Fourth Comps and the Consequences

[Terrel L. Shields]

I firmly believe UWs request 4th comps as a means to punish persons appraising rural property or unique style dwellings (A frames, Log Homes, etc.)

The purpose of that punishment is to compromise the appraiser. Punished enough, they will attempt to avoid the fourth comp by making up data. Fake comps are usually not completely fake. SF is lowered or raised to get within $10/SF of the subject sales price, Sales prices altered, etc. The appraiser rationalizes this often as minor detail, previous or asking price, maybe the SF is wrong on the MLS or tax card, etc. "It didn't really look that big from the road." The mind is funny about tricking itself.

How many times have you been told, "no, you don't need to have 3 log homes for comps" and you provide a single one, only to get a call asking for a fourth that is "closer, more similar, etc."

There is a simple solution to the 4th comp. Require they pay for your time. Report back to the client the request (as it usually comes directly from the underwriter), and request it in writing. Fire back your fee for the 4th comp. I charge $100 each, so far no takers.

4th comps are unnecessary, irrational, and implies you saved back the best comp for last. If the client has to pay for that, then I have no quarrel, but I am doing no more freebie work. USPAP, Fannie Mae, or no one else explicitly requires an appraiser to redo a report to satisfy an underwriters lust for power over the appraiser. It is pressure and it needs resisted every bit as much as the requests for minimum valuation.

terrel

 

[Pamela Crowley (Florida)]

Terrel,

If I provide a 4th or even 5th or 6th comp, it's usually because it helped bracket something - not necessarily 'necessary' - or, was to emphasize the much lower value I was coming in with compared to the contract. If I'm asked to provide additional comps that were not already on the first version, I do charge $100+/- for each one. This usually makes them decide that what they have is good enough. I also have been known to ask them to go ahead and have the original reviewed if they don't like it - my attitude depending upon theirs.

 

[Richard Carlsen]

Since my market is a low-density rural market, I generally, as a rule, add a 4th or 5th comp if I don't have a true comp i.e. same neighborhood, same size and/or builder, etc. This has reduced my calls for additional comps by 95% over the years.

The one's that get my goat are when they are told in the report that it is a low density market and that the only 5 known sales within the past 13 months have been included in the sales grid. They still come back and ask for an additional comp that is closer and with less gross adjustment.

Do they think I am holding out on them? Keeping one up my sleeve? This happened the other day and my attitude after working for 17 days in a row was not good however I told them I would check. The area in question is in between two MLS areas and just under another. I checked the two main ones again and nothing. On a hunch, the third one was checked, knowing that I would find nothing. BINGO! There it was. A 6th comp within 3/4 of a mile with lower gross adjustments.

Do UW's know something I don't?

 

[jtrotta]

Terrel

several years back I thought similarily of the additional comps; first off it's an insult, that some idiot 17 year old thinks they know more than you. Secondly I decided that if that was going to be the case, they would get a whatever comp. and that whomever the company was that initiated the job would have to pay. We set the wheels in motion and have been charging ever since.


Richard,

yep, they think they know your market and that was caused by the AVM company's who can't tie their own shoes yet (I'm being polite). This is the market that causes "limited" data to be avaiable and time frames to become distant. The problem with these basics is, the lack of understanding by the UW who is not out in the market place, but behind a desk some kazillion miles from where you are and has absolutely know understanding of your market area at all. You can look at all the data you want (in an office-space & time away from the market area), but you need to know the current trends and that can change on a daily basis.

Did you ever wonder why they want the 4th comp. on a separate
sheet :?: It's so they can destroy that paperwork if it's a deal killer - so your doing the extra work & travel time free. That is why I began charging ten years ago for additional work beyond whats required.

*Q- can you use (1) comp. and do a report :?:

8)

 

[Restrain]

Have a 1800 SF home on 3 acres with two barns. However, most of the homes on such acreage are 2500-3000 square feet, custom built, with horse facilities (the area is the quarterhorse version of the Kentucky bluegrass country). We sent in a report with 4 comps. Of course, all were larger, etc. and over 2 miles away. The UW comes back with the usual "closer, more similar in size, similar amenities". If I had them, I would have used them. I wish they would READ the report instead of marching lock-step with their UW guidelines.

 

[Jo Ann Meyer Stratton]

About once a year, maybe in a two year period I get a call from a client that an underwriter has a question. Otherwise the only calls I get after a report is sent to the client is either complaints about the value or I made a typing mistake (typing mistakes I correct immediately). Questions about value I tell them to go away. Any other questions I tell them to read the report and all pages of the addendum, it is already discussed and then I tell them to go away. Anyway, I believe the reasons I don't get calls for additional comparables or other items is because my original report could have any where from 3 to 9 comparables and at least three pages of addendums, maybe even as high as five pages. I describe everything in every report that covers every question that I have ever received from an underwriter over the past 20 years. It is always easier to do all that at the time of the original assignment then to write letters or try to remember how or why a week to six months later. One of the other topics has been the speed of typing up reports. Because I use a template that does cover every question from the past twenty years and deleting is very speedy, I still can actually create and type up a report in less than 30 minutes. Research, analysis, etc which would need to be done whether the report was very short or very long are the time consuming parts. And the template reminds me of what I should cover.

 

[Elliott]

You want a 4th Comparable? You can't handle a
4th Comparable!!

Every now and then I give them that low 4th comparable,
that might be better in terms of net and gross or
closer or whatever....but it indicates a lower value.
I don't know what they do with it, they don't call
back. I figure they just throw it in the trash, which
is what I did mentally.

elliott

 

[Verne Hebert]

Hey Terrel,

Love that new logo! I used to know this guy..............a real chicken lover........drove around in a coupe.

Oh come on. It's a little funny.

But hey, I am with you. I don't mean to be brash, but when I am finished with the report it is done. I am not telling you that I am not human, but 98 % of the time it is complete.

Actually I don't think it is a power thing. It is a lack of experience thing on the part of the green clerks.

I often include a fourth sale....when I deem it is necessary to further clarify some market reaction (s), and shore the technical soundness of the report..or if data is really poor.

I, however, consider it a "supplemental requirement" by the lender. I don't like it but I'll do it if I am paid the fee I am owed.

Bill 'Em

 

[graindart]

I've cut back on my extra comps added above the usual 3 with one of my clients. I got a new client a few months ago, and have been doing rural and/or manufactured home stuff for them, which usually has few like comps. I started off using 4 or 5 comps on each report, only to have them request the "extra comp that is more comparable". With my already including 4 or 5 comps, I was left with just about nothing to add. I've since gone to submitting my report with only 3 comps. To my surprise, they haven't requested a single extra comp since then. To me, these type reports are better supported with the 4-5 comps that I usually use, but it must be setting off alarms on there checklist.

 

[Mike Garrett RAA]

I concur....extra comps are $100 each, how many would you like? Oh, by the by, if it indicates a lesser value, I might come in even lower! Are you sure this is what you want?