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Proximity to Subject

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Tumbuktu

Junior Member
Joined
May 23, 2013
Professional Status
Certified Residential Appraiser
State
Texas
I was recently listening to a FHA Webinar and there was a mention of acceptable distance of Subject and the Comparable based on Location.

Subject Location / Acceptable Distance of Comparable
Urban / Less than 1 Mile
Suburban / Less than 2 Miles
Rural / N/A

But for certain lenders/AMCs anything more than a 1 mile for Suburban becomes problematic.

Personally I think this matter is very subjective and there should not be any hard lines. For example 0.99 Miles is within 1 mile but just a difference of 0.02 miles takes it out of one mile radius to 1.01 miles.
 
The GSEs and FHA don't have "hard stop" requirements. Just explain why distance exceeds recommended.
 
Hard and fast rules regarding comp selection are not a good idea. Different markets require different standards. I once had a lender reject a comparable that I used because it closed six months and one day before the date of valuation. The comparable that they rejected was located next to the subject and was identical!
 
Such rules are idiotic. The house next door might not reflect the same "market" ... Markets are made up of buyers and buyers relate to the cash they can spend or credit they can muster. The $1,000,000 place next to a $56,000 house isn't the same "market".

The problem is FDIC is using the fannie standard as "truth" and are suing appraisers who do not use a sale within 1 mile and less than 6 mo. old (thread is found elsewhere on the forum on that subject.)

Living in a rural area, I decides some 10 years ago, that I don't want to play this game and I eschewed the secondary market and don't regret it a bit...
 
These are guidelines, not rules. If you exceed 1 mile just explain why.

In reality, there are many assignments where one mile makes sense...the guideline is there to get appraisers to consider close proximity or subdivision comps first. However, there are many cases where the one mile guideline is not applicable or marginally applicable.

Just explain why it is exceeded...I have never had a problem with it when explained.
 
Such rules are idiotic. The house next door might not reflect the same "market" ... Markets are made up of buyers and buyers relate to the cash they can spend or credit they can muster. The $1,000,000 place next to a $56,000 house isn't the same "market".

The problem is FDIC is using the fannie standard as "truth" and are suing appraisers who do not use a sale within 1 mile and less than 6 mo. old (thread is found elsewhere on the forum on that subject.)

This is not 100% correct. When that poster made that claim an posted the complaints, I questioned him on it. I said, surely that was not the only reason why, that these reports must have been reviewed and had issues other than 6 months/one mile. If you recall the thread or want to revisit it, he responded that I was right, that those reports had been reviewed and the complaints were worded poorly.

In other words, the FDIC is not out there suing appraisers solely because they used comps over 6 months old or over one mile away. To infer that is absurd and will scare people, which is why I questioned it on that thread.

However, if it is found on review that comps were "cherry picked" to make a value, and were used from far off locations to do so, when there were far more comparable sales closer to subject that were ignored, then, the FDIC, or other parties, might have a cause for complaint or suit.

Living in a rural area, I decides some 10 years ago, that I don't want to play this game and I eschewed the secondary market and don't regret it a bit...

see above comments.
 
Just finished this yesterday. Comps 1 mile... bwahahaha.

 
The secret is to adequately explain why you have exceeded recommended guidelines.

"My research did not reveal three closed sales within one mile of the subject property so I expanded the search area to a ____ radius from the subject property"

While FNMA may think a mile is a good guideline, most buyers don't think that way...at least IN MY MARKET. Having sales in the same subdivision is good but some times that isn't always possible. You, as the appraiser, should be the deciding factor.
 
What happens if your subdivision is so large that there are comparables properties more than a mile away that are still in the SD? Look for more of the same when the ASB starts firing out its "best practices" requirements.
 
What happens if your subdivision is so large that there are comparables properties more than a mile away that are still in the SD? Look for more of the same when the ASB starts firing out its "best practices" requirements.

That's an easy one, just explain..."comp 3 is over a mile away, however it is in the subject subdivision , which is spread out over an approximate two mile radius.""

Imo , one of the big problems are the mandatory checklists or "reviews" done by computers or clerks, that automatically question any comp over a mile, even if there already is an explanation in the report.
 
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