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1 Comp In S/d

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Travis McGee

Senior Member
Joined
Sep 18, 2004
I have a FHA report with one dead on comp in the same S/D on the same street @ $213k within last 12 months. This is the only sale within S/D within 12 months sale date was 10/16/02 almost a year ago. Time adjustment? Comp#2 within 1 mile radius good comp @$237,900 04/15/03. Comp#3 okay $224k. My questions #1 The subject is similar to the [email protected], Iwould not personally want to pay more than 213k. Most lenders/investors do not want appraisals over the highest sale within the same S/D .At what point does the sales go up? You eventually have to go over that high sale and I know that as long as I support my value/opinion, I should be okay. But still I would not want to pay over 213k and I have had appraisals conditioned for the same reason and then the lender still would only loan on the high most similar sale within the same S/D. The contract price $229k my opinion 220k, I know there are other factors to consider, but I just wanted to get the forums opinion because this has happened a lot in the past. I have had other appraisers ask me the same questions. IF YOU OR NOT SUPPOSE TO GO OVER THE HIGH SALE OR WHEN YOU DO IT RAISES A RED FLAG; HOW DOES THE HIGH SALE BECOME THE HIGH SALE? I hope I made since or that you guys/girls understand this scenario/assignment.
 

Ghost Rider

Senior Member
Joined
Apr 27, 2003
Professional Status
Banking/Mortgage Industry
State
Connecticut
First, I would never let my opinion come into determining value......I have had MANY sales and refi's where I walked through the house, and said to myself "I'd only pay X amount" and in the process of doing my research, found MANY sales which supported a higher valuation.....Always interesting when that happens. As far as how the sales within a subdivision get higher, MANY appraisers might not give much weight to the one you are looking at which sold almost a full year ago. It is quite possible that in a subdivision without much sales activity, in a strong market, that homes may appreciate without it being readily observable. Same thing happens in condo complexes......There are a LOT of small complexes in my area which hadn't seen sales activity in the past 3 years, but during the boom in the beginning of this year, they were popping up on the market.....How do you determine value for these?? By looking at other comparable condos. It's the same thing with Single Families, at least it is for me.

As far as what the lender wants to do, they can always cop ANY appraisal down.....Just cause we appraise it for $200,000, they don't have to lend on that full amount if they don't want to, it is their money, and their rules.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Do you have any active listings in the subject's subdivision? If so, how do they compare to the subject and how long have they been on the market?

One of the common mistakes that I see appraisers make is that they only look at what has already sold to determine the direction that the market is going when indeed a change may have taken place since the comps were sold over six months ago. Looking at active sales is an important part of the market analysis that is frequently ignored.

Though I only use them as a last resort, sometimes those active listings can lend additional support as extra comps IF you need to back up your opinion that a contract price is excessively high or if the market area is showing signs of appreciation that are not easily detected because of the lack of recent sales.

I went through more than a few heated debates with local appraisers about this a couple of years ago. They were using high sales that were over six months old to justify high purchase and refi values when the active listings were indicating a distinct pattern of stabilization, a growing number of days on the market, growing inventories of available homes and that homeowners were motivated to make price concessions. End result was that many properties were over-valued, leaving the homeowners with little equity and in some cases unable to sell for what they owe on their mortgages.
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
I do consider the listings as well as the market trends, however at this point interest rates have increased and I personally believe they will continue climbing before they fall again. I feel confident with my opinion of value and I did leave out my personal opinion about not paying over 213k. I use the data to support my opinion and I think back to other assignments where I see that outside comp's were used due to the lack of sales within that S/D and the value seemed excessive after I do a history of sales within and try to figure out the appreciation within the S/D. The owner always says "It appraised for more last year or even two years ago."
Outside comp's become complicated at times due to the extra amenities, quality of construction, location...etc
Appraising is a science, art and a challenge at times. We all have been trained in similar ways but some time we can do the same assignment and come up with very different opinions, that somewhat bothers me. I guess as long as we stay within a reasonable rang it's okay. I will turn this report in today with my opinion of 220k. WOULD YOU IGNORE THE 213K SALE DUE TO SALE DATE 10/16/02 OR GIVE A LOT-LITTLE WEIGHT TO THIS COMP?
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Originally posted by ANTHONY ALLEN@Sep 2 2003, 08:24 AM
WOULD YOU IGNORE THE 213K SALE DUE TO SALE DATE 10/16/02 OR GIVE A LOT-LITTLE WEIGHT TO THIS COMP?
I would not ignore the sale if it's all that you have for that subdivision, but I would consider it to be borderline obsolete in determining the market trend.

