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1 www.Mckissock.com www.McKissock.com 1-800-328-2008 www.McKissock.com www.Mckissock.com

2 www.McKissock.com 1-800-328-2008 Welcome and Course Description Welcome to Analysis in Action, presented by McKissock LP. This course concentrates on analysis – the backbone of all appraisals. We will start with an extensive investigation of market analysis, complete with USPAP and regulatory guidelines, and examples. We will study market analysis for the URAR and the 1004 MC Addendum and look at some charting tools. Then we will concentrate on sales analysis; again with USPAP and regulatory requirements. Then we will focus on comparable sales selection, qualitative, and statistical analysis. Page 3

3 www.Mckissock.com www.McKissock.com 1-800-328-2008 Seminar Objectives Discuss requirements for market analysis by USPAP and various clients Complete the market analysis sections of the 1004 and 1004 MC report forms Employ analytical tools for better market analysis Explain practical applications Identify requirements for sales analysis by USPAP and various clients Complete the sales analysis sections of the 1004 report form Employ analytical tools for better sales analysis Page 5

4 www.Mckissock.com www.McKissock.com 1-800-328-2008 Seminar Agenda USPAP requirements for market analysis Fannie Mae and Freddie Mac requirements for market analysis FHA and VA requirements for market analysis ERC requirements for market analysis Market analysis in the 1004 and 1004MC forms Market analysis for private appraisals Excel charting functions

5 www.Mckissock.com www.McKissock.com 1-800-328-2008 Seminar Agenda USPAP requirements for sales analysis Fannie Mae and Freddie Mac requirements for sales analysis FHA and VA requirements for sales analysis ERC requirements for sales analysis Selecting comparable sales Qualitative analysis of sales Statistical analysis of sales

6 www.Mckissock.com www.McKissock.com 1-800-328-2008 Announcements Break times and lunch Restroom locations Smoking areas Be considerate of those near you Please silence your cell phone, pagers, etc. Attendance sheet Certificates and evaluation forms

7 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Analysis  The separation of an intellectual or material whole into its constituent parts for individual study  The study of such constituent parts and their interrelationships in making up a whole  A spoken or written presentation of such study Source: American Heritage Dictionary Page 6

8 www.Mckissock.com www.McKissock.com 1-800-328-2008 Synonyms Analysis  Study  Reasoning  Opinion  Judgment  Interpretation  Evaluation Source: Collins Thesaurus of the English Language Page 6

9 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Analyze  to study or determine the nature and relationship of the parts of by analysis Source: Merriam Webster Dictionary  to scrutinize information or data with the intention of identifying patterns, trends or anomalies to solve existing problems Source: www.cchra.ccahrd.ca Page 6

10 www.Mckissock.com www.McKissock.com 1-800-328-2008 Analysis is Required from appraisers What sets us apart Your best friend The genesis of value opinion What it’s all about

11 www.Mckissock.com www.McKissock.com 1-800-328-2008 Be An Analyzer Bunny

12 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Market A set of arrangements in which buyers and sellers are brought together through the price mechanism; the aggregate of possible buyers and sellers and the transactions between them. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 7

13 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Real Estate Market Buyers and sellers of particular real estate and the transactions that occur among them. Source: Dictionary of Real Estate Appraisal, 5 th Edition Page 7

14 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Seller’s Market An active market in which the sellers of available properties can obtain higher prices than those obtainable in the immediately preceding period; a market in which a few available properties are demanded at prevailing prices by many users and potential users. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 7

15 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Buyer’s Market A market in which buyers have the advantage; exists when market prices are relatively low due to an oversupply of property or reduced buyer demand. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 7

16 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Depressed Market A market in which a drop in demand is accompanied by a relative oversupply and a decline in prices. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 7

17 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Market Analysis A process for examining the demand for and supply of a property type and the geographic market area for that property type. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 7

18 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Market Area The area associated with a subject property that contains its direct competition. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 8

19 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Market Area Delineation The process of identifying the market area associated with the subject property. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 8

20 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Neighborhood  A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.  A developed residential super pad within a master planned community usually having a distinguishing name and entrance. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 8

21 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Neighborhood Analysis The objective analysis of observable and/or quantifiable data indicating discernible patterns of urban growth, structure, and change that may detract from or enhance property values; focuses on four sets of considerations that influence value: social, economic, governmental, and environmental factors. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 8

22 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP STANDARD 4 - REAL PROPERTY APPRAISAL CONSULTING, DEVELOPMENT In developing a real property appraisal consulting assignment, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete the research and analyses necessary to produce credible results. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 10

23 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Definition of Appraisal Consulting from the 2012-2013 USPAP: APPRAISAL CONSULTING: the act or process of developing an analysis, recommendation, or opinion to solve a problem, where an opinion of value is a component of the analysis leading to the assignment results. Comment: An appraisal consulting assignment involves an opinion of value but does not have an appraisal or an appraisal review as its primary purpose. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Note: The ASB has proposed the retirement of STANDARDS 4 and 5 for the 2014-2015 USPAP. A similar proposal was made for the 2012-2013 USPAP, but it was not adopted, and STANDARDS 4 and 5 were retained. Page 10

24 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP SCOPE OF WORK RULE Comment: Scope of work includes, but is not limited to:  the extent to which the property is identified;  the extent to which tangible property is inspected;  the type and extent of data researched; and  the type and extent of analyses applied to arrive at opinions or conclusions. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 11

25 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1-2 (c) (iv) if the opinion of value is to be based on non-market financing or financing with unusual conditions or incentives, the terms of such financing must be clearly identified and the appraiser’s opinion of their contributions to or negative influence on value must be developed by analysis of relevant market data; Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 11

26 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1-3 (a) identify and analyze the effect on use and value of existing land use regulations, reasonably probable modifications of such land use regulations, economic supply and demand, the physical adaptability of the real estate, and market area trends Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 11

27 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4 In developing a real property appraisal, an appraiser must collect, verify, and analyze all information necessary for credible assignment results. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 11

28 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4(a) When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 11

29 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4(b) When a cost approach is necessary for credible assignment results, an appraiser must:  develop an opinion of site value by an appropriate appraisal method or technique  analyze such comparable cost data as are available to estimate the cost new of the improvements (if any); and  analyze such comparable data as are available to estimate the difference between the cost new and the present worth of the improvements (accrued depreciation). Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 12

30 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4(c) When an income approach is necessary for credible assignment results, an appraiser must:  analyze such comparable rental data as are available and/or the potential earnings capacity of the property to estimate the gross income potential of the property;  analyze such comparable operating expense data as are available to estimate the operating expenses of the property;  analyze such comparable data as are available to estimate rates of capitalization and/or rates of discount; Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 12

31 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4(e) When analyzing the assemblage of the various estates or component parts of a property, an appraiser must analyze the effect on value, if any, of the assemblage. An appraiser must refrain from valuing the whole solely by adding together the individual values of the various estates or component parts. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 12

32 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4(f) When analyzing anticipated public or private improvements, located on or off the site, an appraiser must analyze the effect on value, if any, of such anticipated improvements to the extent they are reflected in market actions Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 13

33 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4(g) When personal property, trade fixtures, or intangible items are included in the appraisal, the appraiser must analyze the effect on value of such non-real property items. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 13

34 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 5 When the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business:  analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal; and  analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 13

35 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Is this a proper analysis? “The subject property sold 11 months ago for $212,500.” No – that is a statement of fact. It is not an analysis. That would be a violation of USPAP. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 13

36 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 6 In developing a real property appraisal, an appraiser must:  reconcile the quality and quantity of data available and analyzed within the approaches used; and  (b) reconcile the applicability and relevance of the approaches, methods and techniques used to arrive at the value conclusion(s). Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 13

37 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae B4-1.2-05, Requirements for the Appraisal Report (04/01/2009) Lenders must ensure that the appraisal report reflects a thorough investigation and analysis of the market value and provides the rationale for the appraiser’s opinion of the market value. Source: Fannie Mae Single Family 2011 Selling Guide Page 14

38 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae B4-1.2-02, Objective and Unbiased Appraisals (04/01/2009) The lender must ensure that appraiser comments regarding unfavorable conditions—such as the existence of an adverse environmental or economic factor—also discuss how the condition affects the value and/or marketability of the property being appraised and explain how the condition was taken into consideration in the valuation process. In such cases, the appraiser’s analysis must reflect and include comparable sales that are similarly affected, whenever possible. Source: Fannie Mae Single Family 2011 Selling Guide Page 14

39 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae B4-1.4-04, Appraisal Report Review: Trend of Neighborhood Property Values, Demand/Supply, and Marketing Time (10/30/2009) The appraiser’s analysis of a property must take into consideration all factors that affect value. Because Fannie Mae purchases mortgages in all markets, this is particularly important for market areas that are experiencing significant fluctuations in property values including submarkets for particular types of housing within the market area. Source: Fannie Mae Single Family 2011 Selling Guide Page 14

40 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Submarket A division of a total market that reflects the preferences of a particular set of buyers and sellers, e.g., fast food restaurants as a submarket of the overall restaurant market. Source: Dictionary of Real Estate Appraisal, 5th Edition Page 8

41 www.Mckissock.com www.McKissock.com 1-800-328-2008 Residential Market Analysis - On the URAR Form Page 15

42 www.Mckissock.com www.McKissock.com 1-800-328-2008 URAR Neighborhood Section Page 15

43 www.Mckissock.com www.McKissock.com 1-800-328-2008 URAR Housing Trends Page 16

