Highest sale, largest sf, asking for some advise please

[Carol Gist]

New construction. This is a fairly big town. House will be one of a handful or any age that will be in the large 3,700 sf range (on a lot). It was originally 3,200 with a large attached shop. However, they changed the plan to convert the shop into a bedroom and bath. Borrower also added $62,000 in upgrades and he will be writing $57K of that directly to the supplier of the upgrades. The $831K price is the HIGHEST price in town of any sf or age in 9 months. Town is growing and I do believe the value is warranted, but just very nervous on this one. This is also a reverse mortgage (which throws me on a new construction, but guess its done). Appreciate any advice. Thank you

 

[George Hatch]

We don't sell our value conclusions, we sell our credibility.

This is one of those situations where it will really help your reader to understand what's going on if you emphasize the general theme of this appraisal problem: subject is newer as well as being at the upper end of the size range for the area and the value will be at or toward the top of range that you would normally expect for the area.

You can build the foundation of that theme by getting specific in your Neighborhood summary about the composition of the area in terms of age range, size range, and price range. Then if the lot area (for instance) is larger than average you can comment about that in your Site Summary, and then do the same for the building area and the quality in the Improvements section.
At the bottom of the Improvements section there's a question about "Does the property generally conform..." This is where you comment about the home being bigger, newer and higher quality than most of the other properties in the area, but not being an overimprovement when considering there are other properties of similar size and/or quality.

Now you've primed the reader for the gunfight that happens on pg 2 in the selection and analyses of these comparable sales which are also atypical for their immediate neighborhoods. You're not surprising them at the last minute with the complexity of your comparisons or with how far out and how far back you had to go in order to find reasonably comparable sales data. You can reiterate that theme in the first line of the Sales Comparison reconciliation, by which point your reader should be in agreement with your assessment of the situation. Assuming they actually read the report.

Try not to bury your explanations in your addenda, but if you are going into detail in an addenda then at least hit all the high points on Pg 1.

 

[Carol Gist]

We don't sell our value conclusions, we sell our credibility.

This is one of those situations where it will really help your reader to understand what's going on if you emphasize the general theme of this appraisal problem: subject is newer as well as being at the upper end of the size range for the area and the value will be at or toward the top of range that you would normally expect for the area.

You can build the foundation of that theme by getting specific in your Neighborhood summary about the composition of the area in terms of age range, size range, and price range. Then if the lot area (for instance) is larger than average you can comment about that in your Site Summary, and then do the same for the building area and the quality in the Improvements section.
At the bottom of the Improvements section there's a question about "Does the property generally conform..." This is where you comment about the home being bigger, newer and higher quality than most of the other properties in the area, but not being an overimprovement when considering there are other properties of similar size and/or quality.

Now you've primed the reader for the gunfight that happens on pg 2 in the selection and analyses of these comparable sales which are also atypical for their immediate neighborhoods. You're not surprising them at the last minute with the complexity of your comparisons or with how far out and how far back you had to go in order to find reasonably comparable sales data. You can reiterate that theme in the first line of the Sales Comparison reconciliation, by which point your reader should be in agreement with your assessment of the situation. Assuming they actually read the report.

Try not to bury your explanations in your addenda, but if you are going into detail in an addenda then at least hit all the high points on Pg 1.

That was a huge and VERY helpful response George. I appreciate all your words of advice. I will follow as you stated. You made all good points. Carol

 

[Overimprovement]

One thing you might have to do is go to another location (if subject is really an outlier). The problem there is deriving a location adjustment. That can be done by taking similar homes in towns A and B. Seeing what the difference is between towns (as a percentage of value, not necessarily just an absolute $ difference). It helps to compare similar homes across different GLAs, so you can better pinpoint that percentage difference. Then you have a basis upon which to conclude a location adjustment for that house similar to your subject, but in a different location.

Is this time consuming? Heck yes. But its very supportable and more credible than having to say no similar comps exist. At worst, these extra comps will help support the large adjustments you had to make on page 2 because subject is an outlier/unique. At best, maybe you even find a really similar comp or two, just miles away.

Good luck.

 

[Carol Gist]

One thing you might have to do is go to another location (if subject is really an outlier). The problem there is deriving a location adjustment. That can be done by taking similar homes in towns A and B. Seeing what the difference is between towns (as a percentage of value, not necessarily just an absolute $ difference). It helps to compare similar homes across different GLAs, so you can better pinpoint that percentage difference. Then you have a basis upon which to conclude a location adjustment for that house similar to your subject, but in a different location.

Is this time consuming? Heck yes. But its very supportable and more credible than having to say no similar comps exist. At worst, these extra comps will help support the large adjustments you had to make on page 2 because subject is an outlier/unique. At best, maybe you even find a really similar comp or two, just miles away.

Good luck.

Thank you very much for the reply. That is definitely something I can do. Would rather take the time and have support for an adjustments.

 

[Artemis Fowl]

For consideration: What is an outlier in an immediate area is not always an outlier when you zoom out a bit. If your typical buyer for that :neighborhood" will not be competing for the subject...perhaps the typical buyer for the subject competes in a different market...that is not defined by being within 1 mile.

 

[sputnam]

There is nothing in USPAP that requires an appraiser to always... under every circumstance, in any market... to meet all of the bracketing that GSE underwriters like to see. Remember, those are guidelines, not rules. Remember, it's not part of your job to make sure that the underwriters approve the loan. As a professional appraiser, you don't care if the loan gets approved or not.

IMO, if more appraisers concentrated on their part, instead of worrying about who they might upset or whether the loan would be made.... we would, as a profession, have a lot more respect.

As for solving your appraisal problem, there are a lot of legitimate ways to analyze the market data. I think once counted more than thirty methods for extracting adjustments. If you only know one or a few methods, your appraisal education is not complete. In situations like yours, you expand the time and distance of your search. You write more explanation into your report.