Picking Comps

[maryjo313]

Seller's Reply

Hhm, my reply from earlier today didn't seem to make it on yet, so not sure if it is lost, or just not approved yet, but I'm too tired and frustrated to type it up again. Not with you George, but with these sellers. You think I don't value appraisers enough, well, you'll love this reply from them on our proposed price for the house:

"I just hunged up the phone with my seller and the apprasial came back with a much lower price and square footage which my seller like to hire another apprasial for 2nd opinion for the measurement which only cost $75 indeed.

We all know that it is very likely that different appraisers have different measurements for the same house and a lot of the times the number may vary from 100 to 150 sqft. "

I won't quote the rest of her email but it only gets worse from there, they then refuse to come down to the price I want, only coming down about $8K from the original sales price, pretty minimal considering the appraisal was $30K less. Heck, at least I never questioned the appraiser on the size issue! As I mentioned, it's looks pretty easy to verify, and I've told my agent to send them that part of the appraisal but I don't see it helping. But really how hard is it to measure a house?? To claim they can typically be that much off is ludicrous. I expect it's just about the most unlikely part of an appraisal to be problematic, particularly when the appraiser has determined the original one was wrong and gone to the trouble of explaining why.

They are prepared to put the house back on the market rather than come down to what we feel is a MORE than reasonable adjustment in price, or giving me more time to try and dispute the appraisal and try to get a higher value, which I would need in any case, so I am going to have to terminate the contract.

So as I said in my last reply that hasn't shown up, whether I agree with all the decisions the appraiser made, he did definitely do me a big favor finding this problem. It does not seem it would have made much difference how else it turned out, this mistake on the seller's part has been a deal-breaker.

 

[George Hatch]

IF the appraiser's measurements are correct and the error in square footage is the only aspect of the situation where the sellers is in the wrong then an $8,000 reduction is pretty reasonable. That means the other comps would all have to be better than the ones in the appraisal. It could happen so I'd never say never.

As for the appraisal, if you have submitted your comps to the lender and they still agree with the original appraisal that should mean something to you.

In the event this deal actually falls through and you end up looking for a different home to buy my suggestion is to get your broker to provide you with the raw data - all of it - from your new target neighborhood, preferably going back at least a year. When I say all of it I mean all of it, even the really small beaters and the McMansions that don't bear any resemblance to what you're buying. It's all useful as background information. Don't waste your time with Trulia. Your broker is getting well paid to help you - under the circumstances this is not an unreasonable request for you to make.

Read all the listings for content to see which ones were sold as foreclosure resales or short sales or other must-sell situations. See which ones commented about needing TLC or being fixers and note the relationships between those and the newer homes and the remodeled homes.

Once you see it all, that will provide you with come context for the sales you decide look most similar to your subject. Make it a point to drive by those homes to see them in real life, and maybe make some notes. Then write a little note to the new appraiser and include the addresses and MLS listing numbers for each of those 5 or 6 "most similar" transactions along with any comments you want to make about them. Don't hand them a list of 20 transactions, that's just harassment. A handful of really comparable properties is plenty.

That way at least the appraiser will see exactly what you see. They may not agree with your choice of comparables or they may rank those comps or adjust them differently than you would but you will at least get your say in at the outset when it really counts.

The old adage in real estate is that "you make your money when you buy, not when you sell". We're hopeful that by the time its all over you are able to buy well.

 

[Delta85]

I never said it was inappropriate for an appraiser to use a comp of that size.

You said your realtor told you appraisers are trained not to use comps with a 500 sq. ft. difference. That's bogus and too simplistic. Sure, in a perfect world we'd submit reports with closed sales all the same GLA. But that's not always possible. I have a report in front of me now and one of my comps is 1000 sq. ft. larger than my subject.

 

[Delta85]

I really disagree with the attacks against my realtor.

What you are getting are experienced appraisers giving you their feedback on realtors in general. Not necessarily your realtor. We don't know that person but many of us have been working with realtors for years and many of them either do not know how to choose comps that comply with standards appraisers try to follow or they are so concerned with their deal closing they will throw everything but the kitchen sink into the mix hoping something sticks.

This has been my experience so I question the data your realtor is feeding you.

 

[maryjo313]

You said your realtor told you appraisers are trained not to use comps with a 500 sq. ft. difference. That's bogus and too simplistic. Sure, in a perfect world we'd submit reports with closed sales all the same GLA. But that's not always possible. I have a report in front of me now and one of my comps is 1000 sq. ft. larger than my subject.

When I said "they" I meant she was taught as a realtor to stick with comps less than 500 sq ft apart from the home she's pricing, as long as good comps are indeed available. I wasn't talking about appraisers, and I even said that when I added right after that statement "I realize appraisers do it differently". So not sure how you got from that that it was talking about what an appraiser should do , I had merely been answering George's question about why my realtor ignored those comps in the neighborhood. Again, there's simply not any lack of comps to choose from around here, so she had provided me with a list of 5 or so from within a mile and the last 3-4 months that were closer to the size of the home as we thought it was. Given that the appraiser was working off a different size for the house, I would think it's not all that surprising that he might pick different comps regardless.