44 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Marketing Time An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. Source: Dictionary of Real Estate Appraisal, 5 th Edition Page 9

45 www.Mckissock.com www.McKissock.com 1-800-328-2008 URAR Housing Trends Page 16

46 www.Mckissock.com www.McKissock.com 1-800-328-2008 Purpose of Analysis The appraiser is to take that information and analyze it to determine if adjustments need to be made in the sales comparison grid, to reflect changes in market conditions since the date of sale of a comparable property. Page 16

47 www.Mckissock.com www.McKissock.com 1-800-328-2008 Definitions Market Conditions An element of comparison in the sales comparison approach; comparable properties can be adjusted for differences in the points in the real estate cycle at which the transactions occur. Sometimes called a time adjustment because the differences in dates of sale are often compared, although that usage can be misleading. Source: Dictionary of Real Estate Appraisal, 5 th Edition Page 9

48 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1-3 (a) Comment: An appraiser must avoid making an unsupported assumption or premise about market area trends, effective age, and remaining life. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 16

49 www.Mckissock.com www.McKissock.com 1-800-328-2008 1004MC Page 17

50 www.Mckissock.com www.McKissock.com 1-800-328-2008 1004 MC Instructions The appraiser must use the information required on this form as the basis for his or her conclusions, and must provide support for those conclusions, regarding housing trends and overall market conditions as reported in the Neighborhood section of the appraisal report form. Page 17

51 www.Mckissock.com www.McKissock.com 1-800-328-2008 1004 MC Instructions Sales and listings must be 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 appraiser must explain any anomalies in the data, such as seasonal markets, new construction, foreclosures, etc. Page 18

52 www.Mckissock.com www.McKissock.com 1-800-328-2008 Inventory Analysis Page 18

53 www.Mckissock.com www.McKissock.com 1-800-328-2008 Inventory Analysis The “Inventory Analysis” section assists the appraiser in analyzing important supply and demand factors in order to reach a conclusion regarding housing trends and market conditions. When completing this section, the appraiser must include the comparable data that reflects the total pool of comparable properties from which a buyer may select a property in order to analyze the sales activity and the local housing supply. Page 18

54 www.Mckissock.com www.McKissock.com 1-800-328-2008 Absorption Rate One of the tools used to monitor these trends is the absorption rate. The absorption rate is the rate at which properties for sale have been or can be sold (marketed) within a given area. To determine the absorption rate, the appraiser divides the total number of settled sales by the time frame being analyzed. The months of housing supply is based on the total listings for the applicable period divided by the absorption rate. Page 19

55 www.Mckissock.com www.McKissock.com 1-800-328-2008 Months of Housing Supply The months of housing supply is based on the total listings for the applicable period divided by the absorption rate. Page 19

56 www.Mckissock.com www.McKissock.com 1-800-328-2008 Absorption Rate Example Step 1: Calculate the absorption rate. If there were 60 sales during a 6-month period (e.g., “Prior 7 – 12 Months” column), the absorption rate is 10 sales per month (60/6). Step 2: Calculate the months of housing supply. If there are 240 active listings, there is a 24-month supply of homes on the market (240 active sales/10 sales per month). Page 19

57 www.Mckissock.com www.McKissock.com 1-800-328-2008 Medians and Trends There are 4 lines of data fields that have grey backgrounds. “Fannie Mae recognizes that all of the requested data elements for analysis are not equally available in all markets. In some markets it may not be possible to retrieve the total number of comparable active listings from earlier periods. If this is the case, the appraiser must explain the attempt to obtain such information.” Page 20

58 www.Mckissock.com www.McKissock.com 1-800-328-2008 Medians and Trends “There may be markets in which the data is available in terms of an ‘average’ as opposed to a ‘median.’ In this case, the appraiser needs to note that his or her analysis has been based on an ‘average’ representation of the data. Regardless of whether all requested information is available, the appraiser must provide support for his or her conclusions regarding market trends and conditions.” Page 20

59 www.Mckissock.com www.McKissock.com 1-800-328-2008 Median Vs. Mean Page 20

60 www.Mckissock.com www.McKissock.com 1-800-328-2008 Announcement SEL 2010-09 In Form 1004MC, in order to provide the most accurate depiction of the “Months of Housing Supply” as of the effective date of the appraisal, the “Total # of Comparable Active Listings” should be based on a specific point in time. For example, when completing the “Current – 3 Months” column for “Total # of Comparable Active Listings”, the number should reflect the listings on the most recent date in the 3-month period (which is also the effective date of the appraisal), and not the cumulative number of listings for the entire 3-month time period. Page 21

61 www.Mckissock.com www.McKissock.com 1-800-328-2008 Announcement SEL 2010-09 Then, when completing the “Months of Housing Supply”, the number for the “Total # of Comparable Active Listings” is divided by the absorption rate, which provides an accurate depiction of the existing housing stock as of the effective date of the appraisal. (Using a cumulative number of listings during the “Current – 3 Month” time period may result in an artificially high number for the “Months of Housing Supply.”) Page 21

62 www.Mckissock.com www.McKissock.com 1-800-328-2008 Announcement SEL 2010-09 If data is available for the previous time periods, such as “Prior 4 - 6 Months” and “Prior 7 - 12 Months”, the “Total # of Comparable Active Listings” should be based on the most recent day in each of those time periods. For example, in the “Prior 4 – 6 Months” column, the “Total # of Comparable Active Listings” should reflect the listings on the last (most recent) day in that time period. Likewise, in the “Prior 7 – 12 Months”, the “Total # of Comparable Active Listings” should reflect the listings on the last (most recent) day in that time period. Page 21

63 www.Mckissock.com www.McKissock.com 1-800-328-2008 Time Periods Is this a stable trend? NO – because the first period is 6 months and the next two are each only 3 months Page 22

64 www.Mckissock.com www.McKissock.com 1-800-328-2008 Time Periods That’s why we have the absorption rate Page 22

65 www.Mckissock.com www.McKissock.com 1-800-328-2008 Overall Trends Some of the trends in the left column are increasing and some are declining – the same as in the right column Everything in the left column is a GOOD thing Everything in the right column is a BAD thing Page 22

66 www.Mckissock.com www.McKissock.com 1-800-328-2008 1004MC Page 23

67 www.Mckissock.com www.McKissock.com 1-800-328-2008 Trend Line (Excel) Page 23

68 www.Mckissock.com www.McKissock.com 1-800-328-2008 Seller Concessions Some appraisers decline to make an adjustment for concessions if they are “typical in the market.” That is not the intent of Fannie Mae. The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area. Page 24

69 www.Mckissock.com www.McKissock.com 1-800-328-2008 Foreclosure Sales The presence and extent of foreclosure/REO sales is worthy of comment when analyzing market data and must be reported on the form. The form also allows for the appraiser to summarize the data and provide other data analysis or additional information, such as analysis of pending sales, which over time can show a market trend. Page 24

70 www.Mckissock.com www.McKissock.com 1-800-328-2008 Data Sources  Federal Housing Finance Agency  Standard and Poor’s/Case-Shiller  National Association of REALTORS®  HUD Datamap  Local MLS  Assessor’s records Page 25

71 www.Mckissock.com www.McKissock.com 1-800-328-2008 Federal Housing Finance Agency Federal Housing Finance Agency www.fhfa.govwww.fhfa.gov Page 25

72 www.Mckissock.com www.McKissock.com 1-800-328-2008 Federal Housing Finance Agency Page 26

73 www.Mckissock.com www.McKissock.com 1-800-328-2008 Federal Housing Finance Agency What transactions are covered in the HPI? The House Price Index is based on transactions involving conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. Conforming refers to a mortgage that both meets the underwriting guidelines of Fannie Mae or Freddie Mac and that does not exceed the conforming loan limit. Page 26

74 www.Mckissock.com www.McKissock.com 1-800-328-2008 Federal Housing Finance Agency How is the HPI computed? The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties. This information is obtained by reviewing repeat mortgage transactions on single- family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac. Page 26

75 www.Mckissock.com www.McKissock.com 1-800-328-2008 Federal Housing Finance Agency Page 27

76 www.Mckissock.com www.McKissock.com 1-800-328-2008 Federal Housing Finance Agency Page 28

77 www.Mckissock.com www.McKissock.com 1-800-328-2008 Federal Housing Finance Agency Page 28

78 www.Mckissock.com www.McKissock.com 1-800-328-2008 S&P/Case-Shiller Indices Page 29

79 www.Mckissock.com www.McKissock.com 1-800-328-2008 S&P/Case-Shiller Indices The methodology uses matched sale pairs for pre-existing homes. Home price data are gathered after that information becomes publicly available at local recording offices across the country. The S&P/Case-Shiller indices do not sample sale prices associated with new construction, condominiums, co-ops/apartments, multi-family dwellings, or other properties that cannot be identified as single-family. Page 29

80 www.Mckissock.com www.McKissock.com 1-800-328-2008 S&P/Case-Shiller Indices Page 30

81 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 30

82 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® Page 30

83 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® Page 32

84 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 32

85 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 33

86 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 33

87 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 34

88 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 34

89 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 35

90 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 35

91 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 36

92 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 36

93 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org AFFORDABILITY Page 37

94 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 37

95 www.Mckissock.com www.McKissock.com 1-800-328-2008 National Association Of Realtors® National Association of REALTORS® www.realtor.org Page 38

96 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD Datamap www.hud.gov/datamap Page 38

