acceptable ages of comps

[brentosa]

Question. I would like some appraisers opinion on acceptable age of comps when completing a FNMA 1004 appraisal.

I received one yesterday that used comps that were 12 and 23 months old(gave no adjustment for date of sales) and was told he used them because they were on the same street. Comp 3 was 8 miles away.

Subject property is one of the larger sized homes in a subdivision with low turnover. Realtor provided 4 comps that she used to support purchase price to the appraiser that have sold in the last 6 months. Comps were outside of the subdivision but less than 3 miles from subject.

Long story short. Property was listed at 575K with contract of 550K yet opinion of value came in at 513K.

 

[Dontbethatguy]

Realtor + Sale = Commission
Appraiser + Sale = $0
I dont know your market, but around here 3 miles in a similar ( appearance ) neighborhood, could mean $100,000, where as it could be possible to go further and find sales of more realistic comparables. To me historic sales when there is a lack of activity may be excellent indicators of value. Since it appears that your upset over the opinion of value being lower than your expectations, keep in mind that a time adjustment most likely would not have helped your cause, and with a lack of sales would not necessarily be warranted. If your not satisfied order another appraisal and dont go into it kicking, screaming, and pointing fingers about the last appraisal. Dont mention value at all and see where the second appraisal is reconciled. Im sure your bound to be able to find a reliable appraiser on this forum in your area.

 

[Metamorphic]

I've used very old sales because they were other wise excellent comps for a difficult to match property. I've also used properties 8 or more miles away. High end properties, unique properties, properties on acreage can all require pushing the definition of "subject's neighborhood" to an extreme level. But I think doing competent work requires that you discuss in the report your rationale for using non-typical comps, and specifically what effort you've made to adjust for the non-typical attribute of the comp. Have you read the report in its totality? One of appraiser's pet-peeves is when people pick up the phone and start asking questions before they've read the report, because the answer is in the report.

In my area, there are some high-end markets that have been more flat than balloon/crash (the key to this seems to be very top of the market, prices beyond where real estate investors/flipers/etc play, lots of retirement money, not much wage/high risk investment money in the market, low turnover, not the kind of owners that have to move/sell for work or family circumstances, etc). It may be that the market you're in has not seen much depreciation. It may be that depreciation has occurred, but there's not enough activity in the market to effectively document the change. It may also be that that the current market is at the same level it was when the sales occurred, but that there was a peak or valley in prices in between. In any case its something a good appraiser would discuss somewhere in the report.

Without all the details, its impossible to say whether the Realtor supplied comps are better than the one's the appraiser chose.

 

[Walter Kirk]

The age and location of the comps used should reflect the judgement of the appraiser. Hard and fast rules can force unrealistic results. For example the failure to use an 8 month comp located next to the subject because it's over six months old. The failure to use a recent sale of a house that is the same model as the subject, built by the same builder in a competing subdivision because it is located two miles from the subject in the same town.

 

[Mztk1]

Location, location, location. I'd look for some support in the appraisal that shows market conditions have been stable over the span of time from date of sale to effective date, but finding the market reaction to the location is the most important factor you must control.

I also hope the appraiser used more than 3 comps when two are that dated.

 

[Marcia Langley]

brentosa,

Appraisers have to reconcile many factors and the date of sale and proximity to the subject are two of the important ones.

A good appraisal will include a discussion of why the comps used were the best available. It may also include a discussion of sales that may have been closer or more recent but not comparable to the subject.

If your appraisal does not contain any of this reasoning then you won't be able to follow his logic.

The information you posted is really not enough for us in this forum to answer your questions.

If this appraisal was done for a lender one would expect it to include the logic. And that should include a discussion of why the dated sales were not adjusted for market conditions (time). It is always possible that the logic is already contained in the report.

Also, if you market is declining, any adjustment for market conditions (time) would make the opinion of value lower, not higher. If you expectations are for a higher appraisal you may be working against yourself.

Also, if the three sales you mentioned were not the first three in the report, they may have been added for extra information only.

In general, if a consumer is not happy with an appraisal they can supply the lender with other sales (like the ones the sales agent showed you) and ask that they be considered by the appraiser.

If it turns out that they are better comps, the bank and their appraiser might reconsider. It's not impossible that a mistake could have been made.

However, don't get your hopes up. It is almost always true that sales agents will tend toward higher priced sales as comps even when they are not the most comparable. Appraisers have to use the most comparable.

 

[Mike Kennedy]

Subject property is one of the larger sized homes in a subdivision with low turnover. Realtor provided 4 comps that she used to support purchase price to the appraiser that have sold in the last 6 months. Comps were outside of the subdivision but less than 3 miles from subject.

Long story short. Property was listed at 575K with contract of 550K yet opinion of value came in at 513K.

Realtor apparently skewed the field of "comps" to promote then hit the bullseye.

Realtor should have utilized the most recent sales IN THE SUBJECT'S subdivision ...........AS WELL as the most similar competing sales; the Realtor should have also analyzed any recent listings, contracts, withdrawn/expired listings IN the subject's subvision. Realtor should have addressed the reasons for "LOW TURNOVER"....

Realtor is an Advocate for the Seller.

Appraiser is prohibited from that role - and rightly so.

Contract Price reflects ONLY the motivations of a particular seller and a particular buyer - not the market.

Often - Realtors INTENTIONALLY go outside subjects' subdivisions when doing a Listing CMA.......with a predominant focus on ACTIVE LISTINGS ....and lack any downward adjustments for List to Sell and /or specific competitive dated CLOSED SALES in subjects' immediate neighborhood...........

then the spaghetti on the wall is exposed to reality.

The Appraiser most likely should have also utilized ALL of the available market data above.

"it is what AND WHERE it is".

 

[The Warrior Monk]

It's difficult to answer the question specifically without knowing your market.

Generally, I would do the following in a market with limited data:

1. Analyze all sales, listings, and pending sales in the subdivision with some time frame (depends on the amount of data in the subdivision);
2. Analyze activity in other competing locations.

In these types of appraisals, it's not "examine one of these and two of those." If the data is limited examine all available information and a pattern should emerge.

 

[toddmallard]

Older Comps

12 and 23 month old comps, with no adjustments? This sounds like my old supervisor. Do you mean that the values in your area has not declined or appreciated in the past 12 to 23 months?. I really don't think so. If the appraiser did a thorought market analysis of the area and adjusted those older comps accordingly, Than those comps would reflect the proper adjusted sales price. Were there or are there any active or pending sales in the sub-division for the appraiser to use?. With proper market information these too can give a true estimated market value. Was this appraiser issued the order from the lending bank? The value that the appraiser came in could very well be the true value. I would be more worried about an appraiser who hit the number in a market that you knew was declining.