Using Subject Prior Sale as a Comp

[Rob Lentz]

How do you feel about using the sale of the subject a year prior to appraisal as one of your comparables?

I have a property in a very exclusive new site condo development, where there are few sales to choose from. This is what I have to choose from:
Subject: 12/2006 -- $535k -- 4249 SF
C1: 09/2007 -- $490k -- 3056 SF
C2: 09/2007 -- $510k -- 3000 SF

Then, I have two listings in the development:
L1: on market since 11/2007 -- $575k -- 3300 SF
L2: on market since 3/2007, but recently reduced significantly -- $465k --3200 SF

That's all I have to go on....the market in the local area for 1/2 mil $ homes is limited in a good year. The nearest similar development is a good 15 miles away.

What would you do? (Notice the size of the subject versus the comps)

I used it - and the L/O says that it was inappropriate to do so. And of coarse, doesn't want to pay. I reminded him that the fee is not contingent on closing a loan. He says that the appraisal is not acceptable. In my opinion, the borrower's LTV is probably not acceptable. What do you think?

Basically, I concluded that the subject's prior sale was one of the best pieces of market data I have to go by. Our market is slow and in decline, so my thoughts are to use the subject's prior sale - any reason this would be inappropriate?

The borrower has added finishing touches, decor, and approx. $10k of landscape work. My conclusion was that the improvements and the market decline are cross-cancelling. After adjusting other differences my closed sales indicate a range as follows:
Subj -- $535K --0%
C2 -- $512k -- Gross:5.28%, Net 4.46%
C3 -- $520k -- Gross:7.9%, Net 1.9%

Thanks in advance for taking the time to comment,
Rob Lentz
Cert. Gen. Appraiser

 

[Obsolescent]

I've had to use the subject as a comp, but included it as the fourth/fifth comp. My first three are the best of what is available. I suspect you're right about the LO not wanting to pay because the deal appears to have gone south.

 

[Rudy Canoza]

If it's a Fannie deal, their guideline is pretty specific. You can only use the subject as Judy stated...4th or higher.

 

[David Wimpelberg]

I used it - and the L/O says that it was inappropriate to do so.

This, of course, is nonsense and defies common sense.

The absolute best piece of market data that the appraiser could ever hope for is an arms-length transaction of the subject. Ignoring it, IMHO, means the appraiser has not completed a credible analysis.

I can understand the lender's leeriness, and extra diligence on the appraiser's end for verifying the sale, but it absolutely must be included in the report and the analysis.

 

[Rob Lentz]

Thanks

Thank you so far for the replies...

However, I don't have the luxury of three comps, in order to put the subject 4th or fifth. I have 2 solds, and 2 listings - and have included all of these (along with the Subject) in my analysis.

I think it is very helpful especially in light of the subject's size compared to the available comps.

Others?

Rob Lentz

 

[lostinthezone]

Personally, I think it's of limited use. It's just too old and as already pointed out, if it's a fannie deal you can't use it as one of the primary comps anyway. To the question as to whether it's inappropriate or not enough to get paid, that's not really the LO's call is it? If he can produce something from the underwriter or lender in writing rejecting the appraisal then he might have a case, otherwise I would say you're owed.

Edit: Typically though, I would think the underwriter/lender wouldn't reject the appraisal outright, but would condition it instead, giving you some room to address the concerns if the use of the subjects sale is the true issue.

 

[Don Clark]

Thank you so far for the replies...

However, I don't have the luxury of three comps, in order to put the subject 4th or fifth. I have 2 solds, and 2 listings - and have included all of these (along with the Subject) in my analysis.

I think it is very helpful especially in light of the subject's size compared to the available comps.

Others?

Rob Lentz

Rob,

Are there any off market sales? Or, sales in a similar condo, or older than a year? Even if the only other condo is 15 miles away, I would use sales from there and explain, explain, explain. You cannot create a com(well you could but you might also go to jail). I have used comps farther away than that when none were available any closer.

 

[Rob Lentz]

No other sales

Don,
I really went hounding for other sales...when there I took pictures of every house in the development and then called those that were not showing up on the MLS. I talked to the assessor and that's all I got.

I'm going to post my email trail and get other's opinions on what next steps should be....because I requested to get the UWs conditions/rejection etc. so I could answer any questions they may have and now the loan officer is saying that "that boat has sailed and the loan is dead", i.e. which I'm reading as "No, I won't work to resolve this with you. And, I still plan on not paying you for the work you did."

So, now he's basically saying that even if the UW would accept sales from farther away we cannot even touch that.

Thanks,
Rob Lentz

 

[Rob Lentz]

LO's first email on 3/3/08

Hi Rob,
We have some issues: It appears you used the subject's house as the first comp for the 4536 Steeplechase appraisal. That basically triggered a Collateral Review at the lender (Wachovia), which killed the deal. I didn't catch the mishap until the lender had the appraisal. I can't, in good conscience, have the borrower pay you for that appraisal. Please call me to see how we proceed.

Thanks,

 

[Rob Lentz]

My Reply on 3/3/08

XXXX,

1.) The subject is one of the best comps available - it is identical to itself - read the commentary.
2.) The deal was more likely killed because the LTV is high...and the market is declining.
3.) I will do what I can to help, but as agreed, the fee is not contingent on a loan closing. It's against the law to operate otherwise.

Sincerely,
Rob Lentz