What is a comp check?

[Pamela Crowley (Florida)]

Basically accurate. Comp check is not defined in USPAP. That's why, when a mortgage broker asks me for one the next words out of my mouth are "what do you want me to do." More than ninety percent of the time, they want pre-determined value.

Now we are at the real issue.

Ask those wanting appraisers to do a 'comp check' to define what they want, and almost 100% of the time you will get the definition very close to what USPAP terms "predetermined value", value contingent appraisal order and appraiser's fee.

Go for the definitions people!!! Get them to put it in writing.

Register at: www.MortgageFraudWatchList.org and report them all.

 

[Jim Bearden]

Interesting answers. Actualy I've only been asked for a comp check once. That was by my best friend and he wanted to know if there was any way a million dollar house could be worth 1.5 or more. He was asking for a friend of his because he runs the builder division for one of the largest mtg cos in the country.

But I still want to know what constitutes a comp check and what does not

 

[hastalavista]

What is a comp check?

On this forum, it's an invitation to an *** kicking party.

:new_rofl:

Now that is funny!

 

[T.E. Faravelli]

Parsing words, citing definitions and debating the ethics fails to speak to the pith of the argument. What are the expectations of the participants? I find the logic of generating a SOW agreement stating the opinions rendered for the "comp check/desktop appraisal" are not for mortgage origination purposes intellectually vapid. The party solicitating the opinions are mortgage originators. What is their motivation? What is the motivation of the comp checker? Providing a service free-of-charge in expectation that it will become a paid assignment. This is a form of operant conditioning that influences and conditions the unconscious mind to bias and an outcome that will be beneficial to the recipient. It also denigrates and marginalizes the profession; why should anyone value your opinions, time and efforts when you as the professional do not? I am hard-pressed to think of any other profession, supposedly a custodian of the public trust, that behaves in such a self-deprecating manner.

 

[Brian Weaver]

Jim;

I don't know what the laws and rules are in Colorado, but in Illinois, comp checks are requested in a variety of ways and called a variety of things. What's important isn't the nomenclature or even the request itself.

When a "potential client", be it an MB, homeowner, or your best poker buddy, asks you for a value or a range of values...you've performed an appraisal. Does this mean you need to maintain a workfile? Again, I don't know Colorado law...but in Illinois, it is more than a good idea to do so.

Let's face it, comp checks don't emerge from idle curiosity. MBs are attempting to "run the numbers" to see what will work or not. When I was on staff at a large S&L back in the 1980s, we typically ran a "sensitivity analysis" on a spreadsheet to see what would happen if a large apartment complex was capped at this rate or that. Was this a form of a comp check? Sure. Was the appraisal department acting unethically? No. We were already in-house employees. We were salary. It was our job. Did we have a workfile? Absolutely.

Let's take the typical MB request: "Say, can you do me a favor? I have some nice customers that are looking for a $250,000 value on their house. They’re in Rocky Flats Subdivision. Last year the house was appraised at $235,000. Can you run some comps to see if $250,000 a realistic number?"

Before concluding that the MB has had ethical by-pass surgery, let’s dissect the request.

1. Can you do me a favor?
I’m always intrigued by favors I somehow owe in advance of knowing someone.

2. Last year the house was appraised at $235,000.
Why aren’t you calling THAT appraiser?

3. Can you run some comps to see if $250,000 a realistic number?
Sure. I can provide you a printout of all the sales in Rocky Flats for last six months.

It’s at this point that the MB begins to qualify the request. He tells you it’s a two-story with four bedrooms on a 10,000 Sq.Ft. site. They just updated the baths. Once the qualifying exchange begins…and you, as the appraiser agree to narrow the sales search based on proffered criteria…you’ve crossed the line from “favor” into appraisal-land.

The MB, sensing that you’re going to bail on the “free” info will typically offer something like, “tell you what, just run the two-story sales in the area. If you can get anywhere near $240,000…that’ll be great. I’ll still be able to do the deal and I’ll send you the ORDER.”

You think…what’s the harm? Heck, the place appraised for $235,000 last year. It has to be worth $240,000 by now. That’s only a little over 2%.

So you do it.

You run all four sales of two-stories in Rocky Flats. They range between $238,900 and $271,000. Perfect.
You fax over a page of sales on your company letterhead.

Fast forward to later that day…you receive the order. It’s even C.O.D.. You go to the property the next and find some funky hodge-podge two-story that smells of wet dog hair and cigarettes. The place is a dump. The owner shows you last year’s appraisal. It’s a nightmare. Obviously overstated by $30,000.

Now what do you do?

You take the owner’s crumpled up $275 and turn in a report to the MB at $205,000. Now comes the firestorm. The MB is furious. The HO wants a copy and you WON’T give it out because you can’t. The MB will exact revenge by turning you into the state.

It happens all the time.

In Illinois, should the report find its way to the agency…the appraiser would most likely face charges under

225 ILCS 458/section 15-10:
Accepting an appraisal assignment when the employment itself is contingent upon the appraiser reporting a predetermined estimate, analysis, or opinion or when the fee to be paid is contingent upon the opinion, conclusion, or valuation reached or upon the consequences resulting from the appraisal assignment.

Whether or not you can “win” at the state level isn’t even the point.

For $275 in rumpled cash, you wasted a half hour on the phone. You wasted another 20 minutes on the MLS. You blew three hours on the inspection. You blew another two hours writing up this nightmare. You angered an MB. You had to produce a workfile for the state. You had to contact you’re E&O provider. You had to endure an investigation. You had to lawyer-up for a conference ($1,000 deductible) and maybe came away with a consent order plus education.

You tell me, Jim. Does this sound like a recipe for success in this business?

 

[Dee Dee]

Fast forward to later that day…you receive the order. It’s even C.O.D.. You go to the property the next and find some funky hodge-podge two-story that smells of wet dog hair and cigarettes. The place is a dump. The owner shows you last year’s appraisal. It’s a nightmare. Obviously overstated by $30,000.

Now what do you do?

Unfortunately most of those who are willing to do "comp checks" would call the lender and give them a heads up that it isn't going to work out, often refunding the fee back to the homeowner or charging a smaller trip fee.

They don't seem to get it that doing this makes them advocates in assisting the mortgage broker to continue seeking out the crooked appraisers.

 

[Brian Weaver]

Dee Dee, you're right. The appraiser will make that call. But guess what, the MB still has the print-out of two-stories. The MB won't let it go. He'll play the "but you said $240,000 would be OK" card.

It rarely ends with a "thanks for killing my deal" heads-up. This is the Russian roulette game too many appraisers play when its slow.

Many appraisers don't see the consequences down the road. They rationalize that for a few minutes on the MLS...I can turn a comp check into an order.

They need to step back to see where the request is leading them.

 

[Fred]

But I still want to know what constitutes a comp check and what does not

what was wrong with my first answer. There are a range of defintions.

You best bet is always: 1) idendentify the problem, 2) identify the SOW necessary, 3) execute the scope of work necessary, and 4) complete a good report - and don't worry about whether someone calls it a comp check or a orangutan.

 

[Vegan702]

Ask your local MLS - usually that information is condidered confidential and they are very protective of it (why do you have a user id & a secret password).

Oregon Doug

You can give them client information, not agent information. Actually most MLS's post their listings on the net now anyways.

 

[Ray Miller]

Dee Dee, good answer.