So...did you have any active listings?
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
DEE DEE,

Active listings yes $224,900 & 226,900 these are the only two which do not make since to me. $226,900 on slab and $224,900 with basement. What do you get out of this except confusion? :eyecrazy: :eyecrazy:
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Active listings yes $224,900 & 226,900 these are the only two which do not make since to me. $226,900 on slab and $224,900 with basement. What do you get out of this except confusion?

To me you have to consider the active listings as well. Although the sale from 10/02 is the last sale in the SD you also have to consider that. I asume that you thourghly checked into that one as well. Talked to the seller/buyer/listing agent/selling agent. You could also consider on your comps that you currently have consider looking at sales from 10/02 in their SD's to see prices then. This may give you a market indication of increasing/decreasing market trends. Consider also the current P&S aggrement. Although this may simply be someone trying to push the upper end of the market and an agent with a non knowlegable buyer how long was it on the market how long have the listings been on the market? These are things to consider. Ultimately if you only belive from your report that the house is worth $220K then send it in at that price. Prepare for the calls and insure that you have looked at it from all angles and directions. It is your neck on the line not anyone else. I would also include several listings in the area as well including the two in the SD. As well as several that are similar to the subject. Not a 3 comp report. With any purchase I include at least 1-2 active listings even if it is at or above the listing price. Below the listing price I include alot more and have even gone at times to 7 comps with 3 active comps. Just to prove the market reaction and value.
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
Ryan,
Thanks, just about every other comp has a basement that I could find, I usually use at least 4-comps. Listings I look at to help form my opinion during my analysis, but rarely put them into the report unless they are all I have. I am prepared for the fuss from the lender and sales agent explaining/yelling :angry: about how I am incompetent and I do not know what I am doing because I did NOT hit the # sales price, that's the way it goes and it is not the first time and I am positive it will not be the last. If I get rid of the comp within the S/D then the contract price may be possible, but at that point I feel like I would be attempting to support the agents estimate of value even though this is a arms length transaction. I may dig a little deeper before I actually turn the report in I have a little time, waiting on the PUD approval list from the lender which buys me time. Thanks Again!!
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
Nothing in USPAP says you have to stay within subdivison- it says within a mile. True, often the most similar comps are in the subdivsion, and I try to use them when I can. But when the only subdivision sale is over a year old, it might not be comparable anymore.

I sold real estate for 5 years before going into appraisal. I rarely had a buyer say, "I want to live in X subdivision." Insteaad, they say "I want a 3 bedroom ranch, with a pool, , no more than a half hour from my job, where my kids can go to X school etc," and the realtor shows them homes in the general area. At times we get fixated on subdivisions in an artificial way.

I am not a number hitter by any means, but we have to keep in mind that it is as much a derelection of duty to under appraise a home as to over appraise it. Final note- in an iffy situation, I look at active and pending listings, marketing times etc. Fear of interest rates rising, which may or may not happen, is a scary reason to make a value on. What if you are wrong and they go down? Just my thoughts.
 

Stone

Elite Member
Joined
Feb 1, 2002
Professional Status
Certified General Appraiser
State
Wisconsin
Where in USPAP does it say to stay within a mile?
 
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