Comparables Check List?

[Pamela Crowley (Florida)]

Step six: This will be controversial but I am going to say it anyway. Once I have found the comparables, I then select those that bracket the sales price or refi price of the subject property, some higher, some lower.

Mike, Mike, Mike. I only do that if it makes sense to do that. Step six for me would be finding:

A) GLA: one larger, one smaller
B) Age: one older, one younger
C) Site if necessary: one larger, one smaller (some need a land appraisal with the subject appraisal)

AFTER these are found is when I look to see if the price can be bracketed. Sometimes it can be, times it can't be. If the value wanted, be it on a contract to purchase or refi, is much higher than what my comps are telling me, I couldn't care less about that value wanted.

NEVER, EVER ignore the newest, nearest, most similar comps to find a value!!!!

The underwriters have programs to pull up the sales surrounding the subject and will know if you 'cherry picked' and ignored close by sales.

 

[Mike Garrett RAA]

Guess that was what I was trying to say...

Lets see if this makes sense. Contract is for $150,000

I pull comps and find these:

145,000
148,000
148,000
150,000
152,000
152,000
157,000
160,000


I would examine them for features (comparability) and lets say I find all of them reall comparable or at least easily adjusted. I would then eliminate the two extremes leaving me with a range of values from, say $148,000 to $157,000. If all else is equal I would use

$148,000
$150,000
$152,000

Notice I said...."IF ALL ELSE WAS EQUAL"!

 

[Mike Garrett RAA]

Hit the wrong button before I could proof read or spell check last post...and I wasn't finished.

I am trying to bracket the value BECAUSE all other things are equal thus demonstrating I have selected properties that have sold for less and sold for more.

Where did you come up with bracketing the square footage, age, and site size? Not a requirement. Those items can be adjusted. Fannie Mae guidelines say..."bracket the sales price". (he now winks and hugs Pammy so she feels loved).

Actually, the perfect comparable is the exact same house, next door, that sold yesterday. They could be all the very same model and all sold for the same amount...no adjustments at all...cept then some cranky underwriter will say..."you are letting the builder set the market"...to which I always answer...."So???". The market is the market and I am only to report what I find, not artificially manipulate it.

Now, lets say the contract was for $158,000. Which three comparables would you select? If all else was equal?????? I would select the higher sales and in my report say....."I am trending to the higher end of the value range based on the present strong real estate market and giving consideration to the contract on the subject property which is also an indicator of the actions of both buyers and sellers in the present market"

Would I come in at $158,000???? Most likely not, but I sure as hell wouldn't be at $148,000 either. Lastly, famous Mikie saying....."he who selects the comps usually selects the final value conclusion!"

 

[Jeff Horton]

Originally posted by Dee Dee@Jul 23 2003, 07:30 AM
Number hitters are notorious for searching by price first, and most do not analyze active listings.

Hey Dee Dee, I recent that!

Actually that is good advice. I have to agree that to someone new or doesn't really know a market shouldn't do that. I usually, but not always, have a ball park figure in my head. I am careful to put in my price range well above and below that so not to bias the search.

In our market it is not unusual in the rural areas to have homes of say 2000 sf ft range from 30K to 200K. So I have gotten in the habit of filtering out the obviously low and high sales.

Good advice Dee.

 

[Shelley Holmquist]

Mike, you have the best sense of humor! I just love to read your posts, and I always learn something from them! Keep up the humor!

 

[Pamela Crowley (Florida)]

OK Mike. Nice to have a market area to work in that comps like that come up!!!! Something like that is rare for me, although it can/does happen in the areas that have been taken over by AVMs.

Now.... regarding:

Where did you come up with bracketing the square footage, age, and site size? Not a requirement. Those items can be adjusted. Fannie Mae guidelines say..."bracket the sales price". (he now winks and hugs Pammy so she feels loved).

From Fannie Mae Form 1004B 6-93

You know, the Appraiser's Certification attached to all of our URARs, etc.

Paragraph (item) 1 - Quote:

"I have researched the subject market and have selected a minimum of three recent sales of properties most similar and proximate to the subject property for consideration in the sales comparison analysis and ........"

I added the bold.

Kiss, kiss, Mikie!

 

[Mike Garrett RAA]

And that doesn't say "some higher and some lower".....Kisses back atcha! :wub: :wub: :wub:

Most similar means, ahhhhhh, most similar! Ever have to use a 2 story comp for a rancher? I have (ugh) because it was all there was so it was "most similar" mainly because it was a sale within a year in the same general area. You are absolutely right...the whole process isn't all that simple and requires a thought process....thus "an appraisal".

I am most blessed in having a good active market and an MLS that has "teef". Our sales agents really do try very hard to do things correctly and make themselves available to the appraiser.

What jerks my chain is when the following occurs:

1. Appraiser goes outside the immediate area because the sales prices are not high enough in the subject's marketing area (subdivision, etc).

2. Appraiser over looks features and amenities on the comps so he/she will not have to make negative adjustments.

3. Appraiser fails to comment and adjust for obvious condition faults and mandatory MPRs.

4. Cost approach has no relationship to the market what so ever.

5. Supervisory appraiser never even reviewed the appraisal report.

If one is going to mentor/supervise a trainee then do so. Teach them how to "appraise", not just fill out a form.

Wanna bet some newbies just learned more in this post than their supervisory appraisers have taught them so far?????

 

[Pamela Crowley (Florida)]

Wanna bet some newbies just learned more in this post than their supervisory appraisers have taught them so far?????

No doubt about that!!!!

 

[Richard J. Glesser]

Ted,

You've just been given a great education on Comp selection. However, I notice that you're from Minnesota, which may or may not present new problems.....lack of comparables. I relocated from an urban area of Northwest Ohio, where most often comps were plentiful, to Northern Michigan, where I'm sometimes lucky to find 1 "good" comp and fill in with anything else available. So here's my add-on to the previous posts:

I start with location - it's the realtors' battle cry and extremely difficult to adjust.

My second step is to determine, in order, what subject features bring the most value to the subject. This is where knowledge of your market is imperative. This varies from market to market. Up here, water frontage is the dominant feature in determining value. If the subject sits on 10 acres, I try to find sales of 5-15 acre parcels. I try to match size within a couple hundred square feet. We rarely have the luxury of similar style homes but I do try to get close on age/condition. Quality is another difficult market adjustment to make because rarely will the same buyers be interested in different levels of quality.

Then there are secondary market expectations. If your subject is a manufactured home, then they will want at least 2 manufactured sales. Likewise, you will need to support the value of the features such as 2 bedrooms and basements or crawls and wall or space furnaces. That being said, while it may not be a good comparable by traditional guidelines, if there is only one 2-bedroom sale and your subject is 2-bedrooms, you'd better include it instead of one which may actually be a better comparable. (Up here, 2 bedrooms does not impose the functional obsolescence it normally does due to the large volume of 2 bedroom homes which, oftentimes, started as cottages.) Six month sales is rarely achievable since our winters last 5 months and effectively diminish the real estate market.

One last piece of advice which I received from my Mentor and has been worth gold to me during my career: "There are always comps. They may not be good comps, but there's always comps." When you get tough assignments, you may have to loosen your search boundaries to find the most similar market sales. I've used comps which would be laughed off the form in urban areas where sales are plentiful, but they were the only relevent sales available. :usa: