Closed Sale After My Inspection Date

[jay trotta]

Inspected a property 06/19 used a closed sale of 06/21. I stated the sale as closed and not pending as it was on inspection date...how would you report the comparable and why?

It Appears the Effective date is; 06/19 and the Signature date is 06/21 and a review of market data took place prior to signature.
1) Definitely a good reason to review Closed data before shipping
2) Notes great support reasoning for 3-5 business day Turn Times and sound reasoning for an appraiser to perform their due diligence reasonably.
As noted within the replies, if used as a comp., I would support the disclosure aspect of it "Pending" to Closing and it's similarity(s) to the subject.

Good Luck

 

[J Grant]

For Mich CG:
http://legal-dictionary.thefreedictionary.com/fraud

Making a new false representation effective date based on a later drive by rather than original inspection date would seem to fit all the categories of fraud...whether a client or user would pursue it as that or as misleading a USPAP violation I cant' say, but why would you recommend an appraiser do that? Why risk it just to make it seem like the eff date took place after a pending sale closed. Either schedule a new date and re inspect interior, or use it as a pending or a closed (not my recommendation but I understand it), and if use it as a closed then comment the date it closed on .

I doubt inclusion of a sale as closed that actually closed after eff date would be construed as fraud, though a client could claim it is misleading. I use these as a pending and comment it closed for X $ before signature date and thus was used as part of support for the market value reconciliation.

 

[Mark K]

In almost any other type of real property appraisal work, a transaction that was pending prior to the effective date and closed 2-days after the effective date would be considered a very good comparable and a very timely indicator of the market.

I would and have used such a transaction for residential mortgage finance appraisasls. I simply explain what the circumstances were and what relevance (usually, a high relevance) I gave it in my analysis. Personally, I don't think it matters if it is identified as "pending" or "sold" in the grid. What matters (IMO) is how it is considered in the analysis. So I'd say either way is fine (pending or closed sale) as long as the timeline is disclosed.

There you go again, Denis, using common sense and, after reading some replies, proving once again that common sense isn't all that common.

I'd use it as a closed sale without a second thought. It was a closed sale as of the date of the report, the date you signed it. Note it in the comments and move along.

 

[J Grant]

http://www.freddiemac.com/learn/pdfs/uw/apr_reminders.pdf

I finally found one "official" reference...read down to the Sales Comparison Approach, line 5: they state at least three comparable sales must have closed before the effective date.

Would follow if a sale closed after effective date before signature date on the grid as a closed comp, would have to be a fourth comp...if one chooses to do that.

Whether Fannie has same guidelines might take time to find out but the entities tend to have similar guidelines .

 

[BRCJR]

I think that's a good option, too!

....and be sure to discuss the interior condition on that "new" date....the water heater leaked while the owners were at work the day after your "full" inspection/viewing and warped the hardwood floors.......it also saturated the finished basement ceiling........why set yourself up for the, most likely not going to happen, liability if something did happen?

I see no reason to "fudge" anything ever. Tell it like it is. Anything other than telling (reporting) it like it is when you observe the property is misleading, in my opinion.

Use the comp as a pending, disclose the chronological order of things, and allow that comp to support your opinion of value.

 

[J Grant]

https://www.appraisalinstitute.org/assets/1/7/MarketConditionsAddendum.pdf

Found another one...this time Fannie Mae a few pages down guidelines for declining markets, appraiser must use at least two comparable sales that closed PRIOR to the effective date...clearly they want sales that closed prior to the eff date as "closed"...

For non lender work / private work might be more of a gray area, though personally I still read as of effective date as the effective valuation date (no matter the client)

 

[Deleted member 134708]

https://www.appraisalinstitute.org/assets/1/7/MarketConditionsAddendum.pdf

Found another one...this time Fannie Mae a fee pages down declining markets, appraiser must use at least two comparable sales that closed PRIOR to the effective date...clearly they want sales that closed prior to the eff date, not after to be called "closed"...

Good find. That's for declining markets only. They also say, if not possible, explain.

So looks like can do 3 closed sales after effective date if have explanation. (FNMA)

"Appraisals of properties located in declining markets must include at least two comparable sales that closed within 90 days prior to the effective date of the appraisal.

In some markets compliance with this requirement may be difficult or not possible due to the lack of market data and, in these cases, a detailed explanation is required."

 

[J Grant]

Good find. That's for declining markets only. They also say, if not possible, explain.

So looks like can do 3 closed sales after effective date if have explanation.

Yes, it is for declining markets only, which does not mean anything other than it is reference I could find in a 10 minute internet search..

The fact that they state prior to effective date, and Freddie link pasted on post # 42...

general ( not just declining market) guideline of at least 3 comps that closed before the effective date means they differentiate the effective date as a closed sale cut off point...if anyone has unlimited time to search every Fannie or FHA manual or guidebook to find other references...I 'd guess they did not came out with a major appraisal policy announcement on the topic because they assume appraisers understand that the effective date means what it says...

 

[Deleted member 134708]

Everything I'm reading (not my feelings, spirit, others opinions etc) is all about what was the subject like physically and its market conditions on x date and come to a value conclusion for that date of the subject by using the best comps available that represent it.

If your signature date is 1 month forward of your eff date, you have 12+ months to go back in time and 1 month forward in time. If those comps need market conditions adjusted for, apply.

That's it.

It seems this comps before effective date is a phallacy past down by generation after generation. I myself fell victim to this. I never thought about it until this thread or asked the question to myself.

 

[Pittsburgh Pete]

Stop with the common sense, you could be committing FRAUD, you could lose your license, heck you might even end up in JAIL!!!!!!!!!!!!!

JGrant referenced a "complaint" of fraud. She never indicated that she thought it was fraudulent. Get off your high horse and learn to read.