• 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.

Opinions on comps

Status
Not open for further replies.

kaien

Thread Starter
Freshman Member
Joined
Jul 18, 2008
Professional Status
General Public
State
Florida
I am very confused about what is acceptable to use as comps on a pending arms length transaction. My wife and I are in the process of purchasing a home and just had the appraisal completed yesterday. Although the home we are purchasing is a regular arms length sale the appraiser used what I would consider 5 distressed comps, and if not 5 three were definitely distressed.

comps 1,3, and 5 were short sales, while comps 2 and 3 were bank owned from foreclosures. I understand that here in Florida short sales do make up a significant part of the market, however, my and the selling realtor sent a number of regular sales to him as comps. He stated that because of the market he is using short sales to do comps. I am of the opinion that short sale comps should be adjusted when comparing with a subject property that is a regular sale. He appraised the property almost 15k less than purchase price.

Please help me out here, we are so frustrated right now and seem to be now in a situation where his ego will not allow him to work with us on this. I don't want to hire another appraiser if this is standard practice.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
So, you have an extra $15k burning a hole in your pocket? Take it to closing and the house is yours. Simple.
 

Lawrence R.

Senior Member
Joined
Mar 27, 2007
Professional Status
Certified General Appraiser
State
South Carolina
I will let the Florida appraisers speak specifically to this, but based on the appraiser's reasoning, and what we all hear about Florida, I would guess he may be justified.

Your house must compete with those lower priced homes for the ever shrinking market.

Remember, not only does the abundance of foreclosed homes change the predominant type of listing in the market, it also changes the predominant type of buyer as well, ie; the investor.
 

Abester

Senior Member
Joined
Jun 12, 2003
Professional Status
Certified General Appraiser
State
Florida
In order to be comparable to the subject, the property would have to be competitive with the subject if it were exposed o the market at the same time.
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
If the short sales and distressed properties are abundant and controlling the market the appraiser is doing his job:

substitution
The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
It really goes neighborhood to neighborhood in my section of Florida (Hillsborough, Polk, Pasco).

I never want to use just short sale and bank foreclosures as comps, even if they are reflective of the market, because it leaves the report open to questions and makes it less credible.

In some neighborhoods I am finding REO properties and short sales as the only recent properties and then when I include a more dated non-Bank influenced sale, once I account for the drop in market value over the past year, it adjusts right in line. But at least that is in the report and you can see it.

When supplying new comps to the appraiser, go through your lender not your agents. Have the agents pull the very most recent sales from the development (if you are in a PUD project) that are similar to the subject. If you are not in a large PUD then you can expand the search but make sure the houses are very, very similar in location style, etc., and are very recent. Also have the agent do that with pending sales, and if they want to really help the cause, they can try to find out what the contract prices are on the pendings. Once done, forward that data to the lender not the appraiser. That is VERY important.

The summer around here as spurred on a bit of an improvement that the aggressive appraisers are overlooking because they always appraised to highest possible value, and the conservative appraisers are missing because they are not following the market but their own point of view of the market. It is possible that the value is there, you just have to prove it to the guy with exceptionally strong data.

If you get very good data and he refuses to consider it fairly, at least it will be the lender he is rejecting and then they might be willing to authorize a new appraisal due to their appraiser's poor business acumen.
 

kaien

Thread Starter
Freshman Member
Joined
Jul 18, 2008
Professional Status
General Public
State
Florida
myself and many other buyers will not even look at short sales, period. I dont have 3-4 months to find out if the bank will accept. How is that competing with arms length transactions? There were other arms length transactions in the area as well? Short sales are sitting longer because of the time constraints, thats why the market is flooded, that reasoning makes no sense.
 

The Warrior Monk

Moderator
Staff member
Moderator
Joined
Mar 30, 2005
Professional Status
Certified General Appraiser
State
New York
myself and many other buyers will not even look at short sales, period. I dont have 3-4 months to find out if the bank will accept. How is that competing with arms length transactions?

This all depends on many factors.

If the foreclosures/short sales are competing with other properties, then they may very well be arms length transactions. If I can buy one property from a homeowner for one price, or one of a number of foreclosed properties for a whole lot less that are listed on the open market, all other factors being equal, the cheaper one wins.

However, if there are issues with the foreclosed/short-sale properties, such as not being exposed to the open market and must be a cash deal, then they might not qualify as arm's length transactions.

Broad statements won't solve the problem; the details of each transaction will have to be analyzed.
 

toddmallard

Junior Member
Joined
Oct 4, 2007
Professional Status
Certified Residential Appraiser
State
Georgia
Are short sales "arms lenght". Think this one out. I personally don't think that short sales are arms length. However they can control the market value. There are some appraisers, such as my old mentor, that think that becaise "we are historic in nature" will not even consider a listing or pending in the equasion. People wonder why we are in this situation.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
myself and many other buyers will not even look at short sales, period. I dont have 3-4 months to find out if the bank will accept. How is that competing with arms length transactions? There were other arms length transactions in the area as well? Short sales are sitting longer because of the time constraints, thats why the market is flooded, that reasoning makes no sense.

Believe me, I know. I had a discussion on that topic with another appraiser who lives outside of Florida and he basically said I was nuts. I call it an economic stigma due to bank influence. I was very surprised by how many appraisers, even in the state, were against my position, which I believe is an obvious one.

But if you are looking in a neighborhood where there is nothing pending that isn't a short sale or REO and all the most recent sales are short sales and REO properties, would you really want to be buying there at a price higher than these properties are going for? The market direction in such a place is most assuredly down.

As I said, each neighborhood is different. You may just have an appraiser who has an opinion that is not in conformity with the market. But then again, you may be thinking with your emotions instead of logically.

The only thing you can do is look, or have your agent look, for more recent non-Bank influenced closed and pending sales that are very similar to the house you want and are in the same project, and have them sent to the lender and then to the appraiser. Or you can insiste you want a second opinion, and if that doesn't work, switch lenders if you have the time.
 
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
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks