An organization can decline in one of two ways: 1) Failure to keep to its original mission; or 2) Failure to modify its direction in the face of change. The Appraisal Institute is the historical 1991 merger of the AIREA (American Institute of Real Estate Appraisal) and the SREA (Society of Real Estate Appraisers). Each […]
Why are adjustments a problem? The concept is simple. How does a typical buyer react (with a number), to a particular feature? For example, it seems to be easy to judge a person’s reaction to a house which is, say, 15% bigger. Economists use what is called a preference function to analyze this. This concept is […]
Time adjustments were often performed after other adjustments, particularly in upward trending markets, according to the December 2024 FHFA Working Paper. Editor’s Note: Read the entire series (so far) here. Some appraisers were avoiding time adjustments, unless needed for another purpose! That purpose is when the appraiser couldn’t match the user-lender’s expectation of value (an “underappraisal”). […]
A timely recap of Time: The FHFA working paper 24-07 provided four strategies used by appraisers to satisfy the prior Fannie Mae and Freddie Mac Selling Guide requirement for time adjustments. The strategies comprise: Grouped data Paired sales Indexed similar-sales Avoidance Editor’s Note: Read the entire series (so far) here. The Appraisal Institute News Release of […]
“Other commonly accepted methods” is the fifth and final “acceptable method” per the Fannie Mae Selling Guide, for time adjustments. Editor’s Note: Read the entire series (so far) here. The FHFA working paper 24-07 listed “common strategies” used by appraisers, whether reliable, understandable, or not. The GSE guideline simply notes some acceptable “methods.” “Commonly accepted,” in […]
Paired sales is the fourth of five “acceptable” methods for time adjustments, according to the Fannie Mae selling guide. Once again, the method is neither defined nor explained. Editor’s Note: Read the entire series (so far) here. A look at USPAP shows no reference to grouped or “paired sales” as a way to support an opinion […]
In this part, we look at modeling, the third “acceptable method.” What kind of a method is “modeling”? That’s pretty broad. Editor’s Note: Read the entire series (so far) here. A common definition of “model” is “a small representation of something.” More formally, it’s “an abstract/logical depiction to improve understanding of prediction.” The Fannie Mae GSE […]
Statistical is the second “method” mentioned in the Fannie Mae Guideline for time adjustments. Editor’s Note: Read the entire series (so far) here. What does that mean? Is it an actual “acceptable” method? It says so. It must be! Let’s look. The Fannie Mae Guidelines do not explain the word, nor the process. We must look […]
We continue to explore what is acceptable to Fannie Mae for “time” adjustment. We have reviewed each of the four ‘FHFA’ time adjustment strategies. We now consider each of the five “acceptable” methods per the current Fannie Mae Selling Guide. Editor’s Note: Access the entire series (so far) here. (We will conclude this series with […]
Reflections: The CAA Conference The Community of Asset Analysts had its Fourth Annual Conference in Las Vegas February 18-19. It was fun. It was smart. It was spirit. All topics, presenters, and attendees promote a great future for the valuation profession. Topics included some forward-looking movement: The continued use of modern-day software, visualization, and emphasis […]
We have reviewed the four time adjustment “strategies,” as noted in the FHFA Working Paper 24-07. Editor’s Note: Read the entire series (so far) here. We now shift over to the response of Fannie Mae, and requirements per their Selling Guide effective February and March of 2025. Briefly, the words are simple. “Acceptable” methods include: […]
Market conditions, time adjustments. The fourth “strategy” noted in the FHFA Working Paper 24-07, we call the “Time Out” strategy. Editor’s Note: Read the entire series HERE. Simply put, the appraiser avoids the issue cleanly, by just ignoring the ‘box’ where the time adjustment should go. Easy. The FHFA report states: “The most common method […]
In this post, Adjust for Time, Part 12, (read the whole series here) the FHFA Working Paper 24-07 infers a third “common strategy” for time adjustments. We will call this the plot–regress method. In this strategy “MLS data on individual sales can be retrieved, and the appraiser can regress sales price on a time trend […]
We now consider the second “time adjustments” method noted in the FHFA paper (24-07). It, too, is noted as being “commonly” used in appraisals. The first method we reviewed was “paired sales”. Now we look at the second method, called “grouped data.” This “related technique, grouped data analysis, involves grouping data by an independent variable […]
Time adjustments are now required by Fannie Mae and Freddie Mac. Time adjustments were previously required “when necessary.” Now a “market conditions” adjustment is required on every appraisal. This means that even if personal judgment says the subject market is “stable,” an analysis must be performed to arrive at the zero adjustment conclusion. An FHFA (Federal Housing Finance […]
