ScoopGear

Making Market Condition Adjustments and Determining When Values Are Declining

This is the forth article in a five-part series dealing with the new 1004MC form (MCF) by David Braun, MAI, SRA.  In Part 1 of this series, David began with a discussion of where appraisers are NOW . . .and gave some direction on where we're headed.  In Part 2, David looks at appraiser's frustration with the 1004MC and in Part 3, he gave us a "What Goes Where and Why" look at the 1004MC.

I am enthusiastic about appraisers gathering large amounts of data onto a spreadsheet for analysis. The power gained from the appraiser being enlightened through this process is staggering. I am on record for supporting Fannie Mae in the over-all process, and condemning the appraisal profession for not beating Fannie to the punch. I believe strongly that the form (not the process) is far too limited.

The Total Solution program that I developed is an example of adding to and expanding a standardized form. Performing a market condition analysis is a lot like sky diving in the sense that you either do it or you do not.

Many critics are correct when they say, “Appraisers are providing misleading market condition analysis.”

I agree that many appraisers are limiting their data and scope of work to such a degree that the results and conclusions are just not reliable. Appraisers are much more like the Wright Brothers at Kitty Hawk, than the modern-day jet pilot . . .but we have to start somewhere.

In this part of “The 1004MC-71 INDUSTRY UPDATE” the process of extracting the appropriate market conditions (time) adjustment for the direct comparison grid and determining the value trend’s direction (stable, increasing, declining) will be addressed.

This method is appropriate for vacant land, apartments, and various commercial properties. Microsoft Excel is the canvas used in the following adjustment extraction process.

The examples are taken from AVT’s Market Conditions Adjustment Extractor. You can view it and other automated appraiser tools at http://www.scoopgear.com/automated-valuation-techn.html

Click Here To Continue Reading . . .

1004 MC; Garbage in, Garbage out

 

At this point, most of you have done the new Market Conditions Addendum. It is not quick... It is not easy... It does not always produce reliable results... And we don't even know yet how well the underwriters will receive them.

I have written and taught a Market Conditions course, and I have also written and published an E-Book on the Market Conditions Addendum to help appraisers through this new requirement.

I've been teaching my new Market Conditions course, and the seats are selling out in many locations. Tells you how important this is to appraisers!

In other locations, the local MLS systems are providing “statistical research” which the appraisers are using. Some automated systems are better, some less good, but they all have a few things in common. They are designed to do your thinking for you, they provide only the information they provide, and they take control of the process and the analysis out of your hands.

The problem with automation is that you are incorporating data into your reports, without any idea whether or not the information is right or wrong, credible or misleading, or even appropriate to the report being written.

You've all heard the old catch-phrases: “Garbage in, Garbage out,” “You can use statistics to prove anything you want to,” and “The best way to lie is to use statistics”

Computers cannot recognize duplicates, or outliers, or anomalies, and all of this misleading data is included with automated statistical models.

 I AM NOT OK WITH THE AUTOMATED SOLUTIONS!

I am an appraiser, meaning I CARE about the quality of my reports. I am subject to USPAP, which says I must produce credible reports which are not misleading. 

I also care about making a living. I cannot afford to spend an hour on this silly addendum, nor can I just use garbage or unverifiable statistics.

Therefore, I have created a simple and elegant method for finding the data and filling in the form, fast and easy. Not automated! My method leaves the analysis in the appraisers' hands, but makes it quick and straightforward.

My method involves using a spreadsheet, which usually scares the heck out of residential appraisers. We became residential appraisers because we like it simple, and spreadsheets do not seem simple! Therefore, I created a “Spreadsheets for Simpletons” approach, which makes it fast, easy and straightforward. If you have never, ever opened a spreadsheet in your life, you can do this easily.

The benefits of my method versus automated systems: You will be in control of your own data You will produce credible results You will have reproducible results for your work file You can easily use Mean Averages if Medians are misleading You can complete the entire addendum (including research) in less than half an hour!

 Please, allow me to help you help yourself! Visit my web site at www.AppraisalMastery.com , and see if I will be visiting your area soon with the live class. If not, then Buy the E-Book. It will teach you this method, which will simultaneously help you save time and produce better work. It is a win-win situation!

Because of the importance of this material, I have priced the E-Book at only $22, and the live seminar at only $49. You have nothing to lose, and everything to gain. 

Please help yourself... I like appraisers, and I do not want to see you in trouble after unintentionally including garbage or misleading statistics in your reports!

The E-Books, HVCC & You and 1004MC Market Conditions Addendum are both available on my website at www.Shop.AppraisalMastery.com .

Upcoming Class Locations and Dates – HVCC Class at 8:00 am and 1004MC Class at 1:00 pm

• 4/13/2009 Salt Lake City, UT
• 4/15/2009 Boise, ID
• 4/18/2009 Reno, NV
• 4/20/2009 Las Vegas, NV
• 4/22/2009 Prescott, AZ
• 4/23/2009 Scottsdale, AZ
• 4/27/2009 Tucson, AZ
• 4/28/2009 El Paso, TX

More locations are being added. Please check our website (www.AppraisalMastery.com ) for more information. Appraisal Mastery Center 4100 Horseshoe Drive Strasburg, CO 80136 303-622-4240 Fax 303-622-4233 www.AppraisalMastery.com  

 

1004MC Total Solution© - Excel 2003 Version NOW AVAILABLE!