97 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD Datamap Page 39

98 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD Datamap Page 40

99 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD Datamap Page 40

100 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD Datamap Page 41

101 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD.GOV Page 41

102 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD.GOV Page 42

103 www.Mckissock.com www.McKissock.com 1-800-328-2008 HUD.GOV Page 42

104 www.Mckissock.com www.McKissock.com 1-800-328-2008 Sale/Resale We know that one of the best ways to establish a price trend is to find sales and resales of the same home. If nothing else has changed physically or functionally with the home – then any change in price can be ascribed to a change in market conditions. Keep your eyes peeled and start a file for any sale/resale data you find. Page 43

105 www.Mckissock.com www.McKissock.com 1-800-328-2008 Sale/Resale Example A property sold 8 months ago for $224,000 and just sold yesterday for $206,000. $206,000 ÷ $224,000 =.92 or 92%. The property lost 8% of its value in 8 months or an average decline of 1% per month. Page 43

106 www.Mckissock.com www.McKissock.com 1-800-328-2008 Sale/Resale Example 2 I am appraising a house in December. I don’t have any sales and resales of the same property to rely on. I have 2 comparable sales that sold in the same neighborhood in June. Should I make an adjustment for market conditions – and if so, how much? I research all the sales in that neighborhood and 2 comparable neighborhoods. There were 12 sales in June at an average price of $142,700. There have been 15 sales in the last 30 days in these 3 neighborhoods at an average price of $148,200. What should I do? $148,200 ÷ $142,700 = 1.04 or a 4% increase $148,200 - $142,700 = $5,500 Page 43

107 www.Mckissock.com www.McKissock.com 1-800-328-2008 Sales Array I live in a small town with not a lot of sales data. I can’t find any sales and resales. I have 6 possible comps for an assignment. I just array them according to time of sale. Sale DateSale Price January 12$137,500 February 27$136,000 April 4$138,000 June 12$134,000 August 5$132,000 September 24$130,000 Page 44

108 www.Mckissock.com www.McKissock.com 1-800-328-2008 Market Conditions Analysis Here is another example. I do my research and find 22 sales in the past 12 months in my subject neighborhood; ranging from $178,000 to $192,000. Look at the listings! Page 44

109 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Page 45

110 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Highlight the data columns 1 1 Click on Insert 2 2 Click on Scatter 3 3 Page 46

111 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Page 47

112 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Click Anywhere on the chart 1 1 Click on Layout 2 2 Click on Trendline 3 3 Page 47

113 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Click on Linear Page 48

114 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Page 49

115 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Go back and Click on More Trendline Options Page 50

116 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Click on Polynomial Page 51

117 www.Mckissock.com www.McKissock.com 1-800-328-2008 Excel 2010 Tools Page 52

118 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA – ML 2007-11 The purpose of the appraisal is to provide the lender/client with an accurate, and adequately supported, opinion of market value. It is the appraiser's responsibility to determine whether a property being appraised is located in a declining market. The neighborhood section of each property specific appraisal form contains a housing trends section where the appraiser marks a box indicating property values are increasing, stable, or declining. Whichever box is selected, the appraiser is certifying that he or she has performed an objective analysis of quantifiable data supporting the observations made. Page 53

119 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA – ML 2007-11 If a property is located in a declining market, the appraiser must provide an explanation in the "Market Conditions" section of the appraisal report that includes relevant information in support of the conclusions relating to trends in property values, demand/supply, and marketing time. The appraiser must also provide a description of the prevalence and impact of sales and financing concessions and/or down payment assistance in the subject's market area. Other areas of discussion may include days on market, list-to-sale price ratios, and/or financing availability. Page 53

120 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA – 4150.2 – APPX D Mark the appropriate marketing time – the typical length of time a property similar to the subject property would have to stay on the market before being sold at a price near its market value. Page 53

121 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA – 4150.2 – APPX D Mark the appropriate demand/supply trend. To determine the equilibrium status of supply and demand in the neighborhood, compare the number of houses sold to the number of houses listed for sale in a recent time period. The similarity or difference between the number of houses sold and listed, not the absolute numbers, should determine the demand/supply level. Page 53

122 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA – 4150.2 – APPX D Market Conditions (including support for the above conclusions):  Provide relevant information in support of conclusions relating to trends in property values, demand/supply, and marketing time.  Provide a description of the prevalence and impact of sales and financing concessions and/or down payment assistance in the subject’s market area.  Other areas of discussion may include days on market, list-to-sale price ratios, and/or financing availability. Page 54

123 www.Mckissock.com www.McKissock.com 1-800-328-2008

124 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lenders Handbook Ch. 11, 8-c: Housing Supply and Demand In every case, the appraiser should:  Consider the supply and demand for available housing in the subject market area, and  Report, either in the “Neighborhood” section of the URAR or on an addendum, the average listing price-to-sale price ratio for the subject market area. Professional judgment must be used to estimate that ratio if it cannot be determined from available data sources. Page 55

125 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lenders Handbook Ch. 11, 8-d: Marketing Time and Trend In every case, the appraiser should:  Consider the marketing time trend (increasing or decreasing) in the subject market area, and  Report, either in the “Neighborhood” section of the URAR or on an addendum, the extent of increase or decrease in the average marketing time (listing period) in that market area. For example, “In the last 3 months, the listing period in the subject’s market area decreased from 180 to 90 days.” Page 55

126 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lenders Handbook Ch. 11, 8-e: Sales Listings and Contract Offers In every case, the appraiser should:  Analyze sales listings, contract offers, and unsettled sales to determine if market conditions changed between the date each comparable sold and the date of the subject property appraisal. This is especially important in markets with rapidly increasing or decreasing values. If the subject property is in a new subdivision, the analysis should include the builder’s closed sales, sales in competitive subdivisions, and sales of similar existing properties. Page 55

127 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lenders Handbook If a sales listing and/or contract offers addendum is submitted: It should provide all of the following information regarding competitive listings or verifiable, bona fide contract offerings considered the most similar and proximate to the subject:  The information usually found in a Multiple Listing Service (MLS) entry or other listing.  How long each property has been on the market (total time listed).  Any change in the listing price of each property (if known).  A short statement comparing the property to the subject.  Contract offerings are more desirable than listings. Page 56

128 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lenders Handbook If a sales listing and/or contract offers addendum is submitted: It should provide all of the following information regarding competitive listings or verifiable, bona fide contract offerings considered the most similar and proximate to the subject:  Any new construction contract must clearly identify all optional items and variations from the basic house type and any sales/financing concession included in the sales price.  Listings should be properly identified and may include a legible copy of an MLS entry.  Although not required, it may be helpful to make adjustments or otherwise use a sales comparison analysis grid. Page 56

129 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lenders Handbook Ch. 11, 8-e: Sales Listings and Contract Offers In every case, the appraiser should: Certify, either in the “Neighborhood” section of the URAR or on an addendum: “I have considered relevant competitive listings/contract offerings in performing this appraisal, and any trend indicated by that data is supported by the listing/offering information included in this report.” Provide a listings/offers addendum if a significant market transition is indicated in the “Neighborhood” section due to changes in employment opportunity, housing supply/demand, average marketing time, seller concessions, etc. Page 56

130 www.Mckissock.com www.McKissock.com 1-800-328-2008 Worldwide ERC® Appraisal Report Page 57

131 www.Mckissock.com www.McKissock.com 1-800-328-2008 Worldwide ERC® Appraisal Report Page 58

132 www.Mckissock.com www.McKissock.com 1-800-328-2008 Worldwide ERC® Appraisal Report Page 58

133 www.Mckissock.com www.McKissock.com 1-800-328-2008 Worldwide ERC® Appraisal Report Page 59

134 www.Mckissock.com www.McKissock.com 1-800-328-2008 AI REPORTS™ Summary Appraisal Report Page 59

135 www.Mckissock.com www.McKissock.com 1-800-328-2008 RESIDENTIAL SALES ANALYSIS TOOLS STRATEGIES Page 60

136 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 1- 4(a) When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 60

137 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 2-2(b)(viii) Summarize the information analyzed, the appraisal methods and techniques employed, and the reasoning that supports the analyses, opinions, and conclusions; exclusion of the sales comparison approach, cost approach, or income approach must be explained; Comment: A Summary Appraisal Report must include sufficient information to indicate that the appraiser complied with the requirements of STANDARD 1. The amount of detail required will vary with the significance of the information to the appraisal. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 60

138 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 2-2(b)(viii) The appraiser must provide sufficient information to enable the client and intended users to understand the rationale for the opinions and conclusions, including reconciliation of the data and approaches, in accordance with Standards Rule 1-6. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 60

139 www.Mckissock.com www.McKissock.com 1-800-328-2008 USPAP Standards Rule 2-2(b)(viii) When reporting an opinion of market value, a summary of the results of analyzing the subject sales, options, and listings in accordance with Standards Rule 1-5 is required. If such information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required. If such information is irrelevant, a statement acknowledging the existence of the information and citing its lack of relevance is required. Source: 2012-2013 Uniform Standards of Professional Appraisal Practice Page 61

140 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae Announcement 2010-09 Appraiser Selection Criteria Lenders are reminded that appraisers must have the requisite knowledge to perform a professional quality appraisal for the specific geographical location and particular property types. Page 62

141 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae Announcement 2010-09 Appraiser Selection Criteria The use of an appraiser who has:  Appropriate knowledge of specific geographical markets  Access to the appropriate data sources  Experience in appraising specific property types within those markets will help to ensure that valuations are accurate and that appraisal practices are appropriate Page 62

