We recently had an appraisal come in $25,000 under contract price – and the agents were irate!
They sent us comps that they insisted the appraiser should correlate to – but: (1) the comps were in another development a few miles away; and (2) the comps were over 20% larger than the subject property, so the appraiser could not use either of them for reasons I explain in this blog: Comparable Sales Appraisers Can & CANNOT Use.
WORST OF ALL though – the agents wanted our appraiser to conveniently ignore recent and nearby comps from the same development that did not support their value conclusion.
We tried to explain that appraisers cannot simply ignore the inconvenient comps but they did not want to accept that reality. In any case, it prompted me to re-post this blog.
MINOR SQUARE FOOTAGE DIFFERENCES
As an aside, the agents insisted that one of the reasons the appraiser was “clearly negligent” was the fact that his square footage (gross living area) estimate differed from county records by about 50 square feet.
We explained that appraisers always do their own measurements b/c county records are often wrong, and that appraiser’s estimates almost always differ from county records.
We further explained that square footage differences of less than 100 square feet usually have no effect on value estimates anyway.
The agent sent us numerous comps that would have supported value beautifully – but for the existence of more recent and more similar comps.
The agent, unfortunately, sent us comps for much newer homes that had closed eight months earlier. If there were no other comps available, the appraiser could have used them.
But, there were several comps that sold for much less, that were closer in age, and that closed within four months of our appraisal date – arousing all kinds of concerns.
WHY AGENTS NEED TO SHARE LOW COMPS – WITH EXPLANATIONS
In this blog, Why Agents Need to Share Low Comps, I talk about a particularly low comparable sale that should not have been ignored b/c there was a very strong explanation as to why it sold for so much less (the entire home smelled like cat urine).
There was no mention of that in the MLS or anywhere else, but most of the agents in the area were well-aware of it.
The point I was making again is that it is often better to employ low priced comparables, with strong explanations in regard to why they sold for so little, than it is to ignore them.
The reason to share low comps with explanations is b/c both human and automated reviewers will always see ALL of the low comps.
If low comps are ignored, suspicious underwriters will call for appraisal reviews; suspicious review appraisers will sometimes cut values significantly if they sense anything is awry; and automated appraisal review software will assign too high of a “risk score” to the appraisal, making it unusable in any case.