   

Download the 1004MC Quick-start Guides:

• Excel 2003 Version Quick-start Guide
• Excel 2007 Version Quick-start Guide

Listen to David Braun's "Intro to Total Solution"

Download Sample Report

Watch Video of the Total Solution Program

Join the Total Solution User Group Forum

Download Total Solutions FAQs

You must have either the 2003 or 2007 version of Excel installed to run the 1004MC Total Solution template!

Delivery by eMail within 24 hours!

 Download Video - Steps to performing market analysis - 1004MC Total Solution

Thank You for your Purchase!

1004MC Total Solution© Questions and Answers from David Braun

Visit the AVT User's Group on the Appraiser's Water Cooler to view Questions and Answers about the Total Solutions Program

Download 1004MC Total Solution Software FAQs

Download 1004 MC Sample Report Update 3-11-09  

Regression Plus Is HERE! Watch David Braun's "Regression Plus" introduction videos

Regression Plus has been released - Order Below! 

Preview the product below  . . .

Download Regression_Plus_User_Manual.pdf

Part I

Download Intro to Regression Plus Part 1.wmv (0.0K)

Part II

Download Intro to Regression Plus Part 2.wmv (0.0K)

Part III

Download Intro to RegressionPlus Part 3.wmv (0.0K)

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Real World Graphing - Deed Restricted vs Fee Simple Market Sales

ScoopGear.com is not only a marketplace but a community blog where appraisers and vendors can share tips and tricks.  Today, Jim Westman of Centennial Appraisal Group, Inc., shares his Real World example of market trend analysis.

Like many of you, I recently received my Nuts and Bolts of Spreadsheets and Graphs DVD set from Anthony Young and I was anxious to put it to work!

There are a couple of subdivisions in Breckenridge, CO with deed-restricted units (limited appreciation) and residents must work in Breckenridge at least 30 hours a week.  Both Vista Point and Wellington subdivisions began at the same time and are adjoining.

My subject is a deed-restricted unit and I included three deed-restricted units in the appraisal report. Comps four and five were fee simple market units.  By paring comparables four and five with one, two, and three I thought the adjustment looked like it was about a 20% difference. But I wanted some concrete support.

To graph the differences between deed-restricted units and free market units, I calcluated the price per square foot for all of the sales over a seven year period in Excel.  Click image or here to enlarge.

The average price/sq. ft. of restricted vs. market units was $210/sf vs $253/sf. But, more intersting is that my market trend analysis supports the fact that this variance holds true over time! 

Conclusion?  Sure enough the market units were about 20% higher than the restricted units.

Ask Anthony! How do you make market adjustments for items with contributory value?

"How do you make market adjustments for items with contributory value?  An excel spreadsheet can not come up with that formula.  Mark"

Mark, I will respectfully disagree with you. I can with an excel sheet measure and study the buying behaviors of buyers in a specific market for a specific feature through time.  I have been able to do it time and time again. I have been able to prove many assumptions right and others wrong.

(Only read on if you dare to hear the truth. [Anthony's climbing on his Soapbox] )

However, first, one must be able to segment the market properly to use this decorative style for adjustment. 

Nothing can replace true appraisal skills. This is why as Patrick Egger points out. "Which chapter is Statistics located in the Appraisal of Real Estate?" It DOESN'T have a chapter, it is at the Back of the book as an appendix.

Why is this?  Well, because, one must understand 50 years of proven technique before using statistics. Statistics mean nothing if the data-set or model is wrong. This is the biggest problem with everyone graphing these days.

With Respect, I must say we are spending more time on making the graph pretty and less time on market delineation. We cannot use any graph for adjustments if the data used is not relevant to the subjects market competition. I cannot use a quote for a Mercedes Benz transmission to figure out how much my Honda transmission will cost. Nevertheless, we are seeing it more and more.

My graphing heart cries out to all graphers and prospective graphers. Please spend more time segmenting your market for true competitive properties than you do picking which are the prettiest colors to graph. When I began this thing I call a "niche" now,  I spent more time making the graph "POP" than I did segmenting my data and wow, when I woke up I have a better perspective today.

Please do not just show the graph of the Decline.

1. Show a short business cycle 3-6 years,
2. Give the reader perspective on where we came from
3. Lead the reader along a path and point out when price left value and
4. Show how it is returning or going below the Historic Value Trend.

Click here to continue reading . . .

Product Review: Nuts & Bolts of Spreadsheets & Graphs

I received my copy of Anthony Young's DVD [ Nuts & Bolts of Spreadsheets and Graphs ] this week and ran it through the paces this weekend.

In Summation: EXCELLENT

The DVD consists of 2 disks comprising 5 chapters of graphing techniques and short-cuts.

Anthony does a great job with the presentation of the material.  Nearly every step of the DVD will run methodically through a procedure and then he will go over the material a second time; thus one doesn’t have to continually rewind if things don’t quite sink in.

I have been graphing my market data for sometime now, however the information provided on the DVD set is amazing.

I only thought I knew how to graph in Excel; the material covered in the project is well worth the price.

The DVD set covers everything from basic functions in Excel to advanced techniques such as utilizing Pivot Tables.  Even the advanced features such as the Pivot Table section can be easily mastered under the direction of his guidance on the video.

Honestly, after spending the better part of the weekend evenings going through the video, I think Mr. Young may have missed his calling. He may want to put his appraiser hat to the side and focus his efforts on this type of endeavor.

My understanding is he will have an advanced series after this project is completed and you can bet I will be one of the first in line.

For those who are considering this DVD, I highly recommend it.

Wendell Browne, SRA

Browne Appraisal, Inc.

www.OurAppraiser.com

Panama City, Fl