142 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae Announcement 2010-09 Appraiser Selection Criteria Although USPAP allows an appraiser who does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae requires that lenders use only appraisers who have the appropriate knowledge and experience and does not allow the USPAP flexibility. Page 62

143 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae Announcement 2010-09 Appraiser Selection Criteria Consequently, the Selling Guide has been updated to state that appraisers who lack the requisite knowledge, experience, and access to appropriate data must not be utilized. Page 62

144 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae Announcement 2010-09 Appraiser Selection Criteria The Selling Guide has also been updated with regard to the lender’s use of third-party vendors such as appraisal management companies (AMC) to clarify that:  Neither the HVCC nor Fannie Mae requires the use of a third-party vendor  Lenders are ultimately responsible for representations and warranties related to the value, condition, and marketability of the subject property  Lenders must hold the AMC responsible for complying with Fannie Mae’s requirements Page 62

145 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae Announcement 2010-09 Communication under the HVCC Lenders are reminded that excessive sale concessions can artificially inflate the sales price of a property, which can then lead to an inflated market value. Particular attention should be given to unusual sale or financing concessions to ensure that they are properly accounted for in the appraisal report. Page 63

146 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae Announcement 2010-09 Treatment of Personal Property Whether an item is real or personal property is generally determined by the law of the jurisdiction where the property is located. A professional appraiser who has the knowledge, experience, and geographical competence to complete the appraisal assignment must also possess the expertise to identify personal property items in the appraisal. Page 63

147 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-01, General Information on Appraisal Requirements (12/01/2010) The lender is responsible for:  The accuracy and completeness of the appraisal and its assessment of the marketability of the property  Selecting the appraiser  Underwriting the completed appraisal report to determine whether the subject property presents adequate collateral for the mortgage  Continually evaluating the quality of the appraiser’s work through normal underwriting review of all appraisal reports and spot-check field review of appraisals as part of its quality control system Page 64

148 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-01, General Information on Appraisal Requirements (12/01/2010) The lender is responsible for:  Ensuring that the appraiser uses sound reasoning and provides evidence to support the methodology used for developing the value opinion, particularly in cases that are not covered by Fannie Mae guidelines  Ensuring that the appraiser provides an accurate opinion, an adequately supported value, and an accurate description of the property Page 64

149 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-01, Examples of Unacceptable Appraisal Practices (12/01/2010) The following are examples of unacceptable appraisal practices:  Development of and/or reporting an opinion of market value that is not supportable by market data or is misleading  Development of a valuation conclusion based on factors that local, state, or federal law designate as discriminatory, and thus, prohibited  Misrepresentation of the physical characteristics of the subject property, improvements, or comparable sales  Failure to comment on negative factors with respect to the subject neighborhood, the subject property, or proximity of the subject property to adverse influences Page 65

150 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-01, Examples of Unacceptable Appraisal Practices (12/01/2010) The following are examples of unacceptable appraisal practices:  Selection and use of inappropriate comparable sales  Failure to use comparable sales that are the most locationally and physically similar to the subject property  Creation of comparable sales by combining vacant land sales with the contract purchase price of a home that has been built or will be built on the land  Use of comparable sales in the valuation process when the appraiser has not personally inspected the exterior of the comparable property Page 65

151 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-01, Examples of Unacceptable Appraisal Practices (12/01/2010) The following are examples of unacceptable appraisal practices:  Use of adjustments to comparable sales that do not reflect market reaction to the differences between the subject property and the comparable sales  Not supporting adjustments in the sales comparison approach  Failure to make adjustments when they are clearly indicated  Use of data—particularly comparable sales data—provided by parties who have a financial interest in the sale or in the financing of the subject property without the appraiser’s verification of the information from a disinterested source Page 65

152 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-01, Examples of Unacceptable Appraisal Practices (12/01/2010) The following are examples of unacceptable appraisal practices:  Development of and/or reporting an appraisal in a manner that is inconsistent with the requirements of the Uniform Standards of Professional Appraisal Practice in place as of the effective date of the appraisal  Failure to address and note adverse factors or conditions that affect value or marketability with respect to the neighborhood, site, or improvements Page 65

153 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-02, Lender Disclosure of Information to Appraisers (10/30/2009) The lender must disclose to the appraiser any and all information about the subject property of which it is aware, if the information could affect either the marketability of the property or the appraiser’s opinion of the market value of the property Page 66

154 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-02, Lender Disclosure of Information to Appraisers (10/30/2009) The lender must provide the appraiser with all appropriate financing data and sales concessions for the subject property that will be, or have been, granted by anyone associated with the transaction. In addition, the lender must provide the appraiser with a copy of the complete, ratified sales contract and all addenda for the property that is to be appraised, therefore ensuring that the appraiser has been given the opportunity to consider the financing and sales concessions in the transaction and their effect on value. Page 66

155 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-02, Lender Disclosure of Information to Appraisers (10/30/2009) If the lender is aware of additional pertinent information that is not included in the sales contract, the lender must inform the appraiser. If the sales contract is amended during the process, the lender must provide the updated contract to the appraiser. Page 66

156 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.1-02, Lender Disclosure of Information to Appraisers (10/30/2009) Information That Must Be Disclosed:  Settlement charges  Loan fees or charges  Discounts to the sales price  Payment of condo or PUD fees  Interest rate buydowns  Below-market-rate financing  Credits or refunds of borrower expenses  Absorption of monthly payments  Assignment of rent payments  Non-realty items included in the transaction  Any environmental hazard information Page 67

157 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-01, Special Appraisal Considerations for Properties Affected by Environmental Hazards (04/01/2009) Environmental Hazards: Eligible Properties Fannie Mae purchases mortgage loans secured by properties affected by environmental hazards if:  The effect of the hazard is measurable through an analysis of comparable market data as of the effective date of the appraisal, and  The appraiser reflects in the appraisal report any adverse effect that the hazard has on the value and marketability of the subject property or indicates that the comparable market data reveals no buyer resistance to the hazard. Page 67

158 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) Manufactured Housing Appraiser Qualifications The valuation principles for appraising manufactured homes are essentially the same as for other types of residential property. However, not all appraisers are knowledgeable and experienced about the unique construction process, as well as the manufacturers’ and federal, state, and local requirements for both construction and installation. Page 68

159 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) Manufactured Housing Appraiser Qualifications Fannie Mae recommends that the lender review the appraiser’s education and experience as well as sample manufactured home appraisals. The appraiser should be knowledgeable about the local manufactured home market and the unique construction process for manufactured homes, and have access to appropriate data sources in order to render an opinion of value for the manufactured home. Page 68

160 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) Fannie Mae’s appraisal report forms require appraisers to develop an opinion of value solely for the real property as completed consisting of:  The manufactured home  Site improvements  The land on which the home is situated Page 68

161 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) Fannie Mae requires market-based property valuations for manufactured homes demonstrated by a well-developed sales comparison approach to value that is further supported by the cost approach to value. Page 68

162 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) An appraiser who is unable to locate sales of manufactured homes that are truly comparable to the subject property may decide that it is appropriate to use either older sales of similar manufactured homes or sales of similar manufactured homes that are located in a competing market so that he or she can establish a baseline for the “sales comparison analysis” and determine sound adjustments to reflect the differences between the comparable sales that are available and the subject property. Page 68

163 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) The appraiser must analyze the contract and manufacturer’s invoice for new homes and provide a summary in the appraisal report. Page 69

164 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) The appraiser must use a minimum of two comparable sales of similar manufactured homes The appraiser may use either site-built housing or a different type of factory-built housing as the third comparable sale Page 69

165 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) When site-built housing or a different type of factory-built housing is used as the third comparable, the appraiser must:  Explain why site-built housing or a different type of factory-built housing is being used for the third comparable sale  Make (and support) appropriate adjustments in the appraisal report Page 69

166 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) When site-built housing or a different type of factory-built housing is used as the third comparable: If the appraiser is unable to develop a reliable appraisal based on at least two comparable sales of similar manufactured homes, the mortgage is not eligible for delivery to Fannie Mae Page 69

167 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B5-2.3-04, Manufactured Housing Appraisal Requirements (04/01/2009) Traditional appraisal data sources do not provide enough quality manufactured home data for the appraiser to develop a supportable and well- documented manufactured home appraisal. While sources such as MLS and public records are important, appraisers must develop other data sources such as manufactured home dealers and construction companies/builders experienced in the installation of manufactured homes. Page 69

168 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide What sources could be used?

