Using comps after appraisal effective date

[KenAZ]

No.

Ignoring it, using it as a pending, or not using it could be misleading. You can use sales before or after the effective date. There is no difference. A comp 1 month after the effective date is just as good as a sale 1 month before the effective date. There is NO requirement that all sales close on exactly the effective date, otherwise we would have no comps. The problem is that most of us have a 1 or 2 day turn around time, so this issue rarely is a concern. The closer to the effective date that you can get, (Before or after), the more reliable the data.

Using it as a pending, places it on the second page (Per FNMA) and uses a pending sales price ($200,000) that is much too high.

 

[Bob Ipock]

Lord, please deliver us from these appraisal board members personal opinions, unsupported and lacking common sense.

 

[TJSum]

The effective date merely refers to the opinion of value. As long as the report date is after the sale closed there is not a problem unless some market altering event has occurred.

But that is the problem, who knows what could have happened in that particular neighborhood that might have altered the market. A murder down the street, a break-in next door, layoffs at the local factory, bonuses at the local factory, on and on.

It is typical to gather and research data after the effective date, but the data should be presented as of the effective date. There needs to be a set standard and Fannie, Freddie and FHA clearly define it.

For those who have the opinion that is fine to present a sale as a sale, even though it settles after the effective date, keep in mind if that is to be the SOP, you are leaving yourself wide open for ALL changes that take place prior to your signature date, not just the ones you wish to pay attention to.

As an example, you inspect on 6/11, you write the report on 6/12, but need to wait for some agents to get back to you for confirmations of the data. The report is all ready to go, and on 6/14 all phone calls have been returned, data is confirmed and you sign and send it off with that signature date of 6/14. Two weeks later, you get reemed by a reviewer because one of your two listings reduced their price on the morning of 6/14 prior to sending your report, and they gave you a bad review because of it. I can hear the howling now on the forum if that would happen.

With your stance of the signature date being the real effective date, you are leaving yourself wide open to any and all changes prior to clicking send.

 

[Elliott]

Of course Greg is right. We aren't in Kansas anymore. We don't live in some
academic world where we debate a sale two days after the 'as of' date, "How
many sales can dance on the head of a pin after 12:01 am?"

 

[TJSum]

You can use sales either before after or during the effective date. There is no FNMA, USPAP, FHA or any other reputable entity that says otherwise.

Think about it. A pending sale of the home next door that is the same model as the subject shows $200,000 on MLS as of the effective date. It closes the next day for $150,000. You write the report and discover that this pending sold. This may be your best comp.

Why would you not use it?
Because some client decided that they don't like you to use a comp the day after the effective date?

Using it as a pending sale is misleading. Using it as a closed sale is solid and is a very powerful indicator of value. Make it comp 1 in all caps. Emphasize in the report that this is the best comp BECAUSE it closed the day after the effective date of the report. That is by far the most recent sale and the most proximate sale.

Comps dated before or after the effective date are supposed to be selected based on what the appraiser thinks is reasonable, NOT what the AMC thinks is reasonable.

The thinking that we cannot use comps that closed after the effective date is just like any other old wives tale. The rumor just keeps spreading, even though it is not true.

Why not present it as a current contract, as of the effective date, as comp 4+, show all the known details of the sale on the grid, and explain in the comment section it settled the day after the effective date, and therefore receives most weight. Nothing wrong with that, we are allowed to gather data after the effective date, but it should be presented as it stood on the effective date, that is why it is called that. The sales price would be used on the grid, not the listing price, because the sales price was the contract price as of the effective date.

In this climate no one is using only three comps anywho, so what are your really saving by calling it a settled sale as of the effective date.

 

[PropertyEconomics]

So representing it as a closed sale comparable when it didn't close before the effective date is not potentially misleading?

No ... it would absolutely be a MISLEADING report .... but you already knew that didnt you .....


I believe KenAZ should rethink his position of using sales which closed after the effective date .... the effective date is a point in time on which the value conclusion is made ... unless he has a crystal ball and can fortell the future .. future sales should NOT be used. Pendings can be used and should be labeled as such, however, until they close the true selling price is not known no matter what confirmation you have ... lots of things happen between contract date and settlement date. Sorry Ken ... you are wrong.

 

[Elliott]

Find me a judge who will not side with the appraiser who used a sale
two days after the 'as of' date as being more representative then the
sale 3 or 6 months ago.

Fannie didn't lose trillions of dollars because appraisers used a few
post-'as of' sales.

 

[PropertyEconomics]

Find me a judge who will not side with the appraiser who used a sale
two days after the 'as of' date as being more representative then the
sale 3 or 6 months ago.

Fannie didn't lose trillions of dollars because appraisers used a few
post-'as of' sales.

Im sure I could find you an appraisal board or two that would not side with you .... so you take yoru chances ... you bring your big bad judge and let the appraiser board bring the big bad Attorney General ... we can all roast hot dogs while the discuss the fate of your license.

The simple solution would be to simply reinspect the home and have a new effective date .. but most appraisers are too ..... I will stop there.

 

[Elliott]

PE,
Fortunately, judges eventually get to rule on de facto decisions made by
boards and AGs. Do you honestly think USPAP is Sharia law that calls for
the stoning or beheading of an appraiser for using a post 2-day sale as a 4th
or 5th sale with an explanatory comment. Its an art, not a science, and
certainly not a religion.

 

[PropertyEconomics]

PE,
Fortunately, judges eventually get to rule on de facto decisions made by
boards and AGs. Do you honestly think USPAP is Sharia law that calls for
the stoning or beheading of an appraiser for using a post 2-day sale as a 4th
or 5th sale with an explanatory comment. Its an art, not a science, and
certainly not a religion.

No .. I dont .. but some appraisal boards do ... so like I said .. take your chances. Good business practice is good business practice ... but you do as you see fit.