When lender ask for additional comparables?

[Roy Courtney]

Mr. Appraiser,
We would like to hire you to prepare an appraisal of zzz Elm Street. We are very familiar with your credentials and you come highly recommended. Please note that we require all comparable sales be within one mile of zzz Elm Street. We do not want any sales that occurred over 3 days ago. All sales must have been financed using conventional loans without any seller concessions. All sales must be within 1 year of age compared to zzz Elm Street. We do not want any of the comparable sales to be over 10 sq. ft. larger or smaller than zzz Elm Street. This report should have at least six comparable sales and three competitive listings. Photos are required of all rooms, front, rear, foundation and attic views. Also a photo is required showing the lights burning in the home as well as the toilet flushing. Please put your head in the toilet while flushing so that the photo will document you were there and the plumbing was functional. A copy of all M.L.S. sheets are required for all listings and sales. Please provide a copy of your E&O insurance as well as your certification. Be advised that we pay promptly for all appraisals at the beginning of the new six-month cycle. Also, we are trying to place this assignment at a fee of $25.00. Please log on to our website and fill out our 75 page application. We will need your credit report, drivers license, auto insurance, life insurance, medical insurance, copy of birth certificate and will. Do not forget to send the $150.00 fee for the background check. We look forward to giving you hell upon acceptance of one of our assignments!:icon_mrgreen:

 

[hastalavista]

We are in a service business ... when clients have questions those questions should be answered. Can it get rediculous ... yes ... but then again when so many take the position its their value or the highway I believe lenders should choose the highway and select another appraiser.

Ditto.

And, I think lenders are going to start selecting other appraisers. I'm not saying they will be looking for appraisers who just roll-over. I'm saying they are looking for appraisers who will address their concerns.

OP: the request you received may be reasonable or unreasonable. Regardless, if you, I, or the appraiser next door are going to work with clients who have questions- sometimes reasonable, sometimes unreasonable- we, as professionals should recognize this going-into the agreement and be prepared to address the questions when they occur.

An initial request for an additional comparable that supports the value is not unreasonable.
We may not be able to satisfy the request, and if so, we need to communicate that to the client with the appropriate support for our position.
Past that, it is a client/lender decision on what to do next.
But what I think is a mistake is to summarily say "no" with the implication that the lender can go pound sand. It is a mistake because if we choose that option, who could blame the lender for moving on to another appraiser who will at least address the issue?

My 2-cents. :new_smile-l:

 

[OminousRun]

I am providing an additional comp for a lender on a VA loan. The appraisal was prepared per USPAP and VA guidelines. However this lender has an investor that ("wants, demands, etc.) an additional comp. NO PROBLEM, one more comp = $100.00. more. I can do that all day and it does not hurt my feelings! When it is MY report, I determine how many comps to use. (Why are you is such a hurry to determine that there is a flaw in your work product?) Just curious.

I'm not going to go into details, but appraisal methodologies are not in line with mathematical and statistical analysis. The flaws in appraisal methodologies leave the window open for significant variance in each report. Too much variance leads to poor results. Allowing appraisers to manipulate data (aka making adjustments to comparable sales), may also increase the variability in results.

So yes, every appraisal report you have ever completed most likely has flaws.

I'm not throwing the appraisal profession under the bus, I just know it is not a perfect profession.

I can make an argument that anything under 30 comps is not enough.

Did I say 30 comps?

Yes, 30 comps.

Do you use 30 comps in every report you complete?

 

[Greg Graybadger]

KJR2008, in answer to your question, I believe that the recent sale of the subject can provide good evidence of market value if the conditions surrounding the sale are truly representative of typical market activity. However, you should realize that clients often view sales of the subject as not being independent support, and they may rely more on your other comparables. I imagine that the reason Webbed was asking how many sales you used was to get an impression of how much support you provided. Typically, three comps with one of them being your subject is NOT acceptable. If you did not provide sufficient support for your opinion, the client's request for more data is reasonable and should be provided at no additional fee. (I would still explain to them the difference between requesting more data and requesting "support" for a pre-determined value. The latter is an unacceptable request.) If you did provide sufficient support, you should explain that any additional comps will be less similar, less recent and/or less proximate, and will not contribute greater reliability to your conclusion. However, you could provide such data for an additional fee (your business decision: waive it if you wish). Good luck.