169 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-03, Special Appraisal Considerations for Modular, Prefabricated, Panelized, or Sectional Housing (04/01/2009) Fannie Mae does not have minimum requirements for width, size, roof pitch, or any other specific construction detail for modular homes. Each such home must have sufficient square footage and room dimensions to be acceptable to typical purchasers in the subject market area. Page 70

170 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-03, Special Appraisal Considerations for Modular, Prefabricated, Panelized, or Sectional Housing (04/01/2009) The appraisal must address both the marketability and comparability of modular homes The appraiser must include the most appropriate comparable sales to support the opinion of value for the subject property Page 70

171 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-06, Special Appraisal Considerations for Properties Subject to Leasehold Interests (04/01/2009) Appraisers must develop a thorough, clear, and detailed narrative that identifies the terms, restrictions, and conditions regarding lease agreements or ground leases Appraisers must include this information as an addendum to the appraisal report Page 70

172 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-06, Special Appraisal Considerations for Properties Subject to Leasehold Interests (04/01/2009) Appraisers must discuss the effect, if any, the lease agreement or ground lease has on the value and marketability of the subject property The appraiser’s sales comparison approach to value must use comparable property sales that have similar leasehold interests Page70

173 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-06, Special Appraisal Considerations for Properties Subject to Leasehold Interests (04/01/2009) When there are sufficient numbers of closed comparable property sales with similar leasehold interests available, the appraiser should:  Use the property sales in the analysis of market value of the leasehold estate for the subject property  Report the property sales in the “sales comparison analysis” grid on the applicable appraisal report form Page 70

174 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-06, Special Appraisal Considerations for Properties Subject to Leasehold Interests (04/01/2009) When there are sufficient numbers of closed comparable property sales with similar leasehold interests available, the appraiser should:  If comparable sales with the same lease terms and restrictions are not available, appraisers may use sales of similar properties with different lease terms or, if necessary, sales of similar properties that were appraised as fee simple estates Page 70

175 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-06, Special Appraisal Considerations for Properties Subject to Leasehold Interests (04/01/2009) When there are sufficient numbers of closed comparable property sales with similar leasehold interests available, the appraiser should:  Appraisers must explain why the use of these sales is appropriate, and make appropriate adjustments on the “sales comparison analysis” grid to reflect the market reaction to the different lease terms or property rights appraised Page 70

176 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-07, Special Appraisal Considerations for Units in Co-op Projects (04/01/2009) Appraisers must use reliable sources to obtain data on the co-op project, the individual subject unit, and the comparable properties Appraisers must indicate the name of each source in the appraisal report or in an addendum to the appraisal report Page 71

177 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-07, Special Appraisal Considerations for Units in Co-op Projects (04/01/2009)  For comparison purposes, appraisers should indicate in the “sales comparison analysis” adjustment grid the dollar amount of the monthly assessments for each of the comparable sales  Appraisers must report the value of the co- op interest, excluding its pro rata share of the blanket mortgage(s) Note: This value reflects the market value for the co-op interest of the unit. Page 71

178 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-07, Special Appraisal Considerations for Units in Co-op Projects (04/01/2009)  Appraisers must comment on the acceptance of housing co-ops in the market area. The degree of acceptance generally is reflected in the availability of similar comparable sales data for co-op units.  If there is limited market acceptance of the co-op form of ownership, or if co-op forms of ownership are relatively new in the market area, appraisers must address any effect that has on the marketability and value of the unit that is being appraised. Page 71

179 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-07, Special Appraisal Considerations for Units in Co-op Projects (04/01/2009)  If submission of more than three required comparable sales is appropriate to support the market value opinion, appraisers must submit other comparable sales—including contracts for sale—as additional supporting data  Comparable sales must be from similar types of projects—townhouses, mid-rise, high-rise, etc.—that have similar common amenities and recreational facilities Page 71

180 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-07, Special Appraisal Considerations for Units in Co-op Projects (04/01/2009)  Appraisers should use sales of co-op units as comparables  However, appraisers may use condo units as comparables sales if co-op unit sales are not available, provided the appraiser explains why those types of comparables were used  Appraisers must adjust the condo comparables to reflect the reaction of the market to the co-op unit when there is a preference for condo ownership in the subject market area Page 72

181 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-07, Special Appraisal Considerations for Units in Co-op Projects (04/01/2009)  If the subject property is a unit in a new or recently converted co-op project, appraisers should select as comparables - one closed or settled sale from the subject project (if one is available) - two closed or settled sales from outside of the project  If closed or settled sales are not available in the subject project, appraisers must use comparable sales from competing projects. Page 72

182 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.3-07, Special Appraisal Considerations for Units in Co-op Projects (04/01/2009)  When the subject property is a unit in an established co-op project—one that has resale activity—appraisers should use the following as comparables: - two closed or settled sales from the subject project (if available) - one closed or settled sale from a competing project Page 72

183 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-05, Appraisal Report Review: Site Analysis Parameters (10/30/2009) Site Analysis Parameters  The subject property site should generally conform to and be acceptable in the market area in terms of size, shape, and topography  The appraisal must include the actual size of the site and not a hypothetical portion of the site for the subject property Page 72

184 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-06, Appraisal Report Review: Subject Property Zoning (12/01/2010)  Lenders must ensure that the specific zoning class has been reported in the appraisal, along with a general statement as to what the zoning permits.  The appraisal must include a statement that the subject property presents a legal conforming use, a legal non-conforming (grandfathered) use, or an illegal use under the zoning regulations; or that there is no local zoning. Page 73

185 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-06, Appraisal Report Review: Subject Property Zoning (12/01/2010) Permissible Use of Land Fannie Mae does not purchase or securitize mortgage loans on properties if the improvements do not constitute a legally permissible use of the land. Page 73

186 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-06, Appraisal Report Review: Subject Property Zoning (12/01/2010) Will a one- or two-unit property that includes an illegal additional unit or accessory apartment (sometimes referred to as a mother- in-law, mother-daughter, or granny unit) be eligible for purchase? Yes, but the appraisal report must demonstrate that the improvements are typical for the market through an analysis of at least three comparable properties that have the same illegal use. Page 73

187 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-06, Appraisal Report Review: Subject Property Zoning (12/01/2010) Highest and Best Use If the current improvements clearly do not represent the highest and best use of the site as an improved site, the appraiser must so indicate on the appraisal report. Fannie Mae will not purchase or securitize a mortgage that does not represent the highest and best use of the site. Page 73

188 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Sources of Comparable Market Data Data and/or verification source(s) for each comparable sale must be reported on the appraisal report form. Single or multiple sources for data and verifications are acceptable provided the appraiser adequately verifies the comparable sales. Page 74

189 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Sources of Comparable Market Data Examples of data sources include, but are not limited to, a multiple listing service, deed records, tax records, realtors, builders, appraisers, appraisers’ files, and the Internet. The appraiser must state the specific data source and refrain from using broad categories, such as “public records.” Data source(s) must be reliable sources for the area where the subject property is located. Page 74

190 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Information used to verify the data is obtained from a “verification source.” Verification sources include, but are not limited to, the buyer, seller, listing agent, selling agent, and closing documents in certain situations. Regardless of the source(s) used, there must be sufficient data to understand the conditions of sale, existence of financing concessions, physical characteristics of the subject property, and whether it was an arm’s-length transaction. Page 74

191 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) When comparable sales data are provided by parties that have a financial interest in either the sale or financing of the subject property, the appraiser must verify the data with a party that does not have a financial interest in the subject transaction. Page 74

192 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Selection of Comparable Sales The appraiser must perform a neighborhood analysis in order to identify the area that is subject to the same influences as the property being appraised (based on the actions of typical buyers in the market area). The results of a neighborhood analysis enable the appraiser not only to identify the factors that influence the value of properties in the market area, but also to define the area from which to select the market data needed to perform a sales comparison analysis. Page 74

193 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Selection of Comparable Sales The appraiser is responsible for determining which comparables are most appropriate for the assignment. Fannie Mae expects the appraiser to account for all factors that affect value when completing the analysis. Page 75

194 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Selection of Comparable Sales For example, if the appraiser believes a foreclosure sale or a short sale is an appropriate comparable, then the appraiser must identify and consider any differences from the subject property, such as the condition of the property and whether any stigma has been associated with it. The appraiser cannot assume it is equal to the subject property. Page 75

195 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) When appraising new construction, the appraiser may need to rely solely on the builder of the property he or she is appraising to provide comparable sales data in accordance with the requirements stated in Properties in New or Recently Converted Subdivisions, Condos, or PUDs, below, as this data may not yet be available through typical data sources, such as public records or multiple listing services. In this scenario, it is acceptable for the appraiser to verify the transaction of the comparable sale by viewing a copy of the HUD-1 Settlement Statement from the builder’s file. Page 75

196 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) By using the HUD-1 to verify a recent sale of new construction not yet available through other data sources, an appraiser may be better able to comply with the requirement that he or she must provide at least one comparable sale from the subject’s subdivision or project. The appraiser must also select one comparable sale from outside the subject subdivision or project and one comparable sale from either inside or outside the subject subdivision or project, provided it is a good indicator of value for the subject property. Page 75

197 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Both of these sales must be verifiable from reliable data sources, other than the builder. The appraiser may also provide additional recent comparable builder sales from competing projects that are not presently available through traditional data sources as long as the appraiser verifies the sale through the applicable HUD-1. Additionally, the appraisal must include discussion and analysis of sales concessions and upgrades for the subject property relative to concessions and upgrades for each builder sale. Page 75

198 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) General requirements for selecting comparable sales:  Influences that may affect value based on market evidence — such as closed sales, contract sales, and offerings or listings of the most comparable properties for sale in the market area, market studies, etc.— must be researched, analyzed, and considered in the appraisal report.  A minimum of three comparable sales must be reported as part of the sales comparison approach to value.  More than three comparable sales may be submitted to support the opinion of market value provided at least three are actual settled or closed sales. Page 76

199 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) General requirements for selecting comparable sales:  It is preferable for the appraiser to provide comparables from the subject’s neighborhood; however, Fannie Mae does allow for the use of comparable sales that are located in competing neighborhoods, as these may simply be the best comparables available and the most appropriate for the appraiser’s analysis.  If this situation arises, the appraiser must not expand the neighborhood boundaries just to encompass the comparables selected. The appraiser must indicate the comparables are from a competing neighborhood and address any differences that exist. Page 76

