Picking Comps

[maryjo313]

You don't say what this neighborhood is like vs the others so we can't know. You may not even know it all that well. The appraiser gave more weight to the two sales that are least similar in size. By itself and assuming everything else was equal they'd have to have a really good reason for doing that. That reason - if it exists - may or may not be limited to proximity. Just the fact that the appraiser did that probably means something.

MAYBE S#3 comes from an inferior appeal neighborhood that has always sold for less and S#4 comes from a superior appeal neighborhood that always sells for more. Neither of these sales directly match up with S#1 or S#2, nor do they match up with each other. Why is that?

In terms of the neighborhood - not sure exactly what you mean, but here's the comment from the appraiser on it:

"The subjects neighborhood is in a quiet area of Northern Raleigh suburb of Wake Forest, with convenient access to local
employment, schools, shopping and places of worship through both 440 and 540. Employment opportunities are considered stable due to access to Raleigh C.B.D. and the Research Triangle "

I know when I researched it, it came up as a relatively low crime area and with good schools nearby. It's a very good location in terms of getting around the area, and also has a community pools included with HOA dues which is always a plus. It's not a real upscale neighborhood by any means, but similar to the majority of the ones for this price range.

In looking at homes in the area, I discounted a couple other neighborhoods based on nearby crime, and only really had one in this price range that I liked better than this. So I don't think the neighborhood is a big issue that would have effected it much, if at all.

One odd thing is that the #3 comp is in the subdivision as well, but he only stated 1 and 2 as being there. I wasn't sure, but my realtor verified that it definitely is. We are asking the seller to come down in price based on the short sale and these couple of relatively low priced sales and will see how they respond.

The #4 we also found odd, because it's fairly far away, almost 4 miles. There's a number of what look to be good comps (similar sized homes) from the last couple months that are closer, so that one seems strange to us, that he'd go that far away. I'm not even familiar with the neighborhood that one is in, to say how it would compare.

Yeah, I know there's no way anyone here could give a definite answers to why this was done the way it was. If the seller isn't willing to come down, we'll just have to present our comps and question the use of the short sale and hope that we can have some luck getting the value adjusted. I appreciate your input on it.

 

[maryjo313]

Ask them the name of the AMC.

Not sure if they would provide that, but for what purpose?

 

[maryjo313]

Short Sale

Well, our first reply back from the sellers is not what we hoped, we need them to be willing to come down more in price than they did, but my realtor feels the agent did a poor job of explaining it as even her reply to us doesn't make sense (they dropped all my closing costs, repairs, etc. and then said they were dropping the price $13K without accounting for those, making it actually less than $7K). We're pretty sure this isn't the most experienced agent, just the fact that she didn't measure the home to make sure the square footage was correct is a bit of a give-away.

We did find out the short sale was in particularly bad shape, with mold problems, broken AC, etc. Easily $20K in repairs would have been needed, versus the home I'm buying which was in such good condition. So if we can get these sellers where they need to be, we might have a good chance to dispute the appraisal on that basis.

 

[George Hatch]

Okay, let's recap what we've come to realize so far:

You started out thinking that the appraiser was $30k low and that they should have used different comps with higher sale prices.

Now we find out that because the appraiser physically measured they were able to discover that both you and your broker had been given incorrect information about the size of the home.

We also find out that 3 of the 4 sales are located in your immediate neighborhood; and that the 4th sale which actually conflicts with the other 3 is located in a different neighborhood that you weren't even considering, some 4 miles away.

Those three local sales bracket the subject's size and present an unadjusted range of $175k to $196k. The $215k is 4 miles away from this neighborhood. I already told you that analyzing residential sales by price/sf is something only idiot agents do and that you should avoid buying into that whole line of thinking. If your broker actually used that line on you then you're welcome to invite them to this thread so we can school them on why that doesn't work and why we never do it.

