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  #1  
Old 02-28-2006, 10:41 AM
Alison Swain Alison Swain is offline
 
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Default Comparable Distance from Subject

Have I somehow missed a directive that all comparables must be within a one mile radius of the subject, regardless of subject's lot size, GLA, quality and additional features?

I appraise in Central Florida where there are pockets of new, old, custom built, tract, tiny, humongous --- whatever --- all overlapping one another. I've got one particular lender who's underwriter is insistent that all comps must be within one mile of subject. In anticipation of this jerk, I wrote extensively in my most recent appraisal for them why it was necessary to extend my search area. The stipulations I got back (the only ones, by the way) sounded as if a) they never read the addendum, or b) they have no reading comprehension of what was explained.

Obviously, if I can find truly comparable homes within one mile, those are what I'll use, but I was trained that the market area was the radius in which typical buyers would search for a home similar to the subject. The one mile rule is simply an arbitrary figure made up by underwriters who can't think outside the box.

Am I all wet on this?
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Old 02-28-2006, 10:48 AM
Rudy Canoza's Avatar
Rudy Canoza Rudy Canoza is offline
 
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I usually quote Fannie Mae Guidelines in my addenda:

Quote:
XI, 406.02: Selection of Comparable Sales (06/30/02)

We require an appraiser to research, analyze, and consider influences that may affect value based on market evidence (such as closed sales, contract sales, and properties for sale in the market area; market studies; etc.). For example, if a property is located in a neighborhood that includes (or is close to) an airport or hazardous waste site or that has relatively high property taxes or vacant or boarded-up properties, we expect the appraiser to research, analyze and use comparable sales from the same neighborhood or affected area (whenever possible) in his or her analysis. This will ensure that any effect of these value-influencing characteristics is taken into consideration in the development of the opinion of value for the property.

If a property is located in an area in which there is a shortage of truly comparable sales—either because of the nature of the property improvements or the relatively low number of sales transactions in the neighborhood—the appraiser might need to use as comparable sales properties that are not truly comparable to the subject property or properties that are located in competing neighborhoods. In some situations, sales of properties that are not truly comparable or sales of properties that are located in competing neighborhoods may simply be the best comparables available and the most appropriate for the appraiser's analysis. The use of such comparables is acceptable as long as the appraiser adequately documents his or her analysis and explains why these comparable sales were used (including a discussion of how a competing neighborhood is comparable to the subject neighborhood).

The appraiser must report a minimum of three comparable sales as part of the sales comparison approach to value. The appraiser may submit more than three comparable sales to support his or her opinion of market value, as long as at least three are actual settled or closed sales. Generally, the appraiser should use comparable sales that have been settled or closed within the last 12 months. However, the appraiser may use older comparable sales if he or she believes that it is appropriate, and selects comparable sales that are the best indicators of value for the subject property. The appraiser must comment on the reasons for using any comparable sales that are more than six months old. For example, if the subject property is located in a rural area that has minimal sales activity, the appraiser may not be able to locate three truly comparable sales that sold in the last 12 months. In this case, the appraiser may use older comparable sales as long as he or she explains why they are being used.

The appraiser may use the subject property as a fourth comparable sale or as supporting data if the property previously was sold (and closed or settled). If the appraiser believes that it is appropriate, he or she also may use contract offerings and current listings as supporting data. However, in no instance may the appraiser create comparable sales by combining vacant land sales with the contract purchase price of a home (although this type of information may be included as additional supporting documentation).

For properties that are in established subdivisions or for units in established condominium or PUD projects that have resale activity, the appraiser should use comparable sales from within the same subdivision or project as the subject property if there are any available. Resale activity from within the subdivision or project should be the best indicator of value for properties in that subdivision or project. If the appraiser uses sales of comparable properties that are located outside of the subject neighborhood, he or she must include an explanation with the analysis.

For properties in new subdivisions or for units in new (or recently converted) condominium or PUD projects, the appraiser must compare the subject property to other properties in its general market area as well as to properties within the subject subdivision or project. This comparison should help demonstrate market acceptance of new developments and the properties within them. Generally, the appraiser should select one comparable sale from the subject subdivision or project and one comparable sale from outside the subject subdivision or project. The third comparable sale can be from inside or outside of the subject subdivision or project, as long as the appraiser considers it to be a good indicator of value for the subject property. In selecting the comparables, the appraiser should keep in mind that sales or resales from within the subject subdivision or project are preferable to sales from outside the subdivision or project as long as the developer or builder of the subject property is not involved in the transactions.