200 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) General requirements for selecting comparable sales:  The appraiser must also provide an explanation as to why he or she used the specific comparable sales in the appraisal report and include a discussion of how a competing neighborhood is comparable to the subject neighborhood  Comparable sales that have been settled or closed within the last 12 months should be used in the appraisal.  Older comparable sales that are the best indicator of value for the subject property can be used if appropriate. Page 76

201 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) General requirements for selecting comparable sales:  Comparable sales that are more than six months old must be accompanied by an appraiser explanation for use.  For example, if the subject property is located in a rural area that has minimal sales activity, the appraiser may not be able to locate three truly comparable sales that sold in the last 12 months. In this case, the appraiser may use older comparable sales as long as he or she explains why they are being used. Page 76

202 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) General requirements for selecting comparable sales:  The subject property can be used as a fourth comparable sale or as supporting data if it was previously sold and closed or settled.  Contract offerings and current listings can be used as supporting data if appropriate.  Rural properties often have large lot sizes and rural locations can be relatively undeveloped; therefore, there may be a shortage (or absence) of recent truly comparable sales in the immediate vicinity of a subject property that is in a rural location. Page 77

203 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) General requirements for selecting comparable sales:  Comparable sales located a considerable distance from the subject property can be used if they represent the best indicator of value for the subject property.  The appraisal must include an explanation of why the particular comparables were selected. Page 77

204 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Properties in Established Subdivisions, Condos, or PUDs  Comparable sales from within the same subdivision or project as the subject property must be used if the subdivision or project has resale activity.  Resale activity from within the subdivision or project is the best indicator of value for properties in that subdivision or project. Note: Use of comparable properties located outside of the established subject neighborhood must be explained in the appraisal analysis. Page 77

205 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-16, Appraisal Report Review: Sales Comparison Approach (11/04/2010) Properties in New or Recently Converted Subdivisions, Condos, or PUDs The subject property must be compared to other properties in its general market area as well as to properties within the subject subdivision or project. Except for units in a non-gut rehabilitation condo conversion project, the appraiser must select one comparable sale from the subject subdivision or project and one comparable sale from outside the subject subdivision or project. The third comparable sale can be from inside or outside of the subject subdivision or project, provided it is a good indicator of value for the subject property. Page 77

206 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Lenders must thoroughly review the “sales comparison analysis” adjustment grid.  Ensure that there are no calculation errors in the dollar adjustments.  Scan the appraisal for substantial adjustments. They raise questions about the validity of using a specific comparable sale.  Ensure that substantial adjustments are addressed in the appraisal. Page 78

207 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Evaluating Sales or Financing Concessions  The dollar amount of sales or financing concessions paid by the seller must be reported for the comparable sales if the information is reasonably available.  Appraisers must provide the sales and financing concession information that was available and verified for the comparable sales. Page 78

208 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Evaluating Sales or Financing Concessions  If information is not available because of legal restrictions or other disclosure-related problems, the appraiser must explain why the information is not available. Note: Fannie Mae will not accept an explanation that indicates that the appraiser did not make an effort to verify the information. Page 78

209 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Evaluating Sales or Financing Concessions  Adjustments based on dollar-for-dollar deductions that are equal to the cost of the concessions to the seller as a strict cash equivalency approach would dictate are not appropriate. Page 78

210 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Evaluating Sales or Financing Concessions  Adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions. Page 78

211 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Evaluating Sales or Financing Concessions  Positive adjustments for sales or financing concessions are not acceptable.  For example, if local common practice or law results in virtually all of the property sellers in the market area paying a 1% loan origination fee for the purchaser, and a property seller in that market did not pay any loan fees or concessions for the purchaser, the sale would be considered as a cash equivalent sale in that market. Page 78

212 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Evaluating Sales or Financing Concessions  The appraiser must recognize comparable sales that sold for all cash or with cash equivalent financing and use them as comparable sales if they are the best indicators of value for the subject property.  Such sales also can be useful to the appraiser in determining those costs that are normally paid by sellers as the result of common practice or law in the market area. Page 79

213 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae 2011 Selling Guide B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (10/30/2009) Evaluating Sales or Financing Concessions  Sales or financing data for comparable sales are generally available. Sales or financing data should be obtained from parties associated with the comparable transaction, such as the broker, buyer or seller, or a reliable data source. The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area; large sales concessions can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than value of the real estate. Page 79

214 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.6: Unacceptable appraisal or inspection practices (10/09/09)  Inclusion of inaccurate or incomplete data about the subject property, the neighborhood, or any comparable sale used in the appraisal analysis  Failure to report and/or consider any apparent factor that has an adverse effect on the value and/or marketability of the subject property Page 80

215 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.6: Unacceptable appraisal or inspection practices (10/09/09)  Reliance in the appraisal analysis on comparable sales that were not personally inspected by the appraiser. A personal inspection requires at least a visual inspection of the exterior of the comparable property.  Reliance in any appraisal analysis on inappropriate comparable sales or the failure to use comparable sales that are more similar to or nearer to the subject property without adequate explanation. Page 80

216 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.6: Unacceptable appraisal or inspection practices (10/09/09)  Use of comparable sales data provided by interested parties to the transaction, without verification by a disinterested party  The use of inordinate adjustments for differences between the subject property and the comparable sales that do not reflect the market's reaction to such differences, or the failure to make proper adjustments when they are clearly necessary Page 80

217 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) If the appraiser has selected comparables from a competing neighborhood, the appraiser must identify the competing neighborhood in this section or an appropriate addendum and describe why it is comparable to the subject neighborhood. The appraiser should explain why the competing neighborhood is a more relevant source of comparables than the subject neighborhood, as of the effective date of the appraisal. Page 80

218 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) The utilities serving the subject property must meet community standards. In addition, the comparable sales should have utilities similar to the subject property. When differences in utilities exist between the subject property and the comparable sales, any adjustments or lack of adjustments made to the comparable sales for significant differences must be explained in the comments area or on an attached addendum. In addition, the appraisal must evaluate the effect these differences have on the subject property's value or marketability. Page 80

219 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) For properties that have recently undergone rehabilitation or renovation, the appraiser must list the changes made and provide photographs of the rehabilitation or renovation Page 81

220 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach Freddie Mac considers the sales comparison approach to be the most reliable approach to value. Therefore, a seller must place primary emphasis on this approach when reviewing and judging the acceptability of each appraisal. Each comparable sale must be analyzed for similarities and differences between it and the subject property. The appraiser must make appropriate adjustments for differences, and indicate the dollar amount of the adjustments to reflect the value of the differences to the market. Comparable sales must be adjusted to the subject property, except for sales and financing concessions that must be adjusted to the market at the time of the sale. Page 81

221 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach The appraiser must independently verify and analyze all pending and recent sales of comparable properties, report how the sales were verified and whether concessions were granted. At least three verified, closed (settled) sales of comparable properties must be analyzed and market-based adjustments made for significant differences between the comparable sales and the subject property Page 81

222 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach Sales or financing concessions are offered by interested parties to the transaction (e.g., the builder, developer, property seller or real estate agent). Because the effect of concessions on sale prices can vary with the type and amount of the concessions, any adjustments to comparable sales must be based on the market reaction to them. The appraiser should provide comparable sales that sold without concessions to support the adjustments made in determining the market reaction to the concessions. Page 81

223 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach Adjustments may not be based solely on dollar-for-dollar deductions equal to the dollar value of the concessions. If comparable sales without concessions are not available, adjustments to comparable sales with concessions must reflect the differences between what the comparable sales actually sold for with the concessions and what they would have sold for without the concessions. The appraiser's opinion of value must reflect the value of the subject property without the concessions. The appraiser must also provide the dollar value of the concessions as a comment in the appraisal report. Page 81

224 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach The three comparable sales listed in the report must be:  Similar to and located near the subject property  Properties with closing (settlement) dates that occurred before the effective date of the appraisal of the subject property  Recently sold. If the sale of a comparable property occurred more than 12 months before the date of the appraisal, the appraiser must justify in the appraisal report the use of the comparable property Page 82

225 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach Additional comparables, in the form of closed sales, sales under contract, or current listings, may be used to support the appraiser's adjustments and conclusions, address changes in the market, support the use of older comparables in stable neighborhoods or support the use of distant or less similar comparables in rural areas. Additional comparables are not always needed, but may contribute significantly to understanding unusual situations, such as limited markets, neighborhoods with little turnover of property, and areas with a variety of distinct property types. Page 82

226 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach Comparables may be taken from a competing neighborhood if:  The appraiser has established that the neighborhoods are comparable and compete for the same buyers, and  Comparables taken from the competing neighborhood are better indicators of current market trends in the subject neighborhood than the existing comparables available in the subject neighborhood Page 82

227 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach For properties located in existing established subdivisions, Planned Unit Developments, or ground lease communities and for units in existing Condominium Projects, the appraiser may use three comparable sales from within that subject project or subdivision. However, if the subject property is in a controlled market (such as a new subdivision or project, a newly- converted project, or an area where the property seller owns a substantial number of units), at least one comparable sale must be outside the influence of the developer, builder, or property seller. Page 83

