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Can I use unsolds as comps?

Discussion in 'Urgent - Help Needed' started by New Orleans Guy, Mar 9, 2006.

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  1. New Orleans Guy

    New Orleans Guy Junior Member

    0
    Feb 8, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    Louisiana
    I am doing my expensive property yet and as expected I am hating it. The house is new construction, estimated at just over 1 million and is just being completed now. There are no other houses that have sold in 2 years like it in this area and the only thing I can find is a few sales and listings from a neighborhood across major roads and about 1-2 miles away. Besides that I have one listing in the neighborhood for about 30% more money and it has about 50% more sqft. This thing is a nightmare I simply don't have good comps. Luckily the loan is something like a 20/80 instead of the standard 80/20 so I am sure that I am not that worried about exact value.

    The sqft is also small for this size house, b/c it has a lot of open area in the top and the Dr. buying it is single/no kids.....GOD he is the man huh? the pool, hot tub, and extensive landscaping (landscaping not comp. yet) seem to really balance out the lower sqft. but how to show it???

    I knew I would hate this one,
    John
     
  2. Karl

    Karl Elite Member

    0
    Jan 15, 2002
    Professional Status:
    Licensed Appraiser
    State:
    Arizona
    Not as much as I hated reading the problem.
     
  3. Scott Fleming

    Scott Fleming Junior Member

    0
    Feb 21, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    John,

    It sounds like you need to get help from someone in your area with more experience than yourself.

    You cannot use listings. You can use pending sales for your fourth and fifth comps if you can verify the information on them.

    FNMA guidelines are just that, guidelines. Sometimes it is not possible to abide by them.

    I just did a very expensive (for the area) home. One of my comps was almost ten miles away and this was in a suburban area near Houston. I have used them farther than that in rural areas You need to examine sales of lots in the area of your subject and in the area of your comps to determine if a location adjustment is needed.

    And of course you need a detailed explanation of why you did what you did.
     
  4. Scott Fleming

    Scott Fleming Junior Member

    0
    Feb 21, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    I forgot to mention that two of the comps were about three years old. If you think that a time adjustment is necessary, again you need to explain and cite your evidence that it is appropriate.
     
  5. Steve Owen

    Steve Owen Elite Member

    0
    Jan 16, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Missouri
    John, you didn't say who the lender was. It might make a difference. But, in general, you cannot use a listing as one of your main comparables... only closed sales. You can use a listing or pending sale as additional support.

    Forget about bracketing, 1 mile distance, etc. Fannie rules don't carry so much weight here.

    In general, use the best comparables you can find. If you must go a longer distance or cross neighborhood boundaries, then the basic question is "is it a comparable and competing neighborhood?" If so, explain it as such, and go for it. If not completely equal, then you may have to take a location adjustment.

    If you cannot find comps to bracket a feature, then you may have to make the adjustment based on past experience. Do you have the experience to do this? If not, seek help from a former mentor or even a good competitor.

    If you can't find comps within a reasonable distance, then it's okay to go back further in time... got a two-year old comp? Use it and adjust for market conditions (time) since the sale.

    One last thought... are you certain your property is marketable? That is a question you always have to ask when doing a property that doesn't seem to have any comps in its subdivision.
     
  6. Dennis J. Black ASA IFAS

    Dennis J. Black ASA IFAS Senior Member

    0
    Mar 5, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    Charlie Brown

    As Charlie Brown would say, "Good grief"
     
  7. Chris Colston

    Chris Colston Elite Member

    0
    Jul 24, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Where would a buyer look for another house like your subject if they couldn't buy the subject? That is where the comps come from.

    John, you don't say where are located or what your licensing level is. If you are a trainee, where is you mentor/supervisor? If you already beyond the trainee level perhaps your old mentor can assist you. This assignment sounds (based only on what you have presented here) that this assignment may be over your head.
     
  8. David Wimpelberg

    David Wimpelberg Moderator Staff Member Moderator

    129
    Mar 30, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    When we appraise these types of properties we place a great deal of emphasis on the location and how the subject and the sales relate to the other homes in their immediate area. A $1,000,000 +/- home that is at the top of its price range in its area should be compared to a $1,000,000 +/- sale at the top of its price range for its area. If the subject is at the top of its price range and the sales are at the bottom or middle of the price range for their area, other factors can come into play. There will probably be a location adjustment, but there can also be other issues with regard to marketing time, appeal, and the like.
     
  9. Mark K

    Mark K Senior Member

    42
    Jan 27, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    Indiana
    John,

    Don't take solace or refuge in the fact that the loan is 20/80. That's what they're telling you today but the good Doc may make it an 80/20 before the loan closes. I've seen it happen many times. You shouldn't be worried about an exact value but you should be very concerned about a reasonable and realistic value, one that you can defend.

    This sounds like a significant over-improvement with functional problems(typical for doctors) and should be valued as such. Last one I was involved in was a doc that spent close to $1M cash on new construction. When he financed it later, he found out it was worth about $500 to $600k, depending on which of the three appraisers you believe. Highest sale within 10 miles/2 years was $450K.

    And no, don't use listings. They mean NOTHING.
     
  10. Steve Owen

    Steve Owen Elite Member

    0
    Jan 16, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Missouri
    Well, they don;'t exactly mean nothing, Mark. They mean that is what someone wants to get for their property. Listings are often an excellent indicator of the top end of the probable range of value... that's why the relo companies like them so well.
     
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