Review appraisal question

[H. Robert Murray III]

Just wanted to run this by yall, I am comfortable with my opinion on how to handle this, but wanted some second opinions.

I am doing a review appraisal on a $1,000,000 property in west Houston,TX with a 1.25 acre site. This market, the Memorial area for those who are familiar with Houston, has expensive land values, high land to value ratios, many new homes being built on reclaimed sites, etc.

The appraisal that I am reviewing is OK except that the dwelling for Comp#1, which is an $800,000 sale with a 1.25 acres site, and a 05/02 closing is razed, scaped clean probably last month. The appraiser may or may not have any knowledge about the this subsequent action after the closing. I could assume this appraiser took comp photo before the demolition or knew about the situation and did not make a comment in the appraisal report and used the MLS photo for comp picture.


The sale is reasonably comparable to the subject, but do you think an underwriter would have any concerns with a comp with this situation.

As a review appraiser, I will just state the facts and comment on the sales validity at the time of closing. And also state how is makes an excellent and supportive land sale.

Thanks for the input.

 

[Jeff Horton]

I don't see a problem. After all the comparable was used as a sale data, not what they planned on doing with it after they bought it.

I once was appraising a mobile home. Couldn't find one of my comps. The mailbox was there but not trailer. I assumed someone bought it and then moved or sold the unit because they wanted the land. I snapped a photo of the lot showing the mailbox. Somehow I found out the unit had burned a few weeks before.

The sale was a good sale and I needed it and I used it anyway. I don't remember if I came up with an old photo or not. But it was a ligimate and comparable sale and no one ever said a word.

 

[Restrain]

I have a bunch of these in the Dallas area. Bungalows selling for $550,000, with the home selling for teardown at $475,000 (example). It would appear that a comment should have been made and some research conducted. One determinate would be how soon after the sale was the appraisal done that used that sale. If there was a significant period of time, then I would have a problem. I see numerous properties that are existing homes but have builder for-sale signs touting a new custom home site. I would check the listings and see if this sale was relisted as a builder homesite. Finally, if this is the trend and the appraiser did not comment to the fact that this sale may well be a teardown due to the price of the sale, then I think I would make a comment.

 

[Mike Garrett RAA]

The fact the purchaser of the comparable was planning to raze the improvement most likely was not disclosed. I think the appraiser would not have known that either. What does the photo show?

My wife's sister had a home in Redondo Beach. The lot was very small...25' by 100' but it had an unobstructed ocean view. They sold the house for $400,000 and the purchaser immediately tore it down to build a bigger nicer house. I just couldn't fathom a $400,000 2500 square foot lot. LOCATION, LOCATION, LOCATION!

 

[Oregon Doug]

Assume nothing.

Compare the MLS photo with the appraisal comp photo - if he used the MLS photo - there is a problem (MLS copywrite), appraiser certified that he did "observe" the comp. If it's not the MLS photo then you have to accept the certification and believe that he did observe the property.

As part of your review, you will have to confirm the sale data. Verify when the home was razed and the terms of the sale if you can (was the cost to raze the home included in the purchase price?). Compare the date the home was razed to the date of the appraisal. Was the appraisal completed before/after the date that the comp was razed? If after and that information was omitted from the appraisal, then you have a problem (read SR 1-1(b) about error of omission).

On the other hand, it may all be fine but that's likely one of the reasons that you are reviewing it.

These kinds of things do happen. Sometime back in the early 80's (that's 19, not 18) I appraised a home in the hills above Berkley, CA. It was a sale and I had three really good comps within a couple of blocks. There was a major fire in the Berkley hills the very next day that wiped out several hundred homes - the subject and all three comps included. Of course the sale fell through but no one mentioned that to the lender that was processing the loan down in LA. Because it was a jumbo loan, they automatically sent the appraisal out for a field review. I spoke with the reviewer afterwards over a beer.

Oregon Doug