228 www.Mckissock.com www.McKissock.com 1-800-328-2008 Freddie Mac 2011 Seller/Servicer Guide 44.15: Property description and analysis (10/15/10) Sales comparison approach Resales from within the subject project or subdivision may be used to meet this requirement. When comparable sales from outside the subject project or subdivision are used, they must also be outside the influence of the subject property's developer, builder, or property seller. Page 83

229 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae – Freddie Mac Repurchases

230 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae – Freddie Mac Repurchases Secondary market lenders usually require lenders who sell mortgages to them to include a warranty of compliance with the Seller’s Guide.  Failure to comply can cause the lender who sold the loan to the secondary market owner of the mortgage to repurchase it at face value.  Many secondary market lenders are forcing the originating institution to buy the loan back.  If the deficiency in the portfolio involves an appraisal, the originating lender may look to the appraiser for responsibility.  Source: www.freddiemac.com Page 84

231 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae – Freddie Mac Repurchases Many appraisers are reporting their work has shifted from appraisal to appraisal review  Forensic review work is now a large percentage of appraisal assignments Page 84

232 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae – Freddie Mac Repurchases Forensic review appraisals  Review appraisal reports where fraud or appraisal ethical lapses are suspected  Usually differ from normal review work where the standard of evidence is different  If the review appraiser knows there will be court testimony required on the assignment, the level of research, verification, and inspection will usually need to be higher Page 84

233 www.Mckissock.com www.McKissock.com 1-800-328-2008 Fannie Mae – Freddie Mac Repurchases Many appraisers are complaining about Conflicting data, opinions, and underwriting loans in markets with substantial troubled properties Some appraisers are classifying a two-tiered market  First market includes the “retail – owner occupant” buyer  Second market is the “investor – owner” who buys the property as an investment and therefore requires a profit Page 85

234 www.Mckissock.com www.McKissock.com 1-800-328-2008 Short Sales, REO Sales, and the MC Form Including or not including REO sales depends upon who is most likely to buy the subject property if an opinion of market value is how much the sellers can sell the property for if they put a sign in the yard  Owner occupant—REO sales may not be the best choice to reflect that property’s value  Investor—If comparable sales were sold to investors, those sales should reflect the buyer’s requirements of a profit and therefore would be valid Page 85

235 www.Mckissock.com www.McKissock.com 1-800-328-2008 Short Sales, REO Sales, and the MC Form  An appraiser has to discern who the likely buyer for the subject is and then find comparable sales, listings, or pending sales that reflect that buyer’s motivations. This is true in all appraisals, not just houses in troubled markets.  Second, if the subject is in fair to poor condition, the likely buyer may not be an owner-occupant because of the cost of repairs and the time required. Page 85

236 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 1.: SALES DATA VS. COMPARABLE SALE (05/99)  Any transaction in the market is a sale, but not all sales are comparable. Consider the type of transaction and physical characteristics of any sale before considering the sale a comparable. FHA HANDBOOK Page 86

237 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 2.: SELECTION OF COMPARABLE SALES FOR ANALYSIS (05/99)  Identify the relevant market based on the area in which the property competes and the forces/dynamics that affect the comparable sale properties. This is necessary in relating the sales to the subject. FHA HANDBOOK Page 86

238 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 2.: SELECTION OF COMPARABLE SALES FOR ANALYSIS (05/99)  Consider the amount of time that has elapsed between the sale date and the effective date of the appraisal. Sales data should not exceed six months between the date of the appraisal and the sale date of the comparable, and must not exceed twelve months. An explanation is required for sale dates in excess of six months. FHA HANDBOOK Page 86

239 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 2.: SELECTION OF COMPARABLE SALES FOR ANALYSIS (05/99)  Consider the quality and quantity of data available for the given assignment. A lack of quality data in a market may force reliance on data in a similar market -- not necessarily the subject's immediate market area. However, clearly explain and justify any sales from outside the subject's immediate market area. FHA HANDBOOK Page 86

240 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 3.: EXCLUDED SALES TRANSACTIONS (05/99) When using conventional sales data, the appraiser must be aware of the terms of the sale and adjust the conventional sales price to reflect any unusual terms. For example, there are sales that must be excluded; however, some transactions may be included but adjusted for factors such as below-market financing to provide a cash equivalent sales price. Page 86

241 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 4.: CURRENT OFFERINGS AND LISTINGS ANALYSIS (05/99) Using these types of sales is discouraged. However, under certain slow market conditions or in markets with rapidly increasing pricing, it may be acceptable to include properties offered for sale. Proceed with caution when analyzing and adjusting these offerings. Recognize the inherent negotiability in price between an offering and a consummated sale. Clearly label these comparables as offering, listing, under agreement, etc., but present them as additional comparable data only. Page 87

242 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 5.: SALES IN ESCROW (05/99) If a bona fide transaction is imminent, sales in escrow are considered to be reliable indications of market pricing. Exercise care in identifying the planned date of closure for the sale and any extraneous circumstances that may impede the closing on the projected date. Page 87

243 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 6.: DISTRESSED SALES (05/99) Using distressed sales is strongly discouraged because of the special circumstances surrounding these transactions. Page 87

244 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 7.: RELOCATION SALES (05/99)  Using relocation sales from a corporate seller at a below-market value is strongly discouraged when the purchaser is the relocation company because of the unusual circumstances surrounding these transactions.  Both distressed and relocation sales are strongly discouraged because they fail to meet the test of "market value“, particularly item No. 1: "The buyer and seller are typically motivated." However, these sales can exceed normal market transaction and affect market values. Page 87

245 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 8.: CONFIRMATION OF SALES AND TRANSACTION INFORMATION (05/99)  The appraiser must verify all market and comparable information used in the appraisal process and is accountable for any information presented as "fact" used to develop the subject property's value estimate. Verification ensures that the information is accurate and meaningful and provides the appraiser with a firm understanding of market motivations and trends. The goal of the verification process is to ensure that only information that accurately reflects current market conditions and trends is presented and that meaningful conclusions can be reached from this information. Page 88

246 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 8.: CONFIRMATION OF SALES AND TRANSACTION INFORMATION (05/99) During the verification process, it is necessary for the appraiser to gain an understanding of the motivations surrounding the sale in order to:  Determine if the sale was arm's-length and not distressed  Understand current market conditions that influence value Page 88

247 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 8.: CONFIRMATION OF SALES AND TRANSACTION INFORMATION (05/99)  Whenever possible, interview a party to the sale to determine the expectations and motivations for purchasing the property. Also, determine whether significant capital expenditures funded by the seller were made shortly after the transaction occurred. If so, determine whether the expenditure needs to be added back into the sale price to reflect the actual conditions surrounding the sale. Page 88

248 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, A., 8.: CONFIRMATION OF SALES AND TRANSACTION INFORMATION (05/99)  The appraiser must verify sale information with the buyer, the seller, or one of their representatives (broker, lender, lawyer, etc.). If the sale cannot be verified with someone who has first-hand knowledge of the transaction, public records must be used. However, the appraiser must clearly state how the sale was verified and to what extent. The appraiser should not use or rely heavily on any sale that was not verified with an involved party or one of their representatives because concessions have become more common in the market. Page 88

249 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA Handbook 4150.2, CHG 1 4-6, B., 1.: SUPPORT FOR ADJUSTMENTS (06/99) Adjustments must be supported by the market. The appraiser must use caution in developing adjustments; not all differences between the sale properties and the subject property are recognized as price-influencing factors in the marketplace. Only those factors that are accepted as value- influencing factors warrant adjustments. Page 89

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251 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lender’s Handbook Ch. 11, 7: Selection and Analysis of Comparable Sales  The appraiser must select the three best closed comparable sales available and properly adjust the sales price of each comparable sale for market- recognized differences between it and the subject property. The goal is to obtain a VA value estimate that does not exceed the price at which similar properties can be purchased in the current market.  The appraiser must adequately explain any reliance on sales that are not truly comparable to the subject.  Sales listings, contract offers, and unsettled sales must not be used as comparables. Page 90

252 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lender’s Handbook Ch. 11, 7: Selection and Analysis of Comparable Sales  Comparable sales should preferably exhibit a narrow price range. The appraiser must adequately explain a wide range in the sales prices of comparables before or after adjustment.  A single data source is adequate if it provides quality sales data verified by closed transactions. Sales data provided by a party to the sale or financing of the subject property must be verified by a secondary data source or a party without an interest in the transaction Page 90

253 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lender’s Handbook Ch. 11, 7: Selection and Analysis of Comparable Sales  Comparable sales should be recent sales, typically within 6 months and generally not more than 12 months old. In some markets, sales over 6 months old may be considered outdated. Note: The appraiser must adequately explain the use of sales over 12 months old. Page 90

254 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lender’s Handbook Ch. 11, 7: Selection and Analysis of Comparable Sales The appraiser must adequately explain any reliance on sales located either:  Further from the subject than similar recent comparable sales readily available in the subject neighborhood, or  Outside of the subject's market area. Note: In some rural areas, comparable sales may be 5, 10, or 20 miles away from the subject property and still be within the subject’s immediate market area. Page 90

255 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lender’s Handbook Ch. 11, 7: Selection and Analysis of Comparable Sales  Generally, good comparables require minimal adjustment for individual feature differences and a minimal total net adjustment. The appraiser must adequately explain large adjustments.  Adjustments based on some factor other than market reaction, such as builder costs for materials, project development, etc., are not generally acceptable. Page 91

256 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lender’s Handbook Ch. 11, 8: Other Market Analysis Considerations The following market analysis considerations are provided as a reminder of VA appraisal expectations and as an aid in development of the appraisal report. Reporting each consideration separate from the requirements of the appraisal report form is optional, unless time adjustments are used in the report Page 91

