Comps in two states

[CGgonnabee]

I did an appraisal 2 months ago...rural location, 3 miles from Virginia/West Virginia state line. Two comps were in VA two were in WV. WV comps were ~8 miles away, but most similar to the subject.

Lender/Broker sends me this:

The file came back from underwriting and they just need you to address the following information:

"Comps 1 & 3 are unacceptable-they are in different states from subject. Per management, appraiser is to replace these 2 comps with closed sales from subject’s immediate market area with similar GLA, design, location and amenities that support the value"


There were about five other items to address, but they were discussed in the addendum that they can't/won't/aren't able to read.

My question: Who is management? I can't find anything in my FHA materials that says that my comps can't be in another state, particularly in a border area.

What would you do? There are no comps that meet their criteria (if there were, I would have used them in the first place)...anything else that I could come up with will be more than 20 miles away. If I give them additional comps, I really don't want to eliminate the two WV sales.

Did I fall asleep in class and miss something? Thanks in advance for your help.

 

[Lee Lansford]

I did an appraisal 2 months ago...rural location, 3 miles from Virginia/West Virginia state line. Two comps were in VA two were in WV. WV comps were ~8 miles away, but most similar to the subject.

Lender/Broker sends me this:

The file came back from underwriting and they just need you to address the following information:

"Comps 1 & 3 are unacceptable-they are in different states from subject. Per management, appraiser is to replace these 2 comps with closed sales from subject’s immediate market area with similar GLA, design, location and amenities that support the value"


There were about five other items to address, but they were discussed in the addendum that they can't/won't/aren't able to read.

My question: Who is management? I can't find anything in my FHA materials that says that my comps can't be in another state, particularly in a border area.

What would you do? There are no comps that meet their criteria (if there were, I would have used them in the first place)...anything else that I could come up with will be more than 20 miles away. If I give them additional comps, I really don't want to eliminate the two WV sales.

Did I fall asleep in class and miss something? Thanks in advance for your help.

If the data selected and analyzed are the most reasonable market substitutes for the Subject of your appraisal--and if you have adequately explained this--I don't know what else you might do.

I would not substitute data that I considered to be inferior for what I had rightfully concluded were more appropriate for inclusion in the appraisal.

You may (fyi: I would charge an additional fee) include other data at the client's request; if the data are inferior to what you have already analyzed, so state your observation and weight ("little or none") the new data as you see fit.

 

[CGgonnabee]

Thanks Lee. It has just been a head-banging, hand-wringing day. When I get tired, I am always afraid that I will miss the forest for the trees.

I appreciate your taking the time to let me know that my brain is not working completely sideways.

 

[timd354]

I did an appraisal 2 months ago...rural location, 3 miles from Virginia/West Virginia state line. Two comps were in VA two were in WV. WV comps were ~8 miles away, but most similar to the subject.

Lender/Broker sends me this:

The file came back from underwriting and they just need you to address the following information:

"Comps 1 & 3 are unacceptable-they are in different states from subject. Per management, appraiser is to replace these 2 comps with closed sales from subject’s immediate market area with similar GLA, design, location and amenities that support the value"


There were about five other items to address, but they were discussed in the addendum that they can't/won't/aren't able to read.

My question: Who is management? I can't find anything in my FHA materials that says that my comps can't be in another state, particularly in a border area.

What would you do? There are no comps that meet their criteria (if there were, I would have used them in the first place)...anything else that I could come up with will be more than 20 miles away. If I give them additional comps, I really don't want to eliminate the two WV sales.

Did I fall asleep in class and miss something? Thanks in advance for your help.

You may be using the best and most relevant comparable sales, but I can see why a lender or secondary market participant would be very leery of making a loan based on such an appriaisal unless the appraiser did a really thorough job of explaining why he used comparable sales from a different state and why no comparable sales from within the same state were usable. The appraiser would also have to do a really thorough job of explaining the similarity and differences in the real estate markets in that area of each state and any such explanation would have to include a discussion of comparative median and these issues, I am sure that many lenders would not be satisfied in any case.average property values, marketability, exposure and marketing times, inventory, local property tax rates, income tax rates, economic conditions, school systems, etc. Anything less would likely make virtually any lender reject the appraisal in such a situation.

Even if you did the greatest appraisal report ever written, some lenders just can not deal with this situation and will reject your appraisal no matter how well you report and explain the situation.

 

[AngelEyes359]

I don't think the lender is being unreasonable with you. This is a huge red flag. I was always taught this was a big no-no. I can remember a report 2 years back that was sent to our office for review where the appraiser comped out a new construction condo in MA using NH comps. It was well written but when you stepped back not at all convincing. The consensus was nice try -you've got to be kidding. I would send the lender the best in-state comps you can find even if they are far away and explain there were no other comps available in the immediate area. You could also include an older sale or active/pending listing nearer to your subject for additional support. Some reports are just ugly. Good luck.

 

[AnonApprsr]

Go past 6 months, and go to a competing neighborhood, even if it has to be 20 miles away, in state.

My boss always says "It doesn't matter if the comparables are horrible, as long as they are the best available and one could find better ones." So there you have it.

Oh, and I agree that it shouldn't be automatic that you can't use out of state comps. But, what about differences between the states? I mean, going from town to town is one thing but you still have the same issues: school systems, taxes (town to town is usually property tax but you have to deal with stuff like income tax lol), public amenities etc. It's a huge difference between NH and MA in taxes, which one is more desirable to live in? Anyway, good luck. Go past 6 months and as many miles away as you have to in state.

 

[Chris Colston]

If you were buying, would you cross state lines?

Your report has to be very convincing that the "typical" buyer would cross state lines to find a similar house to purchase as the subject. Would you?

Does your report explain the differences and similarities from one state to another? Property taxes, schools, road maintenance, insurance rates, all these and more can impact the value from one state to another. I know it's a "summary" report, but even a summary has to have enough information be convincing and not misleading.

Around here (Central Florida), we have enough just to convince that someone might cross a county line let alone the state line.

 

[RSW]

Is the subject property near Grundy, VA and War, WV? If it is, then I understand your problem. We have several counties here in East TN that are close to the KY and VA borders and I used to appraise in those counties. I would never go over the state line to get comps since I did not know the market in those areas. You may know more about your area and that is good. But, I would go further away and stay in the same state as the subject property in order to locate comps.

 

[Don Clark]

Depends

Depends on the type of property. For example, in multi million dollar properties such as those might find that are owned by Donald Trump in Florida, an actor in Hollywood, or a very large uniques property such as the Biltmore Estate in North carolina, one would need to go not only to another state to find comparables but sometimes search the entire country. In the case of the Biltmore estate, the last appraiser for that used comparables that were the great estates and castles in europe.

But, for a Fannie Mae, VA, or FHA type loan, i would not use comparables from another state. I do appraisals in Virginia and North carolina. there are places in North Carolina that you cannot get to without going through Virginia. One such place is Knotts Island. You can only get there by driving through Virginia Beach, virginia or taking a free ferry from the courthouse area in Currituck County, NC. The ferry is 5 miles from the mainland and takes 45 minutes. The next area is known as Gibbs Woods, supposedly a part of Knotts Island but seperated from that area by a 10-15 mile drive through Virginia. When I do appraisals in either of those areas I may very well have to use sales from knotts Island, Gibbs Woods, and from the mainland. In some case the sales may be more than 8-12 miles from the subject. I will also go back more than a year to find similar properties to the subject.

Now, there is a very unique place called tangier island that is in the middle of the Chesapeake Bay. A friemd of mine did an appraisal tere. there is about 200 people on the island. At the time of the appraisal there had only been 1 sales in the past 5 years. So, he used the 5 year old sale, 2 similar sales from the eastern shore of Maryland, and the eastern shore of Virginia. The client paid for his airplane rental (it is 45 minutes by boat to the mainland), paid for his overnight hotel stay(hotel also serves as the jail when needed), and paid $1,000 for the appraisal. I asked if the client was satisfied with that. His reply was that they probably would not have been but he had gone around the island(takes about 10 minutes) and interviewed the local residents(about 10% of them) as to what they thought it was worth. Lender bought it, hook, line and sinker.

So, it depends. In your case, i would require the same thing that the lender is requiring.

 

[Mr Rex]

I work 2 large lakes along the NC/VA border and often use comps from both states. Although the VA tax rates are lower, the buyers of these properties don't decide based on which state its in, its based on views, access, subdivision amenities, water depth etc. I know that I didn't consider it when I purchased lake properties in VA, and was pleasantly surprised at the tax rate. The lower tax rate is more than offset by higher utility costs etc. I have made it a point since this came up once in an appraisal of a lake property to ask property owners if the state location made a difference in their decision. I have yet to find it to be the case. I even ran it by my accountant, making one my primary versus the other for overall tax considerations, and there wasn't enough difference to warrant a market value difference. Your mileage may vary.