Because rural properties often have large lot sizes and rural locations can be relatively undeveloped, there may be a shortage (or absence) of recent truly comparable sales in the immediate vicinity of a subject property that is in a rural location. This means that the appraiser often will need to select comparable sales that are located a considerable distance from the subject property. In such cases, the appraiser must use his or her knowledge of the area and apply good judgment in selecting comparable sales that are the best indicators of value for the subject property. The appraiser should include an explanation of why the particular comparables were selected in his or her analysis.
Then I ask the undertaker to provide the comparable sales within 1-mile of the subject property that (s)he would like me to consider.

/Thank you...please drive through...
  #3  
Old 02-28-2006, 01:49 PM
Craig Roberts's Avatar
Craig Roberts Craig Roberts is offline
 
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State: North Carolina
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Is your subject located in a rural area or a suburban area?
  #4  
Old 02-28-2006, 02:06 PM
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Pamela Crowley (Florida) Pamela Crowley (Florida) is offline
 
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The main thing to know and understand is that USPAP has nothing to say about the distance of the comps used.

Fannie, etc., have 'guidelines'. Guidelines are not mandatory, but when exceeded, should include an explanation.

It really doesn't matter whether it's Urban, Suburban, or Rural. The best comps are the best comps and no client can dictate to use sales that are not the best just because they want the appraisal to be within 'guidelines'. That would be demanding appraisers violate USPAP, and appraisers cannot legally do that no matter what the client wants.

* USPAP come FIRST!!!
* "Guidelines" can and are exceeded often, if they are Fannie's, Freddie's, VA's, FHA's, etc., then the appraiser only needs to explain why there were exceeded, but CANNOT let those guidelines get in the way of USPAP.
* Any other client 'wants', if legal, can be considered, BUT CANNOT cause USPAP violations.

If the client can't understand that, then the appraiser needs to decline the assignment. Appraisal clients CANNOT enforce any 'guidelines' that would cause a USPAP violation. Period.
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  #5  
Old 02-28-2006, 03:23 PM
Alison Swain Alison Swain is offline
 
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Thanks, gang. All comments are very welcome and helpful.
  #6  
Old 02-28-2006, 03:24 PM
leelansford leelansford is offline
 
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"Explain, explain, explain..."

I have no idea as to whether or not what follows here applies to your specific situation...but...I find that the biggest problem that appraisers face in their communication of appraisals is their inability to properly communicate (in the appraisal report) the complexity of the assignment and the extent that the appraiser went to find appropriate substitute properties as sales comparisons.
The result: The client is left wondering exactly why the comps are as they are.
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Last edited by leelansford : 03-01-2006 at 12:47 AM.
  #7  
Old 02-28-2006, 03:32 PM
Tim Hicks (Texas)'s Avatar
Tim Hicks (Texas) Tim Hicks (Texas) is offline
 
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Default

Quote:
Originally Posted by Alison Swain
Have I somehow missed a directive that all comparables must be within a one mile radius of the subject, regardless of subject's lot size, GLA, quality and additional features?

I appraise in Central Florida where there are pockets of new, old, custom built, tract, tiny, humongous --- whatever --- all overlapping one another. I've got one particular lender who's underwriter is insistent that all comps must be within one mile of subject. In anticipation of this jerk, I wrote extensively in my most recent appraisal for them why it was necessary to extend my search area. The stipulations I got back (the only ones, by the way) sounded as if a) they never read the addendum, or b) they have no reading comprehension of what was explained.

Obviously, if I can find truly comparable homes within one mile, those are what I'll use, but I was trained that the market area was the radius in which typical buyers would search for a home similar to the subject. The one mile rule is simply an arbitrary figure made up by underwriters who can't think outside the box.

Am I all wet on this?
There is nothing wrong with this as long as you are not avoiding sales in the neighborhood to a achieve a value. Make absolutely sure that there are not more similar sales closer to the subject property. A subject's neighborhood is its neighborhood and should be considered a factor.
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  #8  
Old 02-28-2006, 03:36 PM
Fred Fred is offline
 
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Pam,
It’s Uspap comes in first and maybe the guidelines don’t come in at all – if Fannie is not identified as an intended user.
  #9  
Old 02-28-2006, 04:10 PM
Timothy Wixted's Avatar
Timothy Wixted Timothy Wixted is offline
 
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Alison,

You could give them what they want. Just state prominately that the additional sales cited are not truly comparable, supplied only at the request of the underwriter and ZERO weight is placed on them.

You could also charge them $100 per extra comp, payable in advance.

Tim
  #10  
Old 02-28-2006, 05:56 PM
David Wimpelberg's Avatar
David Wimpelberg David Wimpelberg is offline
 
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Quote:
Originally Posted by Steven Santora
Pam,
It’s Uspap comes in first and maybe the guidelines don’t come in at all – if Fannie is not identified as an intended user.
Wouldn't it be a reasonable assumption that anything done on a Fannie form has Fannie as an intended user?
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