1004 Revisited Part 4 – Why can’t the Median Sale Price as a percent of List Price be auto-calculated from the fields found on the 1004MC form?
The 1004MC questions keep rolling in so we’ll keep blogging about it! In this blog we are going to help clarify a common question we received, which also happens to be the title of this blog, "Why can’t the Median Sale Price as a Percent of List Price be auto-calculated from the fields found on the 1004MC form?"
The reason the form can’t perform this calculation is because the program doesn’t have the necessary data to do the math, only you do. Now this might come as a surprise to some of you so please read on for clarification.
At first look, it seems this data field could be automatically calculated by simply dividing the Median Comparable Sale Price by the Median Comparable List Price. But that’s not what the form is asking you to do. The form is requesting you to provide the median sale-to-list percentage of listed properties that were sold during the time periods stated on the form.
If this is unclear – check out an updated series of Frequently Asked Questions issued on September 23rd by Fannie Mae reiterating their position on this issue. We highly encourage you to review all these FAQs for other important clarifications on appraisal and property related topics.
Question #45: Is the Median Sale Price as Percent of List Price determined by dividing the Median Comparable Sale Price by the Median Comparable List Price from the preceding data on the form, or is it based only on comparables for sold properties?
Answer: The Median Sale Price as a Percent of List Price is to be determined by analyzing the comparables that have sold and settled during the specific time frame, not by using the data from the lines above this section on the form.
If you haven’t been completing this section of the 1004MC grid as specified, this FAQ may not be so easy to understand. To help, here’s an illustration:
Assume 5 sales occurred during a given time period. The list price, sale price and percentages are as follows. What is the Median Sale Price as a Percent of List Price?
Sale Price as % of List Price
Illustration Answer: As the Median is the “number in the middle” of a data array arranged from low to high the answer to the question would be calculated as follows for this data set:
List Price: $200,000 $205,000 $206,000 $210,000 $215,000 (The median is $206,000.)
Sale Price: $184,000 $188,000 $199,000 $200,000 $201,000 (The median is $199,000.)
Sale Price as % of List Price: 89% 93% 94% 95% 98% (The median is 94%.)
Based on the data set the median is 94% for the Sale Price as a Percent of List Price, which is how you would answer this question on the 1004MC.
However, if you mistakenly divide the Median Sale Price ($199,000) by the Median List Price ($206,000) the result is 97%. Again, to arrive at the percentage the form is really asking for, we need to follow the math as explained in the illustration to calculate the individual Sale Price as percentage of the List Price and then identify the median percentage. This is why your software cannot calculate or pre-populate the data field in the 1004MC. It does not “know” the individual Sale Price as a percentage of the List Price of each individual sale.
Thank you to the many appraisers who responded to the 1004MC blogs and asked this question. We have a strong feeling you were not the only ones confused, and perhaps today some may realize they’ve been calculating this field incorrectly.
NOTE: Using ACI’s Free Market Conditions eService (eServices > Import Analysis Data > Market Conditions) MLS data feed detail does calculate the Median Percentage for you automatically. For further instruction, read our previous blog on setting up the Market Conditions eService.
If you have additional questions or a need for further clarification regarding the 1004MC, please email firstname.lastname@example.org.