What constitutes "waterfront" property

[tbliss86]

I live in Texas and our home is lakefront property. I recently had an appraisal come back on our house that I think is not an accurate appraisal. The first comp that was used by the appraiser for a comp is not lakefront property. It sits on 5 acres and has a pond in the back. What is the definition of waterfront property?

 

[Hamlet]

Were the other comps in the report waterfront properties? Was there an adjustment for the difference on the first comp? What were the comments the appraiser made about this comp in the report that explains why they used a comp that was not waterfront?

Sometimes perfect comparable properties are not always available for analysis, but this must be explained and be adjusted for in the report.

 

[Dee Dee]

I live in Texas and our home is lakefront property. I recently had an appraisal come back on our house that I think is not an accurate appraisal. The first comp that was used by the appraiser for a comp is not lakefront property. It sits on 5 acres and has a pond in the back. What is the definition of waterfront property?

Is it possible that the appraiser chose the comp because there was a lack of recent sales of waterfront properties similar to yours?

 

[tbliss86]

The other 2 comps were waterfront but there was no mention that the first was not. In fact, she noted it as waterfront on the appraisal. My neighbor is a realtor and we were able to pull up 5 other waterfront comps that were actually more recent sales that the appraiser listed.

 

[Walter Kirk]

It seems as though the appraiser considered the lakefront properties and the pond front property to have equal market value. Do you have any reason to doubt this?

 

[Mike Plumlee]

My neighbor is a realtor and we were able to pull up 5 other waterfront comps that were actually more recent sales that the appraiser listed.

Don't assume that "more recent sales" = better comparables. They may be, but appraisers are to select the "best" and most similar comparables. Sometimes that may mean using more dated sales. "Recent" is what the underwriters like but they not be the best indicators of value for your home. You didn't mention if these other 5 more recent sales were of the same quality, age, size, and condition as your home. If they're not then that may explain why they were not in the report.

Second, there is no universal definition of waterfront. In Texas, it could mean abutting a lake, the Gulf of Mexico, a bay, or even some canals. It's not been my experience that it would apply to a pond completely contained within someone's property. That being said, the term "waterfront" has an implied general use and that would be that it "fronts water", which usually means to the rear of the property. Sounds better than waterrear doesn't it? Did the appraisal explain or discuss the location/site/view characteristics or differences?

 

[Dee Dee]

What, if any, similarities did the pond-front property have to your property?

I guess what I'm wondering is this...are the other waterfront properties that you and your realtor friend consider as "comps" also similar in other aspects... such as square footage, age, quality of construction, views, etc.?

Not that I'm saying it's the case here, but if all of the waterfront comps that you and your Realtor neighbor found were SUPERIOR to yours, perhaps the appraiser had to look for a comp that was similar in aspects OTHER THAN the waterfront site.

 

[VolcanoLvr]

I deal with numerous lake, river and saltwater 'waterfront' properties. Quite frankly, I question the competency of the appraiser who would use a 5 acre parcel as a comp for a waterfront property, especially since other waterfront properties were apparently available.

This is a situation where it's possible that a 'technical' problem has been discovered in a report. I believe you have the right to discuss this report and the potential other waterfront sales with your lender. Lenders cannot 'shop' for the highest value from appraisers, but they can question the accuracy of comparables...especially in a situation like yours.

If the other waterfront sales are indeed similar to your property and have sold in a time period close to the inspection date, the lender should query the appraiser as to why they were not used.

It may be that a second appraisal report should be done so that your property is properly represented.

Don't contact the appraiser yourself. Work thru the lender. But make darn sure that you have proper additional sales before you do.

 

[Mztk1]

My first question is, What is the utility of your lake? The definition of a lake is a large body of water surrounded by land, and the definition of a pond is a body of water surrounded by land, smaller than a lake. So a lake is a large pond, while a pond is a small lake. Large and small are subjective assessments. Value difference in my markets often come down to utility. Can you ski on your lake? Are motor boats allowed? The more activities one can do on a given lake compared to any other lake makes a large part of the value difference. In my area, if I compare a ski-lake to an "electric motor boat only" lake, I'd have to seek out the market reaction difference. A large lake in my area that is limited to only fishing, can be equal to a pond where there are fish, and very inferior to a smaller lake where skiing is allowed.

My other point, though, is, there are two ways to tackle an appraisal problem. An appraiser can pick the three most similar sales in the market, or the appraiser can select the three most similar sales that bracket the subject's overall appeal in the market. This can lead, rightfully, to the use of different comparables from one appraiser to another. The latter method is known as "the bracketing method" and is what FHA requires.

Generally, in bracketing, the appraiser determines a probable range of value for a property, using qualitative techniques to a pool of sales. This pool is divided into two groups: Those superior to the subject, and those inferior. To bracket the subject's appeal, one from each group must be selected, and the third can would be the most similar sale to the subject regardless of which group it is a part of. It could be that your appraiser believed the 5 acre sale with a pond to be the most similar and best indicator from the inferior pool of sales. It is a judgement call. But my opinion is simply if one of the comparables in the report is superior to your house, and one is inferior, and both are market sales, then the appraiser more than likely set up the logic puzzle in a sufficient manner, and the value is going to be within a reasonable, acceptable range - often even if larger mistakes are made.

 

[CANative]

If your property fronts a recognized recreation type lake and the comp sale is a rural Texas property with a mudhole ag or retention pond it's not an appropriate comparable sale.

How about this one from one of my files? Pond or lake? It's totally within the property boundaries. Can you ski on it? Of course. It's your lake.

See the house? It's center frame. The blue-ish area where the lake juts into the hills.