Opinion of Value Below Comparables

[Ariba]

Has anyone encountered a situation where your opinion of value is below the comparables in the appraisal report?

LENDER STIP

• The value of the property is $1,190,000, but all 3 comparables used show an adjusted sales price above our value. I believe we should have an added comparable that comes in lower and then will bracket our subject's final value.

This is the situation, the subject was listed at 1,250,000 the price was lowered to $1,200,000 after 60 days due to a lack of showings and interest. The average DOM is 6-10. The executed purchase price is $1,190,000 as was my opinion value., The lender now wants a comparable to bracket the lower sale price. However, there are none as there have only been 3 sales in the subject market which are included in the appraisal report. In other words, there are no lower-priced sales in the market. The 1004MC shows as much. All this has been explained in the addendum of the appraisal report.

Is it reasonable to have an opinion of value below the comparables in the appraisal report? How could you justify a higher opinion of value than the executed contract when the subject has been on the market for 60-days without any offers?

Could this be a result of a declining market and/or mortgage rate increase?

 

[Overimprovement]

Is it reasonable to have an opinion of value below the comparables in the appraisal report? How could you justify a higher opinion of value than the executed contract when the subject has been on the market for 60-days without any offers?

Could this be a result of a declining market and/or mortgage rate increase?

No, generally not reasonable. I would revisit my grid adjustments. What was it about this property that kept it on the market 60 days with average DOM much lower? Condition? Quality? Location? External obsolescence?

And yes, date of sale adjustment can certainly be in play, but those should be in the grid if indicated.

 

[J Grant]

Has anyone encountered a situation where your opinion of value is below the comparables in the appraisal report?

LENDER STIP

• The value of the property is $1,190,000, but all 3 comparables used show an adjusted sales price above our value. I believe we should have an added comparable that comes in lower and then will bracket our subject's final value.

This is the situation, the subject was listed at 1,250,000 the price was lowered to $1,200,000 after 60 days due to a lack of showings and interest. The average DOM is 6-10. The executed purchase price is $1,190,000 as was my opinion value., The lender now wants a comparable to bracket the lower sale price. However, there are none as there have only been 3 sales in the subject market which are included in the appraisal report. In other words, there are no lower-priced sales in the market. The 1004MC shows as much. All this has been explained in the addendum of the appraisal report.

Is it reasonable to have an opinion of value below the comparables in the appraisal report? How could you justify a higher opinion of value than the executed contract when the subject has been on the market for 60-days without any offers?

Could this be a result of a declining market and/or mortgage rate increase?

idk why if your comps had higher sale prices AND adjusted higher than subject , your OMV is lower,
It is lightweight to have only 3 comps on a million plus property. I try to use 4-5 comps on nearly every appraisal because it makes for a stronger support. Look at listings and pendings too to get handle on the trend of present market.

 

[Ariba]

No, generally not reasonable. I would revisit my grid adjustments. What was it about this property that kept it on the market 60 days with average DOM much lower? Condition? Quality? Location? External obsolescence?

And yes, date of sale adjustment can certainly be in play, but those should be in the grid if indicated.

It could be in a declining market. The subject market is a newer development, similar in GLA, function utility year, and quality of construction.

 

[Overimprovement]

One other thought--your market value should be driven by comparables, not contracted purchase price. The question should be why is contract price different than market value, not how can I get market value to 'fit' contract price.

 

[Overimprovement]

It could be in a declining market. The subject market is a newer development, similar in GLA, function utility year, and quality of construction.

That can be ascertained by current actives--are they showing a higher DOM as well at this price point?
This can be a difficult point in the market to support market value--when a steep runup has occurred, peaked, and then started tracking back down. Tough for date of sale adjustments to capture that. Each date of sale adjustment should be based upon what has happened in total to the market since that particular sale, not a blanket, across the board monthly adjustment of x percent per month.

 

[alebrewer]

Confused: are you saying your OOV is below the comparables' raw sales prices or adjusted sales prices? If raw - it shouldn't be an issue. If adjusted - yes - you've made a mistake. Your OOV can't be lower than the adjusted sales range unless you're giving weight to one of the other approaches to value - which, if you're reporting on the 1004, you can't do per the certification...

 

[J Grant]

Has anyone encountered a situation where your opinion of value is below the comparables in the appraisal report?

LENDER STIP

• The value of the property is $1,190,000, but all 3 comparables used show an adjusted sales price above our value. I believe we should have an added comparable that comes in lower and then will bracket our subject's final value.

This is the situation, the subject was listed at 1,250,000 the price was lowered to $1,200,000 after 60 days due to a lack of showings and interest. The average DOM is 6-10. The executed purchase price is $1,190,000 as was my opinion value., The lender now wants a comparable to bracket the lower sale price. However, there are none as there have only been 3 sales in the subject market which are included in the appraisal report. In other words, there are no lower-priced sales in the market. The 1004MC shows as much. All this has been explained in the addendum of the appraisal report.

Is it reasonable to have an opinion of value below the comparables in the appraisal report? How could you justify a higher opinion of value than the executed contract when the subject has been on the market for 60-days without any offers?

Could this be a result of a declining market and/or mortgage rate increase?

How would we justify it - because we don't appraise the subject contract, we appraise the subject property.

Either your OMV is well supported or it is not, regardless of a SC price. Appraisers trying to match a SC price when support shows something else, can find themselves in these types of situations.

 

[Mark K]

. Appraisers trying to match a SC price when support shows something else, can find themselves in these types of situations.

Agree.

Makes me wonder what the appraised value would be absent the sales contract?

 

[alebrewer]

Makes me wonder what the appraised value would be absent the sales contract?

Exactly why we should be reporting a range of value, instead of a point value...