Wachovia Mortgage, FSB's Appraisal Department has issued an Important Information on Market Analysis Requirements memo to all of their Wachovia Independent Contractors (WIC's). Download wachovia_mortgage_market_analysis_requirements.pdf
Here are a few excerpts from their memo:
Now, more than ever, with all the press about the “mortgage crisis” and declining markets throughout much of the nation, market analysis has achieved a new level of visibility. In fact, as you may know, Fannie Mae announced an amendment to their selling guide on December 5, 2007 regarding declining markets. Fannie, Freddie, (VA) and other secondary market purchasers are using the state of the market to help establish loan level acceptability.
We believe that property values, demand/supply models, and marketing time are all related. Therefore, when discussing a market, we want you to analyze the market based on sales, listings, pending sales, withdrawn, expired listings, etc.
The tables below are examples of how Wachovia Staff Appraisers must report market statistics on their appraisals. We recommend that you adapt these for your use or provide similar, clearly stated, and easily understandable statistics for the appraisals you complete for Wachovia. This will save you and us time in not having to contact you to discuss your reporting of the markets.
The first table (below) provides the median value for your NEIGHBORHOOD.
This data provides the basis for determining whether your market is “Increasing”, “Stable”, or “Declining” and reporting the “One-Unit Housing Trends” on the appraisal report. Based on the median sales prices in the table above we can see clearly that the market trend is “Declining” and have market support for our conclusion.
The next 3 tables below provide data for competitive properties in your MARKET AREA (properties that the buyer might consider when shopping for the Subject Property).
Evaluating the first of three tables (above) we can see that the “Absorption Rate” (number of sales divided by the number of months) has been declining steadily – an indicator of a declining market or one that may soon be declining; this provides you support for marking the “One-Unit-Housing Trends” as “Over Supply”. The Inventory remains the same for each column because that is the CURRENT number of listings and pending sales on the market. We can see that the “Month Supply” has climbed rapidly and clearly indicates an over supply as reported on the appraisal.
The next table (above) shows the declining median sales prices for competitive properties in our Subject’s market (3 Months, 6 Months, and 12 Months values).
And, the last of these tables (above) shows that during the past 180 days the median percent reduction from list price has declined additional support for a declining market and while the 3 month median DOM was 37 days, the current pending sales (51 days) and active listings (55 days) indicates a softening market.
Based on our analysis we must conclude that:
- the “Property Values” are “Declining”,
- the “Demand/Supply” is “Over Supply”, and
- the “Marketing Time” is “3-6 months”.
At first glance many appraisers may be concerned that reporting the median sales prices data we request is going to be time consuming, but all we are asking is that you provide a more detail summary all the research you have been doing already to determine the current market.
Most MLS provide summary statistics for your Comp Search or MTA search. If necessary you could run several searches for market analysis, reporting the median value's for each of the previous 12 months to determine a trend in values.
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