Appraisal News and Business Tips

New Fannie Appraisal FAQs including 1004MC

New Fannie FAQs – Appraisal and Property Related Frequently Asked Questions (FAQs) including 1004MC guidelines Published September 23, 2014

Fortunately, the document indicates which Q&As are new, as it is often hard to figure out what is new and what has already been sent out in other documents.

If you do lender work, read this document!!

Topics include:
– Comps with accessory units
– C&R ratings
– Comments on adjustments
– Sales over 12 months old and distance from subject – Ok to use
– Legal, non-conforming and proof of rebuilding – not required
And many more relevant and useful Q&As, including guidelines that have been around for a while, such as Net adjustments, etc.  Looks like Fannie has figured out many of the topics relevant to appraisers!!


For many appraisers, the 1004MC comments will be very helpful:

Q16. What type of properties are to be analyzed for the data reported in the One-Unit Housing Trends portion of the Neighborhood section of the appraisal report form?

The data regarding trends to be reported in the One-Unit Housing Trends section must be reflective of those properties deemed to be competitive to the property being appraised. Additional commentary should be provided on the other segment(s) of the neighborhood when segmentation is present to aid in understanding the overall neighborhood dynamics.

Q17. Are the trends that are reported on the Market Conditions Addendum to the Appraisal Report (Form 1004MC) the same trends that are to be reported in the One-Unit Housing Trends section of the appraisal report (Form 1004)?

Yes. The conclusions regarding trends that are obtained from the Form 1004MC must be the same trends reported in the Neighborhood trends section of the Form 1004. The information reported on both forms must be consistent to provide the lender with a clear and accurate understanding of the market trends and conditions present in the subject neighborhood, based on properties that are considered competitive with the subject being appraised.

Read the additional 1004MC Q&As.

Thanks to appraiser Dave Towne for some great comments on 1004MC:

Ever since the blasted MC Form was mandated in 2011, I’ve been saying the way appraisers have been ‘classically’ trained and used the Neighborhood check boxes on the primary forms did not mesh with the MC Form requirement.  (And in fact, I quit doing the ‘classic’ method then, and have been doing what Q16 & Q17 below say.)

I happen to believe one reason why the MC Form was instituted was that this ‘classic’ reporting methodology of reporting overall dissimilar neighborhood property trends (heterogeneous properties) did not (and does not) make sense when the assignment is to appraise a single property using comparable (or competitive) properties.

Dissimilar properties seldom have the same trend components that the comparable (competitive) properties have.  As such, they don’t need to be reported…..except as the last sentence of Q16 says …. ”Additional commentary should be provided on the other segment(s) of the neighborhood when segmentation is present to aid in understanding the overall neighborhood dynamics.”

An issue with the ‘classic’ methodology is the “predominate” value of an overall neighborhood with dissimilar properties can be much different than when only comparable (competitive) properties are used in the trend analysis.  So, when appraisers use the proper properties as outlined above, there should be no significant problems with that data point, because the “predominate” value will more than likely fall within the price range of the comparable (competitive) properties.

My comment: Finally some guidance on issues that have been driving appraisers crazy with lots of differing appraisal opinions. Now, we can use answers directly from Fannie!!

Hopefully, AMCs and lenders will use these Fannie guidelines instead of making up their own. Particulary, the guidelines that have been around for a long time that are repeated in these FAQs. You can refer them to this document.

Link to FAQs


Appraisalport poll comments and results on 1004MC (from their Sept. 2 blog posting at

“This month, I want to take a closer look at two recent polls – one related directly to the use of AppraisalPort and the other concerning a controversial form. Starting with the form, we asked: What do you think about the 1004MC form? This was a popular poll with a total of 5982 responses. The form doesn’t appear to be well thought of; with 66 percent of respondents selecting the answer “It really doesn’t work well and should be retired.”  Another 21 percent answered that “It is OK but in need of some updating or modifications.” It seems that the 1004MC form is going to have some trouble getting a date to the prom because only the remaining 13 percent of voters said “It still gives the client a good idea about current market conditions.”

“I did receive some additional feedback on this poll. Some appraisers just don’t like to use the 1004MC because it’s just something else that has to be done; takes more time out of the day; and may not provide accurate results – especially in rural areas. Others think it really is the first step to a more modern style of computer-assisted appraising.“

Appraisal Today newsletter

  1. You are not suppose to include “outliers” in the one unit housing trends section yet you state that the 1004MC range should correspond with those numbers. If you are appraising a subject which is an outlier how does that make sense? And of what value is it?

  2. The form is just not good and causes more confusion, get rid of it.

  3. I greatly dislike the 1004MC – I don’t believe the use of the median price lends itself to being an effective appraisal analysis tool. When there are limited sales just one or two low or high sales can distort the median price and indicate a trend that is not actually occurring in the market

    For the past year the local newspapers have been touted the amount of inbcreases in the sales prices of homes. Yet, the MLS-generated 1004MC will show a declining market, caused mainly by either dissimliar sales or a lack of enough sales to do a meaningful analysis.

    When I prepare the 1004MC, I use the same criteria that I used to locate the comparable sales.

  4. The ONLY condition I ever get from AMCs/lenders about the 1004MC is the innane requirement that some specific lenders have that I must fill in the whole condo section at the bottom with “N/A” for a SFR report (so I guess that no one thinks in my SFR report that I just forgot to fill this section out, which doesn’t apply). I can’t believe any lender REALLY reads or gives any consideration to this. If I try to discuss it with any mortgage broker or real estate agent, they have no idea what I am talking about. Working in a mostly rural area with limited sales and wide swings in values in the same “neighborhood”, it is the exception rather than the rule that the trend data in the 1004MC matches the page 1 data since the geographic area being considered/searched for comps is so diverse. Also, there is usually so little sales volume in any given rural “market segment” that the calculations in the 1004MC form end up being statistically meaningless- you can’t base a “trend” on 1-3 sales in some time periods. In my opinion….

  5. A loan officer would never kill a deal over an MC form. Gigantic waste of time.

  6. It is only the Trends section (Property Values, Demand and Supply, Marketing Time) of the 1004 that needs to match the MC and relates to the sub-market and is based on “competitive properties”. The rest of the Neighborhood section (Price and Age Ranges, etc.) relate to the neighborhood as a whole. For example, in the Selling Guide, it says; “the age range should reflect the oldest and newest ages for “similar” types of residential properties”. Similar means the range only includes single family properties when appraising a single family home. This makes more sense to me that they would want the trend information to be more reflective of the subject and the other information to illustrate how the subject fits into the overall neighborhood.

  7. Hate the MC most of the time – the only time it works correctly is in large subdivision with a lot of sales – outside that, the numbers could swing so wildly it makes no sense.

  8. I’ve never had a comment or question from a lender about the MC form in an appraisal, data in MC form or my comments in the MC. The only time I ever got a comment was the time I forgot to check a box. This leads me to believe a low level employee of the lender or AMC reviews to see if boxes are checked, comments are made but no one uses the MC form to help make a lending decision and/or higher level employees don’t look at it. End result is more meaningless work for the appraiser.

  9. If Fannie/Freddie, etc want the neighborhood section of the 1004 to match up with the MC they need to revise the language on the 1004. Nowhere on the 1004 does it state that the analysis is for only the small sub-market in which the subject property falls. It says very clearly “One- Unit Housing Trends” and “Neighborhood Characteristics” To confine the analysis only to homes in the subject’s class in my opinion is false and misleading to the reader.
    Is it proper appraisal practice to extrapolate a trend from a small sub-market to the whole? Try explaining that to the plaintiff’s lawyer.

Leave a Reply