 

[Webbed Feet]

I somebody calls asking for an extra comp to support the appraised value you provided them, it probably means there is a flaw in your report.

That's quite the EA you are using there. Be sure and include your opinion may not be valid if the EA is later found to be untrue....

<.....snip.....>Who determines how many comps is enough? That is open for debate.

Yes, and that debate, regarding any minimum number of comps to be used, should take place at the time of engagement and the matter settled in an engagement contract prior to the start of any services by an appraiser.

If an appraiser feels going beyond the contracted minimum is called for in order to comply with USPAP, then the appraiser is certainly free to do so. But our trade should be placing the brakes on all of these after-the-fact and uncontracted for demands.

 

[Webbed Feet]

<.....snip.....>
I can make an argument that anything under 30 comps is not enough.

Did I say 30 comps?

Yes, 30 comps.

Do you use 30 comps in every report you complete?

Sounds as if you've been CompSmashing too much. I don't know about you, but I typically start out with anywhere from fifty to four hundred comps in every report I complete. And have for years.

Try and morph a lack of setting clear engagement contract parameters with clients into a theory of all appraisal methodolgy is flawed if you want, it doesn't change the current environment for appraisal services being completely disingenious from the very get go the majority of the time. The reality is some very large percentage of resldential ordering attempts start out based solely on turn time and fee. If those two things are not, relatively, fast and cheap, no inquiry or conversation about quality or minimium agreed standards for any engagement contract ever takes place.

The fact our O.P., as noted by Bother Graybadger, has not posted back the total number of comps that were originally used is beginning to speak volumes regarding the situation. The O.P. asking us if a prior subject sale cannot be given primary consideration now ends up a smoke screen as far as the real problem causing the request for more comps. It all becomes a matter of asking the wrong question(s) while not supplying the truth about what was really done. When looked at in the way it very well may have gone down that caused the situation in the first place for the O.P., taking a stance that all clients and underwriters have some sort of devine right to demand more "comps" whenever they feel like it simply doesn't address this thread at all.

Yes, doing a poor job at so much as meeting USPAP minimums ends up with underwriting stips. The rest of us cannot help that many appraisers do a poor job. Unfortunately, doing a great job at going way beyond USPAP minimums, while meeting engagement contract requirements as well, seems to also result all too often in underwriting stips that are nothing more than additional assignment conditions not disclosed at the time of engagement. The appraisal trade needs to recognize and respond to this later case with polite refusal, not open armed lubbing of it's back side.

I don't pay the price for users of appraisal services hiring inadequate services because they focused solely on fast and cheap in the hiring process, or allowed that to be done on their behalf that way. They pay the price of that. ..... And I will not be treated the way they treat all the other appraisers that they hire that way.

 

[hastalavista]

If an appraiser feels going beyond the contracted minimum is called for in order to comply with USPAP, then the appraiser is certainly free to do so. But our trade should be placing the brakes on all of these after-the-fact and uncontracted for demands.

The term "uncontracted" is interesting. I agree with you 100% that unwarranted/unreasonable demands should be declined. But I think a large part of the problem is that many of us (myself included) tend to look at things from a very narrow perspective. That may work in the situation where we are not reliant on maintaining a positive customer-service relationship with our clients. But that is not the case. And when I say customer service, I'm not talking about bending-over or violating USPAP. I'm talking about assisting the client when we can.

Case in point: Rebuild letter for legal, non-conforming properties.
Now, I have a nice statement I put into all my reports regarding that providing a rebuild letter is beyond the scope of the assignment, and at best, I can cut/past into the report what the ordinance says- and I make a comment that I'm not interpreting the code one-way or another, I'm just providing it as information for my client to consider.
I get a call from the UW (yes, it was the UW) of one of my biggest clients. Can you state if the subject can be rebuilt she asks. I professionally say no, point out the statement in the report she has, and suggest if she really needs it, she should contact the jurisdiction for a letter. She says, "ok, let me see what I can do."
She calls me back later and says she's really in a bind. She discussed it with her UW boss, and they both understand the situation. In fact, she says, she runs into this problem in San Francisco a lot. Is there anyway I (she asks) can do some research and forward her some additional information that they can reference and use to make their lending decision? I tell her I'll look into it.
I spent about 3-hours researching the zoning ordinance, putting together a document that cites (what I thought) were the relevant codes, put all the links to the web site that I thought were meaningful, and sent it off to her.