257 www.Mckissock.com www.McKissock.com 1-800-328-2008 VA Lender’s Handbook Ch. 11, 8-b: Sales Or Financing Concessions The appraiser should report:  In the “Neighborhood” section of the Uniform Residential Appraisal Report (URAR) or on an addendum, the prevalence of sales or financing concessions (for example, interest rate buy-downs, inclusion of non-realty items in the transaction, seller payment of any buyer closing costs, etc.); and  If any comparable sale involved concessions, the effect of the concessions on the sales price of the comparable should be noted. In doing so, the appraiser should consider: – that the effect of financing/sales concessions can vary in different locales Page 91

258 www.Mckissock.com www.McKissock.com 1-800-328-2008 ERC Form Page 4 Page 92

259 www.Mckissock.com www.McKissock.com 1-800-328-2008 ERC Form Page 4 Page 93

260 www.Mckissock.com www.McKissock.com 1-800-328-2008 ERC Form Page 4 Page 94

261 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Selection When you choose comparable sales, what are the three most important things you look for? Page 95

262 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Selection What is the most important feature you look for first? Page 95

263 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Selection What if your subject:  is a 2-bedroom house?  has 10 acres?  is new?  is in the best school district?  has 2 units?  is in a flood zone? Page 95

264 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Selection What if your subject:  is a condo?  is a ranch?  is a 2-story colonial?  is a “handyman’s special”?  is a cabin on a lake?  is a green home? Page 95

265 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Selection Can a comparable sale be sold over one year ago? Must a comparable sale have the same highest and best use as the subject property? Must a comparable sale have the same zoning? Page 95

266 www.Mckissock.com www.McKissock.com 1-800-328-2008 Selection of Comparable Sales First – delineate the market area. Market area is defined as: The area associated with a subject property that contains its direct competition. Market area delineation is defined as: The process of identifying the market area associated with the subject property. Page 96

267 www.Mckissock.com www.McKissock.com 1-800-328-2008 Market Areas Market area The geographic or locational delineation of the market for a specific category of real estate, i.e., the area in which alternative, similar properties effectively compete with the subject property in the minds of probable, potential purchasers and users.” Source: The Appraisal of Real Estate, 13th Edition Page 96

268 www.Mckissock.com www.McKissock.com 1-800-328-2008 Market Areas Market areas are defined by a combination of factors – e.g. physical features, the demographic and socioeconomic characteristics of the residents or tenants, the condition of the improvements (age, upkeep, ownership and vacancy rates), and land use trends. Source: The Appraisal of Real Estate, 13th Edition Page 98

269 www.Mckissock.com www.McKissock.com 1-800-328-2008 Selection of Comparable Sales Selection of appropriate comparable sales is impacted by:  The competency of the appraiser  The availability of verifiable sales data  Ethical standards (USPAP)  Client standards (Fannie Mae, FHA, VA, ERC, private clients, etc.) Page 96

270 www.Mckissock.com www.McKissock.com 1-800-328-2008 Selection of Comparable Sales URAR Certification 7 says: I selected and used comparable sales that are locationally, physically, and functionally the most similar to the subject property. Page 97

271 www.Mckissock.com www.McKissock.com 1-800-328-2008 Bracketing Sales Do you need to bracket sales? Bracketing is defined as: A process in which an appraiser determines a probable range of values for a property by applying comparative analysis techniques to data such as a group of sales. The array of comparable sales may be divided into three groups— those superior to the subject, those similar to the subject, and those inferior to the subject. The sale prices reflected by the sales requiring downward adjustment and those requiring upward adjustment refine the probable range of values for the subject and identify a value range (i.e., a bracket) in which the final value opinion will fall. Page 97

272 www.Mckissock.com www.McKissock.com 1-800-328-2008 Bracketing Sales Strengths include:  Can be used to support a value opinion in the mid-range  Adjustments tend to move in both directions – reducing the spread of the adjustments  When data is plentiful, this is the preferred method Page 97

273 www.Mckissock.com www.McKissock.com 1-800-328-2008 Bracketing Sales Weaknesses include:  May not be possible if data is limited  May result in forced and inaccurate results  May force the appraiser to use sales that would not be considered appropriate  May result in omitting better sales  May result in a misleading opinion of value Page 97

274 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA – ML 94-3 (1994) In selecting comparables, the bracketing method must be used. Ideally, one of the comparables should be a little larger (200 sq. ft. to 300 sq. ft.); another, a little smaller; and the third should be approximately the same size (generally within a hundred square feet of the subject). DO NOT SELECT COMPARABLES BY SALES PRICE. All adjustments must be extracted from the market. No adjustment should be made unless it has a material effect on value. Page 98

275 www.Mckissock.com www.McKissock.com 1-800-328-2008 FHA – 4150.2 – Appendix D (2006) In selecting comparables, use the bracketing method. It is advisable to bracket sales using both dwelling size and sales price whenever possible. If bracketing is not possible, the appraiser should explain why. Page 98

276 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Adjustments Do you need to make an adjustment for:  A swimming pool?  A 2-car garage versus a 1-car?  A 1-car garage versus a carport?  A one-car garage versus no garage? Page 98

277 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Adjustments Which is most important?  Number of adjustments made  Size of adjustments made  Number of plusses versus number of minuses  Total gross adjustments  Total net adjustments  Absolute amount of adjustments Page 98

278 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparable Adjustments Do you have to make quantitative adjustments? WHY

279 www.Mckissock.com www.McKissock.com 1-800-328-2008 APPRAISAL USPAP defines an appraisal as: the act or process of developing an opinion of value; an opinion of value. Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value). Page 99

280 www.Mckissock.com www.McKissock.com 1-800-328-2008 Comparative Analysis Comparative analysis is defined as: The process in which a value indication is derived in the sales comparison approach. Comparative analysis may employ quantitative or qualitative analysis, either separately or in combination. Source: The Dictionary of Real Estate Appraisal, Fifth Edition Page 99

281 www.Mckissock.com www.McKissock.com 1-800-328-2008 Quantitative Adjustment Quantitative adjustment is defined as: In the sales comparison approach, the process of making numerical adjustments to the sales prices of comparable properties, including data analysis techniques (paired data analysis, grouped data analysis, and secondary data analysis), statistical analysis, graphic analysis, trend analysis, cost analysis (cost-to-cure, depreciated cost), and capitalization of rent differences; usually precedes qualitative analysis. Source: The Dictionary of Real Estate Appraisal, Fifth Edition Page 99

282 www.Mckissock.com www.McKissock.com 1-800-328-2008 Qualitative Analysis Qualitative analysis is defined as: The process of accounting for differences (such as between comparable properties and the subject property) that are not quantified; may be combined with quantitative analysis. Source: The Dictionary of Real Estate Appraisal, Fifth Edition Page 100

283 www.Mckissock.com www.McKissock.com 1-800-328-2008 Qualitative Data Qualitative data are defined as: Data that are based on subjective measures, where the data tend to fall into nominal or ordinal categories; usually represented in the form of words. For example, a characteristic like curb appeal may indeed affect market value but may be difficult to quantify numerically. Also referred to as categorical data. Source: The Dictionary of Real Estate Appraisal, Fifth Edition Page 100

284 www.Mckissock.com www.McKissock.com 1-800-328-2008 Relative Comparison Analysis Relative comparison analysis is defined as: A qualitative technique for analyzing comparable sales; used to determine whether the characteristics of a comparable property are inferior, superior, or similar to those of the subject property. Source: The Dictionary of Real Estate Appraisal, Fifth Edition Page 100

285 www.Mckissock.com www.McKissock.com 1-800-328-2008 Relative Comparison Analysis Page 101

286 www.Mckissock.com www.McKissock.com 1-800-328-2008 Ranking Analysis Ranking analysis is defined as: An ordinal technique for analyzing data, commonly used in the analysis of comparable sales; a variant of relative comparison analysis in which comparable sales are arrayed in descending or ascending order of desirability and each is analyzed to determine its comparability to the subject property. Source: The Dictionary of Real Estate Appraisal, Fifth Edition Page 101

287 www.Mckissock.com www.McKissock.com 1-800-328-2008 Ranking Analysis

288 www.Mckissock.com www.McKissock.com 1-800-328-2008 Ranking Analysis Data could be ranked in ascending or descending order by:  Sales price  Price per square foot  Date of sale  Lot size  GLA  Number of rooms, bedrooms, baths, etc. Page 102

289 www.Mckissock.com www.McKissock.com 1-800-328-2008 Quantitative Analysis Quantitative Analysis tools include:  Paired Data Analysis  Grouped Data Analysis  Statistical analysis - Graphic analysis - Simple linear regression analysis - Multiple linear regression analysis - Automated Valuation Models Page 102

290 www.Mckissock.com www.McKissock.com 1-800-328-2008 Computer-Aided Appraisal Software www.appraisalworld.com/compcruncher Page 103

291 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 103

292 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 104

293 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 104

294 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 105

295 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 105

296 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 106

297 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 106

298 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 107

299 www.Mckissock.com www.McKissock.com 1-800-328-2008 COMPCRUNCHER™ Page 107

300 www.Mckissock.com www.McKissock.com 1-800-328-2008 Thanks for coming! I hope you enjoyed the course, and if you have any questions, please don’t hesitate to call McKissock at 1-800-328-2008


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