Fannie & Freddie will require "Market Condition Addendum" (1004MC) - Starting 04/01/2009 

Starting April 1st, 2009, Fannie Mae and Freddie Mac will require 1004MC, "Market Conditions Addendum" for all 1-4 unit properties.  This form is intended to provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood.   

On Novermber 14, 2008 Fannie Mae released Appraisal-Related Policy Changes and Clarifications. 

Here are some key points.  The major sections of the Market Conditions Addendum are the Trend of Property Values, Supply/Demand, and Marketing Time.  The form is a structed format to easily identify current market conditions and trends.  This will help prevent those appraisers who skip over important market condition details.  Many appraisers, including Cal Appraisal Group already provide these important details in their reports.  It is the job of the appraiser to report on the trend of property values, the supply of properties in the subject neighborhood, and the marketing time for the properites.

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 condiitons.  The absorption rate is one of these tools used to monitor these trends.  The absorption rate is the rate at which properties for sale have been or can be sold within a given area. To determine the absorption rate, the appraiser divides the total number of 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.

For example:    44 homes sold in a 4 month period in this area (44 / 4 = 11)  11 Homes sold per month.  There are currently 33 homes  for sale (Actives).  The absorption rate for the area being analyzed is 3 months.  (33 / 11 = 3)

1004MC -Fannie Mae also expects the appraiser to provide their conclusions for the reasons a market is experiencing declining market values, an over-supply of properties, or marketing times over six months.  As most markets are declining, the appraiser should be providing extensive detail on current conditions. 

Fannie Mae does recognize that all of the requested data for analysis are not equally available in all markets.  Some MLS data providers are no longer require to provide the Days On Market (DOM) and some markets it may not be possible to retrieve the total number of comparable active listings from earlier periods. Fannie Mae will require the appraiser to explain the attempt to obtain such information.  There also 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.

Form 1004MC also provides a section for comments on the prevalence of seller concessions and the trend in seller concessions for the past 12 months.  Fannie Mae wants the appraiser to provide more detail into the effects of Sale Concessions as they have increased in many markets. 

Foreclosure and REO sales section has been added to the 1004MC as national records have been broken to high number of foreclosures affecting market values. 

1004MC is one full page in length and will soon be require for all 1-4 unit properties.  More information is available on their webiste.  Send comments to CalAppraisalgrp@yahoo.com

Questions?

Please don't hesitate to contact us via our website or by phone if you have any questions about the new form we haven't answered here.