1004MC Interpatation

[Austin Martin]

Now that the 1004MC has been with us for almost a month I have a few questions. There appears to be 2 schools of thought when filling out the MC. One school of thought: Define the neighborhood and use what data is available in the defined neighborhood to fill out the MC. If no comps or listings are found within the defined neighborhood then a zero is put in that box. The other school of thought go big and expand your search area to allow for enough data to fill out the MC. In my market having more then 1 comp in the defined neighborhood is unusual. How are the rest of you approaching this?
Thanks

[Patrick Egger]

Define "competitive to the subject", state the limitations of the data, complete the 1004MC with what you have, communicate to the client via your "addendum to the 1004MC addendum" and let them underwrite the risk.

Patrick Egger

[Austin Martin]

So here is the situation I have 4 comps none of which come from the subject's defined neighborhood. Due I use thsoe 4 comps to fill out the 1004MC and explan that none of them are in the subject's neighborhood but are still competitive to the subject property? Also, do you enter 4 at the top of page 2 of the URAR and again explain that those four are not from the defined neighborhood but were the most competitive?

[Diana (Idaho) CRA]

In the case of Boise, Idaho where sales data can be extremely limited, I exspand my area and include the data from that search to fill out the 1004MC. I explain why the immediate neighborhood did not produce results and why I exspanded the search. The subject's "market area" then replaces the "subject neighborhood". The market area typically defines adjacent comparable neighborhoods which may exceed 1 mile in distance. As long as you define and describe what the results represent, the 1004MC is considered applicable and legitimate.

[Gary Chase]

Hi Diana,
My PERSONAL view is that I never expand beyond the subject's market segment within the neighborhood for the 1004MC. I fill in zeros or ones in a lot of my 1004MCs. The reason I find this form such a time eater is that the 1004MC says that it describes the neighborhood, which is a conclusion of the form that is misleading in all my neighborhoods. Therefore, I add charts and page(s) of descriptions explaining what is going on within the the neighborhood & the need to search beyond the immediate market segment to find competitive sales so that I am not being misleading. If you start telling the reader that there are 100 sales that compete with the subject, the logical expectation is going to be that out of that 100 sales you should be able to find 3 that sold in the past 3 months within 1 mile, with the same style, and requiring only minor adjustments. SO, why did you not include those in your sales grid instead of the ones that 2 or 3 miles away that are 6 to 9 months old? PS Nice to have someone else from Idaho. : )

[Rick_from_Utah]

I think this is a "local" problem. The form is looking for "trends" and when you have a small number for analysis, the trend tends to be questionable.

For me, in my marketplace, I want to explore what really happens in the marketplace. We as appraisers do not do what realtors do in helping market participants "buy and sell" houses. Most people look at what they think they afford, and hence, have a range of value first, then they areas they consider to buy in, and as they 'explore' a significant sample, starrt to narrow-in like appraisers do (from the start).

To clarify, a broader search is what I think market particpants do, and appears more meaningful in observing trends.

With that said, I like the MC1004 form and I have always in my practice completed a similar analysis to it. It has been a basis for 'checking boxes', establishing pricing, absorption, "value direction" (i.e., appreciating, stabilizing, & declining), etc.

But, I think the definintions of neighborhood, competing neighborhoods, and other related are the things one has to consider and then bring it back to "local circumstances".

I do see alot of comments on this. although there are several in our group.

Pat made an interesting comment to our group here in Utah (Salt Lake City). "You guys don't play nice together" or something like that. Our egos, business practices, and other factors tend to DIVIDE us, when we need to UNITE for a stronger group.

I don't care if anyone disagrees with my 'observations', but I do hope they respect the fact I took the time and effort to contribute. And that is more important than if I am "absolutely correct" or if I dot the "i's" or cross the "t's", you know.

Kind regards,

Rick from Utah