There are two things to consider in your situation (assuming your assignment must be completed in compliance with the GSE guidelines).
The first is regarding builder sales and new or under-construction developments. From the current Selling Guide (my bold for emphasis, italics for additional emphasis):
If the subject property is located in a new (or recently converted) condo,
subdivision, or PUD,
then it must be compared to other properties in the neighborhood as well as to properties within the subject subdivision or project. This comparison should help demonstrate market acceptance of new developments and the properties within them.
The appraiser must select one comparable sale from the subject subdivision or project and one comparable sale from outside the subject subdivision or project.
The third comparable sale can be from inside or outside of the subject subdivision or project, provided it is a good indicator of value for the subject property.
Two of the sales must be verifiable from reliable data sources, other than the builder. Sales or resales from within the subject subdivision or project are preferable to sales from outside the subdivision or project provided the developer or builder of the subject property is not involved in the transactions.
To meet the requirement that the appraiser utilize one comparable sale from inside the subject subdivision or project, the appraiser may need to rely solely on the builder of the property he or she is appraising, as this data may not yet be available through typical data sources (for example, public records or multiple listing services). In this scenario, it is acceptable for the appraiser to verify the transaction of the comparable sale by viewing a copy of the HUD-1 Settlement Statement from the builder’s file.
When providing builder sales from competing projects that are not presently available through traditional data sources, the appraiser must verify the sale from the applicable HUD-1 and indicate on the appraisal report that the HUD-1 was the document utilized for verification. Additionally, the appraisal must include discussion and analysis of sales concessions and upgrades for the subject property relative to concessions and upgrades for each builder sale. (For special appraisal considerations regarding condo projects, see
B4-1.4-03, Condo Appraisal Requirements, and B4-2, Project Standards.)
I Italicized the word "must" because there isn't any question of what "must" means. If going to the GSEs (or complying with their requirements) you must complete the above.
However, what I think gets missed and what may be more strongly emphasized in this latest rendition of the Selling Guide is that sometimes, good comps aren't available. What I get from your post is that the best comps are in the same development, and there isn't anything truly comparable outside of the development within the primary competitive market area.
Here is what the Selling Guide says is acceptable (my bold/italics for emphasis):
Fannie Mae does allow for the use of comparable sales that are located in competing neighborhoods, as these may simply be the best comparables available and the most appropriate for the appraiser’s analysis.
If this situation arises, the appraiser must not expand the neighborhood boundaries just to encompass the comparables selected. The appraiser must indicate the comparables are from a competing neighborhood and address any differences that exist. The appraiser must also provide an explanation as to why he or she used the specific comparable sales in the appraisal report and include a discussion of how a competing neighborhood is comparable to the subject neighborhood.
If a property is located in an area in which there is a shortage of truly comparable sales, either
because of the nature of the property improvements or the relatively low number of sales transactions in the neighborhood, the appraiser
might need to use as comparable sales, properties that are not truly comparable to the subject property. In some situations, sales of properties that are not truly comparable may simply be the best available and the most appropriate for the appraiser’s analysis.
The use of such sales is acceptable as long as the appraiser adequately documents his or her analysis and explains why these sales were used. (For additional information, see
B4-1.3-03, Neighborhood Section of the Appraisal Report. For specific information concerning the selection of comparable sales for manufactured home appraisals, see
B4-1.4-01, Factory-Built Housing: Manufactured Housing.)
So, not only can the appraiser go out of immediate competitive market (which Fannie refers to as a "neighborhood") but, if need be, the appraiser can use sales that otherwise would not be used
because there isn't anything better.
This is what I would do in a case like this:
A. I appraise the property. Sometimes the builder sales are the best available and accurately reflect the value of the home. If I think the new home is truly superior to the older homes and that the market will pay a premium for that newer home that is consistent with the sale price, then I've concluded that the property is worth what it is selling for.
B. I'd call my client and tell them that there is an issue regarding the comparables. Clients expect to see certain things, and when they don't, they expect to see other things. I know they are expecting to see a comparable outside the project that is a great match to the subject. It isn't there. So what are they going to expect when they don't see it? They are going to expect a very good explanation of why it isn't there and are going to expect to see a persuasive argument supporting what I provided instead. Rather than telling them in the report, I'm going to call them in advance and discuss the situation and let them know how I am going to proceed; if they agree, great. If not, I'm going to stop because if I think the market value is $X, I'm not going to value the property at less than $X (just as I wouldn't value the property more than $X).
C. Then I'm going to write the report using the best sales I have, and present my analysis for their review and consideration. They can choose to make the loan or not. But I'm going to preempt their request for another comparable by completing all the previous steps.
This is a lot of work. It doesn't matter. This is the appropriate way to complete the assignment
if (1) the appraiser concludes that the market value of the subject is consistent with the purchase contract price, (2) there are no out of the development comparables similar to the subject within the competitive market (or, as the GSEs call it, "neighborhood"), and (3) the appraisal
must comply with GSE guidelines.
Also, this gives the opportunity for the appraiser to find out if the approach would be acceptable to the client. If it isn't, they the appraiser can stop right there and not finish the appraisal; just bill for the work that has been done.
Lenders want safe properties and borrowers as loan-customers. Who can blame them? The appraisal is supposed to provide the lender with an opinion of the market value of the collateral that is being pledged against the money being lent. Market value means how much will the property sell for in the market under all the conditions that are listed in the specific definition.
Sometimes, a property (or a development) sets the new high-value mark within a neighborhood. Everyone gets this. But lenders get nervous about lending on the best/highest value home/development in the neighborhood; they want to be confident when they agree with the appraisal's value conclusion. Ok, that makes sense as well.
If I have the data that leads me to conclude that the subject is worth $X, then it is worth $X.
If the lender wants data that doesn't exist, that is a problem... but not my problem. Appraisers have said for a long time that we don't create the data, we just analyze what is available. And sometimes clients, in an effort to be confident, want data (comparables) that do not exist. My problem is to solve the value question for the subject and provide support for my conclusions. The lender's problem is to evaluate the appraisal and determine if it meets their lending requirements.
If their lending requirements are based on the GSE guidelines, then having the perfect "comp" is not a requirement. What is a requirement is to provide sufficient explanation and analysis of what I tried to do, why I couldn't, and then what I did instead (The expected wasn't possible, so they expect an explanation of why that is so and support for what I did do... and I gave it to them).
This appraisal is exactly what they need for their intended use: to rely upon to make a mortgage lending decision.
Good luck on how you complete this assignment.