Her boss calls me back, sincerely thanks me, and tells me they'll use this in the future when they run across the issue. I have not had any more requests from this client on that issue.

Ditto, same client and the cost approach. A while ago, the cost approach was requested based on the UW, not a policy. I was called and asked for one and explained why I thought it was irrelevant. I was transferred to the big cheese who oversees the entire UW department. He is not an appraiser, but knows appraising better than most, and teaches courses on the subject. We talk and I explain my position. He agrees with me. He sets a policy that unless it is new construction or a very unusual circumstance, the cost approach-decision is up to the appraiser. This is a national lender (one of the top 10).

I'm not blowing my own horn. What I am saying is that customer service may not be part of USPAP but it is part of common-sense business practices. And I say when a client makes a request that, we might not agree with, we should stop and look at it from their perspective and ask ourselves if assisting the client can improve upon the process and the relationship.

About half the posts I read on this forum regarding a client-request should (IMNSHO) be addressed as part of good business practices. The other 50% should be declined based on good USPAP practices or business practices.

Of course, if one wants to build his/her business model around the concept that the only thing he/she does is provide an appraisal report and the service-requirement starts and ends there, that is their choice. Just don't complain when the clients migrate to others that want to maintain a good appraiser-client business relationship while maintaining USPAP standards.

(WF- my comments are not directed at you. Your post did trigger my line of thought and that's why I quoted it. Unreasonable demands, no dice. I just believe some of us should try to understand the issue from our client's perspective and, if we did, some of the unreasonable requests would not be so unreasonable... but perhaps still a PIA :new_smile-l

 

[CANative]

The very few times I've been asked for another comp I state that of all the reasonably similar properties to choose from I presented those that required fewest adjustments because this would logically mean the most similarity to the subject and thus the best and strongest indicators of market value. I explain that choosing additional sales would not provide better or stronger indications because they would need higher adjustments indicating a lack of similarity.

This has always placated the underwriter or AMC fool.

 

[Webbed Feet]

<.....snip....>
(WF- my comments are not directed at you. Your post did trigger my line of thought and that's why I quoted it. Unreasonable demands, no dice. I just believe some of us should try to understand the issue from our client's perspective and, if we did, some of the unreasonable requests would not be so unreasonable... but perhaps still a PIA :new_smile-l

Unless I was referring to braille it was poor grammar anyway. Regardless, requests for explanations or assistance with comprehension are not requests for additional assignment conditions. I think implying that those of us that wish to see a defined end to the services contracted for are saying we are unwilling to provide customer service is reading words into our mouths we never said. I don't believe we need examples of what customer service is either.

Why don't we start a thread of examples of many hours of intense "customer service" in an attempt to respond to customer "concerns" and to promote understanding and comprehension that simply resulted in no more orders regardless of the effort made? I am sure the forum posters could fill that thread up with a few hundred pages of examples for us. I would venture to guess the thread would outstrip your successful examples of "customer service" by at least five to one. I could be wrong, who knows?



But if it were a money bet, I know what side of the bet I'd lay my money on.....

 

[DMZwerg]

I can make an argument that anything under 30 comps is not enough.

Did I say 30 comps?

Yes, 30 comps.

Do you use 30 comps in every report you complete?

Yes! :icon_twisted:

I examine solds and active listings reducing each from over 70 down to the 15-20 most comparable per search (and often doing multiple searches) using what I know about the subject to reduce the over 70 down to 15-20. I then use the data on the 15-20 from each search to reduce it down to the most comparable 6-12. I type in those 6-12 and weed out even further until I have what I feel I need. So, I have "used" 15-70 per search and thus I believe I hit your statement requirement.

You mention 30 due to statistical significance. That is fine, but remember that 30 would be expected to include the extremes, extremes we appraisers weed out as "not comparable". When doing a statistical analysis (such as a 1004mc) we may need those 30 to lend significance, but for the report we have continually excluded the less comparable and thus 30 is no longer the significant number. There is a reason "3+" is the "standard" for a typical (non-complex) property. :icon_mrgreen: