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Comps Sales Prices Much Lower Than Subject

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zhencai

Sophomore Member
Joined
May 27, 2003
Professional Status
Certified Residential Appraiser
State
California
Hi guys,

I have an appraisal order for a purchase loan. The contract price is $455,000 but the comps sales prices are in $390,000-$405,000. There is no concession except that refigerator will stay. How do I handle this situation?

Thank you!
Zhen Cai
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
zenchai:

You do an appraisal.

If you do not know how to competently perform an appraisal do not do an appraisal. You should hire an appraiser.

The fact that you ask this question seems to indicate that you are not an appraiser.

If you are an appraiser you should not appraise until you can associate yourself with someone who can do the work properly OR decline the assignment as it is out of your competency range.
 

Liz South

Junior Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Virginia
Basically the question is "is this house really worth what it sold for?"

There are several ways to address this issue, but I agree with the previous posting that unless you know how to look at all of these different ways you should NOT do this appraisal. Remember USPAP requires you to be competent to do this appraisal. Either become competent by associating with a senior appraiser who hopefully is or decline the assignment and have it assigned to an appraiser who will study the market to determine the accurate value for the subject.

Liz S.
Sweating here on the east coast.
 

Phil Rice

Member
Joined
Apr 22, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
What color is the refrigerator? Can you justify a $60,000 adjustment for the fridge?
 

Carnivore

Elite Member
Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
HUMOR ON



Originally posted by Phil Rice@Jul 15 2003, 05:26 AM
What color is the refrigerator? Can you justify a $60,000 adjustment for the fridge?
Phil,

I think your off the mark here. One must first determine if the refrigerator has food in it. Once thats done then determine if the food come from a disount food outlet or was it from a local market specific gourmet deli.

If all comps are similar then look to color for your adjustment.

Try getting it right next time! :redface:

HUMOR OFF
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Back up and take a strong look at the subject vs. the comps. IF there is absolutely no reason for this home to be selling for $50K over the market, then nuke 'em. I had a case last year where a family from California was purchasing a home 1 year old with pool for $490,000. Home was a FSBO. People from Calif had come in and not researched the market - just fell in love with the home. Builders had cut their costs for the same home new so that the actual value of the home was $430,000. Add $20K for the pool (market contributory value) and you have $450,000 for the home.

An uninformed buyer is not a reason to value a home above the market.

Roger
 

Steve Gish

Sophomore Member
Joined
Apr 28, 2003
One must first determine if the refrigerator has food in it. Once thats done then determine if the food come from a disount food outlet or was it from a local market specific gourmet deli.
Would one depreciate the food if it appears beyond it's economic life? :rofl:
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Roger is correct...an un-informed buyer is the greatest danger to themselves, especially when they are about to invest mucho-dollars in a property they have "fallen in love with". Love is blind, and realty agents encounter that daily. One might hope the buyers have agency representation that is committed to pulling the buyers aside, and saying something like...."you know Mr. Jones, I think you are really paying about $50K too much for this property". The agent then awaits the buyers' response....but at least they have been told. Does that happen ? Maybe. Sometimes. Never ? Short of those folks working out their differences, it is the appraiser's duty to tell his or her client what their unbiased opinion of current market value is......and not worry about who else may be offended. The buyers can always come to the table with an extra $50K down payment and prove their love for the property....and to heck with the appraiser's opinion. Don't fall for the old throw-in-the-refridgerator trick ! They use it every time there is a real price/value discrepancy.
 

Richard J. Glesser

Junior Member
Joined
May 16, 2002
Professional Status
Certified General Appraiser
State
Michigan
Ross

While it might appear proper for the real estate agent to advise the purchaser that they're paying too much, I believe that would violate his client duties through the MLS toward the seller and to get the highest price possible. Unless he/she's disclosed that they're a buyers' agent. Besides, the higher the sale price, the higher the commission. Imagine how many million dollar homes would exist is appraisers were compensated based on value. (direct USPAP violation)

This appears to be an uneducated buyer since top of a neighborhood and appreciating values shouldn't rise that far above the norm. Find the best comps and bring in the value wherever it falls! You may end up saving the buyer a bundle and will be able to sleep tonight. :usa:

PS You can give the realtor a call and ask them what they feel makes this home worth so much more than the neighborhood - and it's gotta be more than custom curtains!
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Would one depreciate the food if it appears beyond it's economic life?

Considering my girth, food never gets that old in my frig.

There are reasons a property is higher than the surrounding comparables, it is because it is bigger or better. No other reasons. So let the chips fall where they may...even if you get conked on the noggin by the axe.
 
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