• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Lender wants value lowered based on active listing comps

Status
Not open for further replies.

MMCHNY

Freshman Member
Joined
Nov 20, 2007
Professional Status
General Public
State
Massachusetts
This is a request from MB.

These are the conditions on our loan approval.

Listings do not support value-these comps indicate a lower value in current market. Appraiser to re-evaluate with the current market information.

This underwriter asked us to supply two active listings to support value and to use a list to sale price ratios of the 3 comparable sales and apply adjustment to active listings. I choose ratio from the comp which I placed most weight on and it brought adjusted values of listings in below subject value and value of comparable sales. This MB has sent back appraisal 3 times prior, we have complied with all requests. They insisted on Comps in the subject's "immediate neighborhood" which there were none within the past 6 months. The 2 active listing are in the subject's immediate neighborhood and have been on the market for 264 & 306 days respectively. In using the ratios on the listings I had to account for the prior price reductions which occurred before the current list price at the time of the appraisal. My supervisor called the MB and they asked him to lower the value to the adjusted values on the active listings on the appraisal and also that mentioned calling the appraisal board on us. He doesn't want to argue with them and told me to do what they want. He couldn't tell me whether they can legally do this. Any comments will be appreciated. Has anyone ever based their final value on active listings??
 
You don't base value on listings, but you can base a market condition adjustment on them. So if you listings are coming in at $90,000 each and the other sales are over $100,000, it would stand to reason that those houses wouldn't sell over $100,000 in todays market. In order to sell they'd have to be priced competitively with those listings and so market condition adjustments are in order.
 
If the asking prices of the listings typically set the high end of the value range, and you have listings of suitable, alternative substitutes for your subject now priced less than the most recent closed sale:

1. That may tell us the values are still dropping.

2. It probably tells us what the subject property is still not worth.

It was never just about the closed sales, but many markets are now forcing appraisers to truly analyze all the market data and not transfer information on the three closed sales to a form or narrative.
 
Substitution: A typical buyer will not pay more for a property than what a competing property can be purchased for. The one with the lowest price will attract the greatest demand. This is the primary principle which the sales comparison approach is based.

Your competing listings will set the upper value threshold. Listings can't "help" support a higher value, but they sure can "hurt" value.
 
There are two listings that are in the same neighborhood as the subject, they were exposed to the market for over 6 months and have not sold. Wouldn't that throw up a red flag to you. Based on the principle of substitution why would a purchaser pay more for the subject than these 2 listings? Did you make a market conditions adjustment to the three primary sales?
 
The loan is for a single family cash out refi. Parents own the and live in the house and gave 2 sons who are the borrowers an ownership interest on the title. The first thing the MB requested was to remove the appraisal order from the appraisal and resend. I questioned that. Supervisor says do it. Next MB says underwriter wants FNMA Form 1007 Single Family Comparable Rent Schedule and FNMA 216 Operating Income Statement, additional comparables in the subject immediate neighborhood and 2 active sales. He said he realizes we will need to charge extra for those 2 FNMA forms. My supervisor calls and tells him the addtional fee and asks why he didn't tell us that they were doing it as an income property? MB has no answer. Supervisor calls all parties, informs them of fee and asks them to call us and send the additional fee if they want us to proceed. No response. 3 days go by and MB emails and asks why we haven't sent appraisal and questions the legitmacy of our requesting an extra fee because the underwriters requests are reasonable. Says he will call appraisal board. Supervisor talks to borrowers attorney who said he was unaware they wanted to do appraisal as income property. MB emails again and says forget the additional forms. This appraisal was done over 1 month ago.
 
Thank you Pam and to all of you who responded. I read this forum regularly and get so much out of it. It really bothers me that I don't get much guidance from my supervisor so I look to many of the different discussions on this forum which are so amazing and are so helpful to a trainee. I try my best to be as thorough as possible and find the best, most recent comps which is getting more and more challenging because of the market slowdown and being in MA there are very few "cookie cutter" neighborhoods in my area. This underwriter has been very adamant about using comps and listings from the "immediate neighborhood". I explained to them why I chose comps over 1 mile and listed the sales within the neigborhood that I didn't use because they were not similar to the subject and gave the specific data on each one demonstrating why they were not similar. In a one mile radius there are single family, two, three & multis, ranches, capes, colonials (old & new) antique homes over 150 yrs, new construction and commercial properties. The three comparable sales I used had 243, 21 & 129 D.O.M, respectively and list to sale price ratios of 21%, 3% & 17%, respectively. They all sold within the past 6 months. The subject is a 78 yr old conventional style colonial, in average condition, has been well maintained and has 1,956 s.f. I found only 1 sale that had higher GLA than the subject in order to be able to bracket the s.f. This has been a real challenge.
 
...Has anyone ever based their final value on active listings??

Responding to your question:

The development of an opinion of MV involves, among other things, your consideration of closed sales, pending sales, offerings, offerings with contract offers and recent off-market competing properties.

Obviously, each situation is unique. Closed sales ("the comps") by themselves may not be a reliable indicator of MV.

Your "active listings" may be a form of external obsolescence.

The opinion of MV is not "based" on active listings, but such market data may affect the opinion.
 
I choose ratio from the comp which I placed most weight on and it brought adjusted values of listings in below subject value and value of comparable sales. This MB has sent back appraisal 3 times prior, we have complied with all requests.
Listing support a "top" value. Your comps should likewise indicate a value at or below the listings or you need a time adjustment. Otherwise, pandering to a client without charging them for it smacks of losing your independence in the process. After all your certification said the opinions expressed are YOUR PERSONAL opinions, not the UW or clients....be careful walking that landmine.
Bracketing may be desireable but not required. If it were then the best house in town is unappraisable right? ditto for the worst. at some point I am going to accuse the UW of "redlining" - seeking some way to turn the loan down and blame the appraiser for it.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Back
Top