Comp Removal Per Client - USPAP Violation

[Mike Ault]

I always liked the "you get to choose the subject, I get to choose the comparables" theory of appraisal practice. Sounds like something Santora might have posted long ago, but I can't recall now.

 

[shrubberyvaluation]

You might be surprised at how bad some appraisals are. No lender that I've ever been associated wants to take the time to submit stuff to the state. Lenders do, however, have mandatory reporting requirements.

I've seen some pretty bad ones. When I see a lot of fluff I expect its probably going to be bad. One I saw the agent gave to me that was done for a pre-listing. Subject about 1,000 SF GLA, all of the "comps" selected were between 2,000-2,500 SF GLA and adjusted at $20/SF. One comp was similar in GLA and of course the adjusted sales price was much lower than the "comps" at least double the size. Included a long CV 40+ years of experience bla bla.

I know decent comps were available including in the community since I appraised it less than a month after. I did use the one comp that was similar in GLA the other "appraiser" used because it was a great comp, but he lumped it in with a bunch of garbage, seemingly to inflate the appraised value.

Seems fraudulent to me, no way that appraisal was done in good faith to try to opine market value.

I've never been asked to remove a comp. I have been questioned before, a lot of the times it was quite a dissimilar comp that was used for bracketing and was given less weight. I only really use comps that settled over a year if there arn't great comps that settled within the past year or its like a model match next to the subject or something very similar.

 

[Tawfik Ahdab]

George, you don’t typically play devil’s advocate. So it surprises me that you insist the ball is in the intended users’ hands.

The appraisal is an intellectual product of the appraiser. Short of the comparable being made up, erroneously represented, or its inclusion in any other way misleading, I fail to see why the intended user should have such input into the appraisal process that the client would disallow a comparable utilized in the appraisal.

There is nothing to prevent the intended user to insist on the irrelevance of a comparable, and to form as low an opinion of the appraisal as he wishes, but for client/intended to insist on its removal in my mind crosses the red line of influence.

 

[djd09]

Age of the Comparable Sales​

Comparable sales that have closed within the last 12 months should be used in the appraisal; however, the best and most appropriate comparable sales may not always be the most recent sales. For example, it may be appropriate for the appraiser to use a nine month old sale with a time adjustment rather than a one month old sale that requires multiple adjustments. An older sale may be more appropriate in situations when market conditions have affected the availability of recent sales, and the changing market conditions causing their use must be explained in the report.

Additionally, older comparable sales that are the best indicator of value for the subject property can be used if appropriate. 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 if they explain why they are being used.

Comparable Sales | Fannie Mae

This topic contains information on selection of comparable sales, including:

selling-guide.fanniemae.com

...

 

[Mejappz]

Oh, oh the King is back .

 

[George Hatch]

George, you don’t typically play devil’s advocate. So it surprises me that you insist the ball is in the intended users’ hands.

The appraisal is an intellectual product of the appraiser. Short of the comparable being made up, erroneously represented, or its inclusion in any other way misleading, I fail to see why the intended user should have such input into the appraisal process that the client would disallow a comparable utilized in the appraisal.

There is nothing to prevent the intended user to insist on the irrelevance of a comparable, and to form as low an opinion of the appraisal as he wishes, but for client/intended to insist on its removal in my mind crosses the red line of influence.

I'll put it this way: if it were my appraisal and I thought a real dated sale was significant I'd add it as supplemental info but I wouldn't necessarily present it as one of my primary sales unless I had a spectacular reason for it. And then it would be on me to make that case to my reader. Gotta sell the solution, right?

Now I don't know how this assignment went or what the report looked like but if the "several years old" sale was presented at the primary basis of the value conclusion then I can understand why a client wouldn't use the report under those conditions. Moreover, even if a client did tell me they didn't think a particular sale was recent enough to take seriously I could still move it from a SC grid to an "in addition to the above sales there is also a very dated sale at..." which would still be including that sale albeit in a narrative rather than grid format.

Now going back to why the client might have raised this objection, one possibility is that even these lenders get audited by their respective regulators. If a regulator spotted an appraisal that took too seriously a very dated sale it could expose that lender to some unnecessary criticism. These regulator types aren't always that savvy about appraisals and it would be easy for a casual reader to see an SC grid, immediately jump to a conclusion about what's going on and then not look deep enough to come off that initial conclusion.

And, sometimes these reviewers and underwriters get overly cautious about what they think the regulators and auditors and loan committee types will hassle them for.

That's why I think there may be a little leeway in this situation somewhere for an appraiser to decide what is/isn't going to resonate with their users. I mean, from the description the OP isn't indicating to the client showing some obvious attempt to lie-by-omission. They might just be trying to reduce their hassle factor.

Lastly, when we refer to the "problem identification" phase on the assignment that can also include identifying where this user's guard rails are so as to seek the SR1/SR2 solution that will solve that problem. The number itself is only part of that solution.

IMO

.

 

[djd09]

Oh, oh the King is back .

B. No person is allowed to influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, inducement,intimidation, bribery, or any other manner including, but not limited to:

https://singlefamily.fanniemae.com/media/4711/display

...

 

[alebrewer]

I've seen some pretty bad ones. When I see a lot of fluff I expect its probably going to be bad. One I saw the agent gave to me that was done for a pre-listing. Subject about 1,000 SF GLA, all of the "comps" selected were between 2,000-2,500 SF GLA and adjusted at $20/SF. One comp was similar in GLA and of course the adjusted sales price was much lower than the "comps" at least double the size. Included a long CV 40+ years of experience bla bla.

This is exactly the scenario I'm talking about. Model match next door to the subject could have sold yesterday, but you can't 'force' the appraiser to use it. Like the old saying, you can lead a horse to water...

 

[Tawfik Ahdab]

George, I much better agree with the new way you put it.

 

[shrubberyvaluation]

Age of the Comparable Sales​

Comparable sales that have closed within the last 12 months should be used in the appraisal; however, the best and most appropriate comparable sales may not always be the most recent sales. For example, it may be appropriate for the appraiser to use a nine month old sale with a time adjustment rather than a one month old sale that requires multiple adjustments. An older sale may be more appropriate in situations when market conditions have affected the availability of recent sales, and the changing market conditions causing their use must be explained in the report.

Additionally, older comparable sales that are the best indicator of value for the subject property can be used if appropriate. 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 if they explain why they are being used.

Comparable Sales | Fannie Mae

This topic contains information on selection of comparable sales, including:

selling-guide.fanniemae.com

...

Used a two year old sale once because the subject was located in a small gated community that sold higher than surrounding areas and the last sale in the community was two years ago. Sometimes its relevant. Obviously if you are just throwing in a 2 or 3 year old sale that is an outlier to pump up the value or from a time of higher prices that is bad.