Thoughts and Tips on Form 1004MC

Form 1004MC or Market Conditions is a new addition to the residential appraisal. It is a standard form that must be included with all residential appraisals that involve home loans. It is not perfect in all respects, but it is a useful way for appraisers to understand the markets. This article offers some insights and advice.

I personally agree in principle with the 1004MC concept. Real estate appraisers have long needed a standardized methodology to determine market trends. This new form was implemented on April 1, 2009 after being amended to compensate for the different levels of data available from local sources such as MLS. Not all MLS services nationwide provide enough analytical tools and information for the evaluator to give a complete analysis, while some other MLS services are highly sophisticated. It depends on where you live and work. The 1004MC also provides transparency to the appraiser’s conclusions about the market and gives the appraiser a much better perspective on past and present market activity.

The use of Form 1004MC is still very new and it will be some time before those who fill it out and those who review the results really understand how to do it. Although it seems simple to complete (and it is), the interpretation of the raw data is much more difficult. For example, the results may show a large increase in the number of homes available on the market and a corresponding increase in the number of months of inventory. This can be as simple as the start of the summer shopping season, or it can be more complex, such as a large number of homes foreclosed online, a new subdivision with dozens of homes available for sale, or perhaps a large layoff. That is causing an unusually large number of people to want to sell. It is up to the appraiser to understand what the market and the economy are doing to find out the cause.

I advise both private reviewers and state reviewers to allow a reasonable amount of time (approximately 1 year) for the industry to adapt and understand Form 1004MC, and private reviewers should realize that attempting to reproduce the results of the Appraiser can produce variations from what they got, even when using exactly the same parameters and spreadsheet formulas. It will take some time for all errors in the source materials to be resolved, and it is well known in the appraisal industry that in some MLS systems, two identical data searches, even moments apart, will yield different data results. It could be faulty databases, faulty database recovery software, or perhaps just data changes due to the input of many thousands of MLS users throughout the day. The 1004MC review will be much less challenging (and potentially less damaging) if a degree of variation is accepted as normal.

Some MLS services provide an easy-to-use spreadsheet with the necessary formulas already built-in, along with a special MLS search function specifically for Form 1004MC, where the appraiser uses a paste function to apply the raw data to the worksheet. calculation. I want to provide some helpful advice for those appraisers who are lucky enough to have this tool.

One tip is to always make sure to scan the price list in the raw data run before analyzing it. Some agents include sales and rental listings in the same category. In other words, listings of homes for rent for, say, $ 800 per month, can be mixed with homes that are active, pending, or sold for, say, $ 100,000. Form 1004MC uses median prices (in the middle), but those $ 800 rents do not belong in the analysis and may lower the true median. Appraisers can use median (average) prices when needed and those $ 800 rental listings will certainly affect median prices. I have also seen prices entered incorrectly in MLS where the agent or their assistant got the price completely wrong or attempted to enter a sale price that included dollars and cents, which many MLS systems will misinterpret. This does not affect the median, but it will affect the average. Be careful with your raw data and filter information that does not belong there.

Another tip is to do a double check when completing the foreclosure section of the form. If your MLS allows it, narrow your second search to include only foreclosed homes however your MLS describes them (foreclosures, foreclosed, REO, etc.) and then paste only those results into a separate spreadsheet for your analysis. This will quickly give you REO / foreclosure trend information and takes just a few minutes.

Another tip is that when defining your neighborhood, unless you are absolutely sure of the boundaries, try browsing the sources on the internet. Many cities have voluntary or involuntary neighborhood associations that have their own websites and often describe their territories. A little time spent doing this and marking them on a wall map will go a long way to you, not just for 1004MC purposes, but to better understand your city.

Another tip is to pay attention to the statistical aspect of your data. If your defined neighborhood produces only a handful of data (samples) to work with, be careful because too few samples can easily produce distorted results. A good minimum number of samples is at least 100. But if you can’t find more than 50, you will need to reconsider your neighborhood boundaries or carefully explain analytical results that are distorted or confusing.

Another tip is to never “model” your 1004MC form. In other words, don’t extract an older one, insert the new data, and continue. It is very easy to forget to properly examine and check the General Trend boxes and modify other sections. Always make a new completed form.

Another tip for Windows users is to create a shortcut to your specially crafted 1004MC blank spreadsheet on the taskbar at the bottom of the screen. This makes it easier to call it without having to close or minimize other windows.

Many appraisers do not have or cannot afford Microsoft Excel software. An alternative is the Calc program, which is part of the OpenOffice.org free software package. Calc is a clone of Excel and has most, if not all, the same functions as Excel. So another tip for Windows users using Open Office Calc is, after making your first spreadsheet, save it and then use Windows Explorer to find it. Before opening it again, left-click once on the file name to highlight it, then right-click and select “Properties” from the pop-up menu. Now find “Opens with” and choose “scalc” or follow the instructions to find and choose the “scalc” program and make sure to check the box that says “Always use the selected program to open this type of file”. OK the change. From now on, Windows will use Calc as the default program to open your 1004 MC spreadsheets, saving you a few steps.

One last tip is that when your MLS 1004MC data run comes as a separate file (text, etc.) that you paste into your spreadsheet, always save your data run along with your spreadsheet. Never rely solely on your spreadsheet software to store your data. It is very easy to make a mistake when saving your spreadsheet data. It is part of your work file and must be saved.

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