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Interacting With Appraisers; Appraisal Comp Criteria

As a lender, we are never allowed to directly communicate with appraisers before an appraisal is done. Real estate agents can, however, communicate with appraisers and many do with great skill, particularly when they meet appraisers at properties.

There a few things to remember when meeting appraisers. First, most are much smarter than people realize. When people think appraisers are not being smart, appraisers are usually just desperately trying to dance around hard and fast appraisal guidelines that don’t always allow for the results we want.

Second, appraisers do not want to be told how to do their jobs or to be unduly influenced. So interaction with appraisers needs to be very delicate and diplomatic. This is an invaluable skill for Realtors that needs to be practiced.

And finally, here are the criteria appraisers have to account for when evaluating comparable sales:

a. Size: Comps need to be within 20% of the size of the subject property. For example, we usually cannot use a 1,300 sf comp for a 1,000 sf subject property. Likewise, we cannot use a 700 sf comp for a 1,000 sf property.

b. Distance: Comps need to be within one mile of the subject property, and not over any major barriers like a freeway or a river.

c. Same Town/City: Comps need to be in the same city as the subject property in most cases, even if the comp is less than a block from the subject property.

d. Closed: Comps need to have closed in the last 90 days. Pending sales and listings are not acceptable.

e. Lot Size: Lot sizes must be accounted for too. If the subject property is on a small lot of 6,000 sf for example, a comp and a 12,000 lot will have to be downward adjusted significantly in most cases.

f. Adverse Influences: If the subject is on a busy street or abuts a school, a freeway or an industrial area, valid comps will need to have similar adverse influences.

g. Bracketing Comps: Valid comps need to “bracket” the appraised value. Hence, at least one comp needs to be priced higher than the appraised value, and one should be priced lower.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646