Thanks to the appraiser's training and experience and diligence you are now more informed about what it is you're really buying as well as how it stacks up against the 3 closed sales in your neighborhood. Thanks to his personal efforts your seller has apparently already agreed to a $13k price reduction (and they should count themselves lucky he found their error before it was too late).

Soooo, at the very least we're no longer talking about the appraiser being $30k low, are we? At the very least this appraisal has already saved you $13k, comprised of what I assume is real U.S. currency that you can spend elsewhere; not Monopoly money that represents an abstract.

Just that savings alone should make you a big believer in the utility of getting an appraisal. That appraisal fee was money well spent, wasn't it? Even if the appraiser's value conclusion is wrong they have provided you with information that nobody else got right. If nothing else you now know more about what's really going on than you did before you got the appraisal report back.


Speaking of which......

Forget for a moment about the active listings your broker has been showing you. Did they also show you at least 5 or 6 of the local sales including all three of the sales used in the appraisal report? Do you know whether or not they were even aware of all three sales? If they were aware of those sales but didn't show them to you then what's their explanation for that? As a matter of fact, having now been informed of these 3 sales why are they still working oh-so-hard to "help" you pay more for the property than a professional appraiser thinks it's worth? Whose side are they on, anyway?


I think this is a valid question that - no matter what - you should find the answer to before you go talking yourself into believing the broker knows the value of this property better than the appraiser. Listings represent the hopes and dreams of the sellers. Not all listings sell, nor should they. That's why most appraisers don't give them a lot of weight when it comes to developing a value conclusion. We know better. We normally only include listings in an appraisal report when a client asks us to and that inclusion is generally for their benefit, not ours'.

If you were completely aware of what the closed sales were actually doing and you took them into consideration prior to submitting your offer then that's great and I salute your broker for doing right by you. We call that making an informed decision. By default, if you were working with any less information than that then you were not as well informed as the appraiser was prior to developing their opinion of value.

It should be apparent that the appraiser approached this assignment with an open mind and they spoke their mind without regard for the well-being of this deal. That attitude is exactly what we certify to in every single appraisal report we sign. Even if he or she is wrong, they're at least being honest about what they're doing and they're not simply rubberstamping a deal under the assumption that the brokers involved know what they're doing. Lucky for you that your lender picked an honest appraiser.

You can't make this stuff up.


As an aside, if you weren't completely informed of these closed sales in a substantiative manner prior to submitting your offer then *in my opinion* that raises some very serious questions with respect to either your broker's competency or their professional ethics. either they don't know the market as well as they're telling you or they do know and they chose to withhold the info from you. Either way, that doesn't look good for them.

Right about now I have come to like the appraiser's chances in this situation a fair bit better than those of your broker. Their value conclusion may indeed be a little low (or not), but they at least told you the truth. The appraiser already saved you at least $13k that your broker was only too willing to see you pay. And that's just for starters. As far as I can tell you should be glad the lender believes in this appraiser's work more than your broker's work. Which, by the way, is exactly why we're here.

Good appraisals don't cost money, they save money.


My obnoxious opinion only. Reasonable people may disagree.

 

[maryjo313]

Here's the comps my realtor pulled up:

Closed On - SQFT - BR/Bath - Sales Price

1. 09/07/12 - 3000 - 4/2.1 - 214,500

2. 06/19/12 - 2550 - 4/2.1 - 237,000

3. 06/12/12 - 2157 - 3/2.1 - 175,000

4. 07/30/12 - 2817 - 4/2.1 - 244,500

5. 05/29/12 - 2178 - 3/2.1 - 182,000


#1 is a nearby (<1mile) sale that was a foreclosure (but in much better condition that the short sale I've talked about, I actually looked at that home myself). It does have an unfinished basement as well which I assume would be a relatively large adjustment (very desirable in this area since so few homes have them, and why I was interested in it myself!) So adjusted price on that one probably is going to end up relatively low.

#3 and #5 are the same listings off my appraisal, since they are relatively recent and less than a mile away. Of the other two she picked, #4 is also from the same sub-division, and the other, #2 is one development over, I don't know the exact distance but looks to be about a mile from the house. Definitely much closer than the one on my appraisal that was about 4 miles away. That was also the oldest comp the appraiser used, from back in March. The short sale was not all that recent either, that one was from May. The #4 does look to have some interior upgrades that probably would give some price adjustments as well. The other homes all look pretty comparable to mine inside.

So still waiting on the seller, but it does look like we might have some decent comps to dispute the appraisal with, from what I can tell with my limited knowledge.

 

[maryjo313]

Appraiser vs. Realtor

Wow George, your determination to defend the appraiser to the end of the earth and then attack my realtor's integrity is impressive. Okay let's recap here.

1. No, he did not *physically* measure the house, at least not that is mentioned in the report. The difference in sq footage is, as I said, an obvious mistake made on the home sketch in the tax records, where the porch was drawn in front of the house, when it actually is flush with the house, and substracts from the living space. I would certainly expect any competent appraiser to have found it.

2. I have never said that he didn't save me some money due to this. In fact, my very first post said this ". So we're figuring about $15K or so less due to this. " So not sure why you are making such a big deal that he saved me some money. I've never said otherwise.

3. My realtor says that they are trained not to use comps that are more than 500 sq ft different than the sales property. Both of the properties in the neighborhood, with the original footage we had for the house, were more than this. I realize appraisers do it differently, but that's why she hadn't originally included them.

4. One of the reasons we are pushing the seller to go lower is the recent foreclosure. If my realtor really was as dishonest as you seem to be implying, she could simply have not told me about the nearby foreclosure, which wasn't even included on the appraisal.

5. I noticed you don't have any real defense for the use of the short sale, which we've found out was completely unlivable, as well as over 3 months old, yet the appraiser, even after stating that the market isn't effected by REOs includes it as his #1 comp, and gives zero adjustment for condition.

6. The appraiser also seems to have passed over two comps that were more recent and closer, including one in the same subdivision, in favor of one that was almost 4 miles away. We can't see any reason for this other than the distant property being lower in price in comparison to those.

I realize that banks probably want appraisers to err on the side of caution, but there are some things that seem very problematic about the choices this appraiser made that all seem to reflect trying to drive the price as low as possible. I'm sorry, but I find it very hard to judge him as you describe as "honest" or this appraisal as a "good" one.

 

[maryjo313]

Thanks to his personal efforts your seller has apparently already agreed to a $13k price reduction (and they should count themselves lucky he found their error before it was too late).

Actually NO, the sellers have not yet agreed to as much reduction as we are asking for, there's a good chance still that we will not be able to convince them that it needs to come down that much.

As a matter of fact, having now been informed of these 3 sales why are they still working oh-so-hard to "help" you pay more for the property than a professional appraiser thinks it's worth? Whose side are they on, anyway?

Of course we ASKED the seller first to pay the appraised price. But we got the expected reply back of basically Yeah, you all are nuts if you think we'd drop the price that much. As we expected we'd get. So whose side are they on? They are on the side of helping me get into a house I really like. And if we just went on the basis of actually believing this appraisal, well, there'd be no chance of that happening.

 

[Delta85]

In my experienced I have found that when there is a disagreement between an appraiser and a homeowner or even a realtor that 9 times out of ten the appraiser is correct or at a minimum, closer to the actual current market value than the other parties so I admit I am biased. I admit to giving the appraiser the benefit of the doubt.

Nobody has seen the report, just the OP review of the report. There might be mistakes the appraiser made. Who knows. But lets make it short and sweet, provide 3-4 superior comparables not cherry picked based on price that support the value you believe is true to your lender or request a full review of the appraisers report or an entirely new report by a local qualified appraiser. If the comps you choose get disregarded by the appraiser the lender still retains the right to fully review his report or order a new one if they believe your comps carry weight.

