Using comps after appraisal effective date

[Michigan CG]

Is it me or this thread over analyzing a simple problem? It is clearly the best comp and two paragraphs of simple narrative solves the whole problem. Pending at time of sale, closed after effective date. Putting narrative comments in an appraisal is not rocket surgery.

Call me silly.

 

[Couch Potato]

Is it me or this thread over analyzing a simple problem? It is clearly the best comp and two paragraphs of simple narrative solves the whole problem. Pending at time of sale, closed after effective date. Putting narrative comments in an appraisal is not rocket surgery.

Call me silly.

Most seem to get bogged down in the brain science.

Any way you look at the perspective of the appraisal, such a sale should be used as a closed sale. Either you view it as a retrospective appraisal, since the opinion of value is formed on the report date, which is after the effective date, so the sale is fine to use, or you view it as a current appraisal, meaning the report date is contemporaneous with the effective date, so any sale between the two dates would also be contemporaneous with the effective date.

Only some twisted, obtuse line of thinking could possibly say the sale should not be used as a closed sale IMHO.

 

[Mike Garrett RAA]

Just happened to me. I notified the lender that my opinion of value is less than the contract price (Tidewater Notification) and the POC has 48 hours to submit any data they would like me to consider. The sales agent, not the listing agent, knew of a listing that was pending sale and might support a higher value opinion but it wasn't going to close until Friday, May 21. It would be a great comp (my thought). On Monday, May 24 I was able to verify the transaction closed. Included it as comp #4 and changed my report date. The effective date of the appraisal, per VA guidelines, is to be the date of my inspection of the subject. No change in effective date but an additional comp that closed after the effective date of the appraisal.

For the record, that sale although a great comp didn't help reach the contract price.

 

[KenAZ]

It is very similar to using a sale 1 day before the effective date. The same arguments apply. The only problem is that we have been told for so long by others that we can't use sales after the effective date. There is no regulation preventing this, just a lot of misinformed well intentioned appraisers that have been told the wrong thing for too long.

If you know that it sold the day after the effective date, then you must use it as a closed sale, as pointed out before. Your explanation in the report could state that it was pending as of the effective date, but explain that a closed sales price is considered more reliable than a pending sales price.

I know that many clients have cows, and mis-informed reviewers have cows over this, but that doesn't make them right.

 

[David Mescon]

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.

Ken is 100% correct. Utilizing a sale which was consummated after the date on which the subject property was viewed does not change the effective date of the appraisal. If market conditions changed between the effective date of the appraisal and the consummation date of the comparable, then those changes would need to be addressed and/or accounted for in the SCA grid. Many would also argue that the CD should be the reference point, not the COE, but that is another discussion altogether. Debating this is moot - it is what it is - it is the changes in the market, if any, that affect the reliability of the data, not the point in time at which the sale was consummated or contracted. Time just happens to correlate closely with such changes more often than not.

 

[Don Clark]

Can I use a comp which sold 2 days after the effective date of the appraisal? I'm getting arguments from both sides, but it is a great comp!

And, it would be a new assignment with a new effective date.....maybe.

 

[Don Clark]

Allow me to be the contrarian:

What if this pending sale closed 3 days following the effective date?

How about 1 week following the effective date?

2 weeks?

1 month?

What's the "cut-off"?

Agreed. The purpose of the effective date is to provide a snapshot in time of what occured prior to and including a set date, not what happens after that date. What if the property burned down the day after you inspected it, reported your appraisal to the client. Would you then revise your report to show the subject had burned down? I don't think so. Ask the folks who suffered through Cartina and had an appraisal just before the storm hit. Ask them how valuable it was to know what the opinion of value was before the hurricane. Then ask the unlucky homeowners who had no clue what their property was worth prior to the hurricane,and no way to prove what it might be worth.

 

[Lee Lansford]

Is it me or this thread over analyzing a simple problem? It is clearly the best comp and two paragraphs of simple narrative solves the whole problem. Pending at time of sale, closed after effective date. Putting narrative comments in an appraisal is not rocket surgery.

Call me silly.

Yes.

Simple "problem"...simple solution.

 

[David Mescon]

The purpose of the effective date is to provide a snapshot in time of what occured prior to and including a set date, not what happens after that date.

Where did you learn that? That statement is unequivocally false. An appraisal is as of a particular effective date - not before and not after. Whether the sales were consummated before or after that one date is irrelevant. If I view a property on a Monday, and a physically similar and proximate sale is consummated on Wednesday, and I write the report on Friday - it's all good, unless the market changed materially between my effective date of Monday and the comparable's sale date of Wednesday. If the market changed either prior to or subsequent to the effective date of the appraisal, I must compensate for that change. If the market has remained materially static, then I do not need to compensate for anything.

This is appraisal 101 stuff folks - not rocket science.

 

[HF Mudd]

Is it me or this thread over analyzing a simple problem? It is clearly the best comp and two paragraphs of simple narrative solves the whole problem. Pending at time of sale, closed after effective date. Putting narrative comments in an appraisal is not rocket surgery.

Call me silly.

I've got to agree with you - Silly - although I'm sure I'd have to explain it a few times to various simian telecommunication specialists.