Has any appraiser found this form to have changed the way in which they analyze or report the market conditions within a residential report? I have read several other blogs and forums regarding this form and it seems to me that there were several appraisers who were already considering this and report these conditions long before Fannie Mae felt the need to provide us with another form.
Still as a review appraiser for several thousand reports in the last two and a half decades, it has not been my personal experience to read more than a handful of residential reports where the appraiser ever addressed the market supply, or absorption, until they were forced to with the creation of this form in 2008.
Still, my concern is that even though Fannie has created a form to force all residential appraisers to address this issue, I am not confident that many appraisers have sought adequate training to understand the point of the information or to present their findings that are representative of the marketplace.
Of course, there have been some training classes to tell the appraiser to fill the number of sales, the number of listings, and calculate the absorption by dividing the number of sales by the number of months analyzed. And then take this absorption rate and divide the current listings to demonstrate housing supply.
But there should be more training for the appraisers and the underwriters to understand the following:
1) This is a sampling of data. Statistically speaking, a random sampling can be an effective measure if the data has been properly qualified and accurately presented; however, if the sample is not reflective of the subject or the subject’s marketplace the results can be quite misleading.
2) The form, as it was designed, only focuses on active listings and sales within a set period of time. It does not take into account the total number of properties that were exposed to the market for that same period of time. For any given neighborhood you could find 10 active listings, 12 sales within 12 months, and 78 properties that were exposed to the market for sale but were withdrawn or expired unsold. In this scenario, even though the absorption rate would show as 1 on the form with a month housing supply, the reality is that 100 properties were exposed to the market for sale and only 10% were reported as sold within 12 months and 10 are actively listed. This information is lost, if the appraiser only fills out a form and does not bother to address the actual market conditions as of the date of value.
I urge appraisers to take the time to understand the dynamics of the market areas in which they appraise and urge underwriters to look for continuity between reports.
There needs to be more extensive training of all real estate professionals to understand the dynamics of the real estate market so that we are not easily mislead and become simple form fillers. If appraisal is simply filling a form and reporting facts why do they require the education? Of course, educational standards of appraisers slipped when they did away with the requirement that an appraiser should be a real estate broker for five years, and the apprenticeship requirements were structured so that hands on training was limited and sponsoring appraisers were able to run sweatshops instead of mentoring the next generation of professionals.
I blame all of us. The ones with unsupervised trainees and the those of us who either never took a trainee or have had one or two in the last several years. It is time that the remaining professional appraisers, and you know who you are, take a stand for the integrity of this profession and take on a responsibility as a teacher, a mentor, or a industry leader of one type or another. Most of us (and I blame myself as well) failed to engage with others. We “fought the good fight” with regard to our personal work, but we stayed quiet in classes, or in forums, or professional meetings when we should have dared to speak up and hold the line of professionalism.
If you agree with me, let me know. If you disagree, good, please allow others to hear your thoughts as well. Remember silence can be considered agreement.
See you around the water cooler!