If the lender avoids stepping in and taking action they believe the appraiser provided a reasonable report.

 

[Delta85]

Wow George, your determination to defend the appraiser to the end of the earth and then attack my realtor's integrity is impressive. Okay let's recap here.

1. No, he did not *physically* measure the house, at least not that is mentioned in the report. The difference in sq footage is, as I said, an obvious mistake made on the home sketch in the tax records, where the porch was drawn in front of the house, when it actually is flush with the house, and substracts from the living space. I would certainly expect any competent appraiser to have found it.

2. I have never said that he didn't save me some money due to this. In fact, my very first post said this ". So we're figuring about $15K or so less due to this. " So not sure why you are making such a big deal that he saved me some money. I've never said otherwise.

3. My realtor says that they are trained not to use comps that are more than 500 sq ft different than the sales property. Both of the properties in the neighborhood, with the original footage we had for the house, were more than this. I realize appraisers do it differently, but that's why she hadn't originally included them.

4. One of the reasons we are pushing the seller to go lower is the recent foreclosure. If my realtor really was as dishonest as you seem to be implying, she could simply have not told me about the nearby foreclosure, which wasn't even included on the appraisal.

5. I noticed you don't have any real defense for the use of the short sale, which we've found out was completely unlivable, as well as over 3 months old, yet the appraiser, even after stating that the market isn't effected by REOs includes it as his #1 comp, and gives zero adjustment for condition.

6. The appraiser also seems to have passed over two comps that were more recent and closer, including one in the same subdivision, in favor of one that was almost 4 miles away. We can't see any reason for this other than the distant property being lower in price in comparison to those.

I realize that banks probably want appraisers to err on the side of caution, but there are some things that seem very problematic about the choices this appraiser made that all seem to reflect trying to drive the price as low as possible. I'm sorry, but I find it very hard to judge him as you describe as "honest" or this appraisal as a "good" one.

I really dislike when homeowners attempt to go toe to toe with appraisers when the subject is......an appraisal report.

Your opinions on many of the choices the appraiser made don't carry much weight as it takes years to become a competent appraiser and that includes class hours, time as a trainee working with a mentor, and passing a state test. The appraiser may be doing things that are over your head. And frankly your realtors input is only slightly more informed than yours IMO based on my experience with realtors in my area.

Your realtors comment about not using homes with 500 sq. feet of diffrence from the subject is bogus. We try and utilize the most similar comps possible but we have to work with the data that is available. I've used comps 500 sq. ft. larger and smaller than my subject and even more so. I always try and bracket the GLA though.

In any case, just take the steps I mentioned in my last post. If you are really confident, put your money where your mouth is and hire a local appraiser to do a second report.

 

[maryjo313]

Comps

The thing is too, it 's so much easier these days for buyers to do their own research. I don't ever rely totally on a realtor, I pull up all the recent sales near the homes I'm bidding on with Trulia, and make my own judgements as well. As I said, I've been shopping for 3 months for a home, I've had a pretty good look at the market around here. There is NO lack of comps in this area. Looking at the home sales for the last year, within about a 1 mile radius of the house, I can find 10-12 all within 200-300 sq ft of the size of the home I am buying. The very lowest price of these is $198K. Most are closer to $210-220 and there's a couple that are probably really upgraded homes that are $20-30K more than that.

The price the appraiser came up with is $10K lower than ANY home in the last year that's close to the size I'm buying (< 300 sq ft). We're shooting to get the seller to the lower range of where the homes have sold, partly because we know they are as reluctant as we are to go back to square one with a new buyer, and since I don't have any pressing need to move and can negotiate from a strong position...but even that is going to require either getting the appraisal changed, or getting a new one.

So yeah, I really don't have much reason to question my realtor on where she's saying we should go with the price. Certainly I trust her more than the appraiser that came up with a value that appears to be significantly off of where the homes have sold for.