Insufficient comps

[J Grant]

Stop chasing rabbits. The point is that valid sales can sometimes show up in public records, especially when considering different property types and locations. Not to mention what's going on with brokerage fees and MLS systems at the moment.

Agree

 

[Mike Ault]

That's a fair exclusion but I've seen entire subdivisions sold out without MLS exposure, and so have you.

And those are "the happy hunting ground" for people interested in mortgage fraud. We had one entire subdivision with over 200 recently completed homes where the appraisal district was forced to lower their assessments 5% across-the-board shortly after it was built out, because that subdivision was developed with no MLS exposure, and every one of those sales had some sort of egregious & undisclosed seller concession involved with them. The Appraisal District was just operating off "reported sales prices", as were the painfully un-diligent appraisers signing off on those transactions at the time. The over-valuations weren't exposed until people needed to sell, and it became obvious that those homes weren't even close to worth what they originally sold for. Outrageous situations like that occur, and "frequently" in nondisclosure states. So, to your point; yes – non-MLS exposed comparables can be legitimate. I use them as well. However, when doing so, I always take special care to not fall into a "mortgage fraud scheme" like that.

 

[George Hatch]

I don't work in a non-disclosure state so I can only imagine the increased degree of difficulty. Across probably most assignments, not just a few.

My original comment was prompted by my experience with CG appraisers deliberately ignoring sales they could see in public records because they "couldn't verify" them. That's far too convenient an excuse for the situation at hand, IMO.

 

[George Hatch]

Oh, and by the way; your example illustrates in color the potential hazards of attributing "misleading" to the appraiser's conduct, "intentional or not"

 

[Mike Ault]

Oh, and by the way; your example illustrates in color the potential hazards of attributing "misleading" to the appraiser's conduct, "intentional or not"

I prefer the term "unwitting" – as in "half-wits", unfortunately operating in a professional capacity.

 

[George Hatch]

Yeah, but due diligence is still a thing. I'm more concerned about the unavoidable errors being laid at the feet of the appraiser instead of at their source.

It's like appraisers getting sued for the water heater despite having no way of knowing on their own.

 

[Mike Ault]

Yeah, but due diligence is still a thing. I'm more concerned about the unavoidable errors being laid at the feet of the appraiser instead of at their source.

True enough – sometimes we must use the only ingredients available to bake the cake. I am trying not to paint with a broad brush and blame the appraiser for simply doing their job, as is the case for all these unfounded & politically motivated "racial bias" allegations. Nonetheless, seizing upon an opportunity to discuss the dangers of relying on non-MLS builder sales as comparables, please allow me to illustrate a tad further. In the case of the overvalued subdivision in question, I "somehow" was able to catch a "glimpse" of two different lists of comparables provided by the builder/developer to the primary appraisal office working that subdivision. One of the "builder comparable lists" reported the real sales prices, The other list reported sales of model match floor plans constructed on the same block by the same builder with $20,000 added to each one of them (primarily $150,000 homes) to facilitate the "seller kickback scheme". A distraught borrower who later engaged me for a rate and term refinance appraisal (to get out from under the disadvantageous financing terms involved with his purchase financing) told me that the builder advised them at the time, "you don't need a down payment when you use * mortgage & title company – use that money to take a vacation instead!" Any appraisals ordered by said entity were automatically routed to the appraiser "who was familiar with subdivision" and whom the builder "was comfortable working with", the sales contract was jacked up $20,000 higher than it commenced at, and everybody involved (other than the appraiser) received a handsome kickback upon closing. As is typical of these situations, the appraiser simply received the opportunity to facilitate more of the fraud, and not a share of the profits. Rant over.

 

[George Hatch]

I keep saying it, if your appraisal process includes going through 30 or 40 sales to get to the ones being presented in the report then it isn't dependent upon any one sale for which your understanding of it is imperfect. Sometimes I include a sale like that solely for the purpose of disclosure so that some clerk can't get the wrong idea about finding a gotcha on me.

 

[andrew81]

Interesting discussion regarding such matters on this thread…
https://appraisersforum.com/forums/threads/utilizing-custom-built-homes-as-comparables.109315/

That thread discussed the use of builder sales, whether they were arms-length transactions, and assemblage. My opinion in this thread topic is that the resale of existing homes that were not listed on the MLS, regardless of sale type, can be acceptable sales.

sometimes we must use the only ingredients available to bake the cake.

My market consists of rural properties and small towns of 30 to 3000 residents. Often times the only one comparable sale in the same town is an estate sale, family sale, other types of non-arms length sale, and private sales. I do not just throw it in the analysis because it is the only neighborhood sale available. I will use it if the sale price is, in my opinion based on a market analysis, within a reasonable range of market pricing. Other sales used might be 3 to 30 miles away. When using sales outside of the neighborhood I place more weight on finding sales that were arms-length transactions and if possible also listed on the MLS. However, I would not ignore a non-MLS sale that is similar in physical and legal characteristics.

 

[David S]

Got an 2055 assignment from AMC. There are only one comp sold in last 90 day. another comp sold in last 90 days will be 3 miles away AND 30%+ larger GLA. How to proceed? Any suggestion? Client / Lender is off hour already. Due tomorrow evening. Thanks!

Lender said ok to use 30%+ larger GLA comp and 6 months+ comp with proper adjustment. Assignment was done and turned in last week. Thanks everyone's input.