 

[maryjo313]

IF the appraiser's measurements are correct and the error in square footage is the only aspect of the situation where the sellers is in the wrong then an $8,000 reduction is pretty reasonable. That means the other comps would all have to be better than the ones in the appraisal. It could happen so I'd never say never.

Well, we are also basing it on the fact that there not only was the short sale in the neighborhood, but since the appraisal there is now a foreclosure sale as well as a second foreclosure (and that one appears to be a really cheap sale) at the end of the month scheduled as well. The 2 smaller comps in the neighborhood as well also should factor into the price. While we don't really agree with the value the appraiser came up with, neither do we think his opinion should be just thrown out completely. So based on that, we do feel the price should come down some additional amount.

When we asked the seller to provide THEIR comps, those were ridiculous (really, I have no complaints about anything my realtor has done to this point, but I can see what you mean about realtors every time we deal with this sellers agent! She is a piece of work.) She gave us comps that went all the way back to 2010, and those just happened to be very high sales prices. In an area where you can easily pull up 10-20 comparable sales in the last 3 months, to provide ones from 2010 is just absurd. That's who we are dealing with though.

I like the idea of providing our comps should we need to do a new appraisal, I'm not sure my current lender would do that. When I asked if I could request they not go through the same AMC the next go around they said they are not supposed to have a say in who is used. I don't get the impression they would let me have communication with the appraiser beforehand, but I can check. I may decide to switch to a local bank the next time though, ones that we know use local companies for their appraisals.

 

[TRESinc]

I like the idea of providing our comps should we need to do a new appraisal, I'm not sure my current lender would do that. When I asked if I could request they not go through the same AMC the next go around they said they are not supposed to have a say in who is used. I don't get the impression they would let me have communication with the appraiser beforehand, but I can check. I may decide to switch to a local bank the next time though, ones that we know use local companies for their appraisals.

you should submit your comps to your lender when you dispute the appraised value. that's really the only thing you can do. they will forward them to the appraiser for review but there is no guarantee that the outcome will be any different.

the odds of the same appraiser coming out a second time are pretty slim. the typical AMC usually keeps large rosters, however the quality of the report can vary greatly and (per examples given in other parts of this forum) is usually not the best. the local lender is your best bet in the long run, and if you can join one credit unions are usually pretty good as well.

 

[George Hatch]

The banking regs prohibit allowing borrowers or their agents to have any role in choosing the appraisers and most lenders won't even get involved with picking individual appraisers for specific assignments.

That doesn't mean the bank can't pass along borrower-developed information to the appraiser. So long as the info is provided with no strings attached, explicit or implicit, then info is just info.

If a lender decides not to do that then that's an internal decision. But just giving it to them in advance makes it a little easier to mount an appeal afterwards if the results of the appraisal turn out to be unreasonable.

Speaking as an appraiser I would much rather know what everyone else is thinking before I turn in my report than after the fact. It's easier for me to deal with differences of opinion about comps in the original report than it is to revisit the assignment a week later and on the basis of reacting to a complaint. Proactive as opposed to reactive.

 

[Delta85]

When I said "they" I meant she was taught as a realtor to stick with comps less than 500 sq ft apart from the home she's pricing, as long as good comps are indeed available. I wasn't talking about appraisers, and I even said that when I added right after that statement "I realize appraisers do it differently". So not sure how you got from that that it was talking about what an appraiser should do , I had merely been answering George's question about why my realtor ignored those comps in the neighborhood. Again, there's simply not any lack of comps to choose from around here, so she had provided me with a list of 5 or so from within a mile and the last 3-4 months that were closer to the size of the home as we thought it was. Given that the appraiser was working off a different size for the house, I would think it's not all that surprising that he might pick different comps regardless.

Appraisers and realtors have different goals. Realtors want to sell and have a bias towards a certain price and/or simply getting the deal to close. Appraisers are there to offer an unbiased opinion to their clients.

 

[maryjo313]

you should submit your comps to your lender when you dispute the appraised value. that's really the only thing you can do. they will forward them to the appraiser for review but there is no guarantee that the outcome will be any different.

the odds of the same appraiser coming out a second time are pretty slim. the typical AMC usually keeps large rosters, however the quality of the report can vary greatly and (per examples given in other parts of this forum) is usually not the best. the local lender is your best bet in the long run, and if you can join one credit unions are usually pretty good as well.

Well, this was through my credit union, but it's one I have for many years and they aren't local to me now, so they use a different appraiser versus local home sales.

Thanks yeah, I've sent the list of comps and a letter outlining why we disagreed with the appraisal, I had thought they had a specific person that reviews these but you are right, they go to the same appraisal service company so yeah, might not be a real big chance of getting a change, but might as well give it a try. I am glad for the information here so I knew not to focus on things like the price per sq ft and focused primarily on the #1 and 4 comps being not as good as newer and closer ones.