comp values in nondisclosure state

[George Hatch]

Several things -

- You appear to have put some time and effort into understanding these things, which is good. Knowledge is power. There's no such thing as too much (relevant) information.

- cost does not equal value in the appraisal of a home. That's not an opinion, it's a fact. If that's part of your plan for your appraisal you might as well give that up right now because it's a waste of time.

I just appraised a property where the builder spent $500,000 in site development costs in order to support a built-in pool/spa combo that would not otherwise have fit that site. Most of those costs were not recovered in either of the last 2 sales transactions for that property. From a cost/value perspective they should have never spent that money or went to that effort to build that pool.

- Some lenders can and will accept comparable sales that exceed the commonly accepted guidelines for "simple" appraisal assignments. Especially for rural properties or other property types for which there are few comparables.

- In any case, we are compelled to work with what's available even when it isn't enough. In my appraisal assignments I virtually *never* have the quantity and quality of data that I would prefer to have, so I *always* have to make compromises and work with what's at hand. That's not a matter of discretion on my part, it's necessity.

- Lenders that won't accept such variances are making those decisions on their own. In those cases it's not the appraisers who are being "dumb", it's the lenders.

- If you can't identify recent comparables then you also can't say that you understand the value of the property as well as a professional appraiser, let alone better than them.

- In God we trust, all others bring data.

 

[Michael S]

I work in a non-disclosure state (New Mexico) and since I deal with commercial properties there's not even an MLS to rely on.

I've found many sales that were great comps but because I couldn't verify the sale price I couldn't use it. Buyer, seller, broker - those are the three parties that will have the details I need. If none of them will talk (or if you can't even track them down) there's not much else you can do. Just move on to the next possible comp. In theory another appraiser might have the information or attorney or lender (if there was one). By and large those parties will not provide that information as their confidentiality requirements prevent disclosing it.

On occasion I've received information but had to agree to keep it confidential, even in my appraisal. In my report I'll reference that a property sold for a certain amount but I can't disclose what property or discuss anything that might reveal the property. Clients don't always like that but that's just the reality of working in a non-disclosure state with limited data.

It sounds like you're dealing with a significant amount of money here. If you're trying to use a lender that insists on using the quickest and cheapest appraiser, they're not going to research any sales that might have occurred outside the MLS. Talk to your lender (or find a new one) that is will to pay more to get an appraiser who will take the time to research those other sales that might be more comparable but don't show up in the MLS.

 

[utah buyer]

thanks you and points well taken from a pro.

accordingly, I don't expect and never did expect that my construction cost would equal the appraised value. My situation is finding that the appraisal preconstruction dropped at COO. I can see your point about the data and without it available to the appraiser, the appraisal will suffer. Having read pre and post appraisals, I can see the post appraiser does urban appraisals and didn't have explanations like the first nor the same level of research. I believe the good news is for me is brand new comps for the new appraiser so the data is there to support their efforts.

 

[utah buyer]

Thank you, I do have a new lender and we talked about the need to pay extra--which I am happy to pay for-- for the kind of appraisal you are talking about.

 

[George Hatch]

Like I said, if you can come up with some additional sales data then that obviously works to your benefit. The appraiser will still exercise their own judgment as to which sales to present in an appraisal, but having access to more is always better than having access to less.

With that said, it's been extremely rare for a broker or a borrower to present me with a relevant sale data of which I wasn't already aware of. In the last 10 years I can only think of a couple of such instances, and neither of them involved single family homes. With that said, the region I work in has a lot of data transparency, which is obviously not the case in your area.

 

[utah buyer]

BTW, I believe you guys should be given access to the Fannie mae database in some way on actual data

 

[George Hatch]

Usable data is valuable to appraisers.

In my region we used to have an appraiser-driven database that reported sale prices and general property attributes for homes from their respective appraisals. But in order for it to work the participants had to contribute their data to the pool. It was feasible then due to the composition and structure of the business but it wouldn't work now.

 

[CANative]

and stay up with actual standards vs misconceptions since Dodd, Frank.

Which "misconceptions" since Dodd, Frank are you referring to in the context of appraisal methodology?

 

[utah buyer]

ie, the highest appraisal for a home can be no higher than the last highest sale in the area.--a house just sold for 560k, so that is the new ceiling--. Or you can't use a comparable across a county line, even if it is close and otherwise comparable. Lender cannot choose an appraiser and must simply send a appraisal request to AMC. and many more that get quoted by lenders as being told to them by appraisers. These are the kinds of things I am hearing in the name of the new rules in the aftermath of Frank Dodd. I could be wrong with the Frank Dodd reference, but this is what I am told.

I have seen these types of issues clarified with supporting guidance. I have found that lenders don't know the Fannie Mae guidelines on appraisals but the underwriters within lending do. In my situation, the underwriter simply wanted wanted the appraiser to document the logic of his conclusions which I recognize can be complex, but allowable under Fannie Mae guidance.



I am not meaning to bash, to the contrary, I am learning the complexity of appraising and realizing that lenders should ask for appraisers with experience related to their projects and let the professional judgment reign. With this knowledge, I think I will have a lender with an appraiser with the right experience and the appraisal may come in lower than my pre-construction number, but at least it will have the same standard of analysis.

 

[utah buyer]

PS, the underwriter approved the application but would not accept the appraisal without narrative on the appraiser's conclusions since that is allowed in the guidelines.