comps
325) Illegal Uses
05/23/08
Good morning Henry,
I am being assigned an appraisal for a multi-family for Private Mortgage Insurance (PMI ). The lender requests an "as is " appraisal. In my initial research, the subject is listed on public records as a 2 family dwelling.
In contacting the owner to set up my appointment, I am told it is a 3 family dwelling. Checking the prior MLS listing when subject was purchased
it is noted as a 2 family style with "finished apartment on third floor." This is typical for the area, but not legal. I will check with the building department when I go to do the inspection to see if there is a permit that changed its use to a 3 family. If not, do I appraise the subject as a 2 family with an accesory apartment and note that the 3rd unit is not a legal use, or do I appraise as a 3 family unit, as it is being used, but note legality issue of third unit.
Thank you
Joe Violetta joseph_a_violetta@sbcglobal.net
Dear Joe,
This is a very tricky problem. These residences with ancillary third floor dwelling units are very common, especially in cities near universities, such as New Haven where I live. Step one is to ask the client what they want you to do. If they say to appraise it as a three family, then I would describe it as such. However, you must report in the appraisal the investigation you made just as in your question. Keep in mind that your highest and best use analysis (which is required) must be for a legal use. However, for your value estimate, you can consider the present use, but you will need to include an opinion as to how long you think that use will be permitted and how the market reacts to houses like this. The best comparable sales are other 2 family houses with an illegal third family dwelling unit as well.
H2
I am being assigned an appraisal for a multi-family for Private Mortgage Insurance (PMI ). The lender requests an "as is " appraisal. In my initial research, the subject is listed on public records as a 2 family dwelling.
In contacting the owner to set up my appointment, I am told it is a 3 family dwelling. Checking the prior MLS listing when subject was purchased
it is noted as a 2 family style with "finished apartment on third floor." This is typical for the area, but not legal. I will check with the building department when I go to do the inspection to see if there is a permit that changed its use to a 3 family. If not, do I appraise the subject as a 2 family with an accesory apartment and note that the 3rd unit is not a legal use, or do I appraise as a 3 family unit, as it is being used, but note legality issue of third unit.
Thank you
Joe Violetta joseph_a_violetta@sbcglobal.net
Dear Joe,
This is a very tricky problem. These residences with ancillary third floor dwelling units are very common, especially in cities near universities, such as New Haven where I live. Step one is to ask the client what they want you to do. If they say to appraise it as a three family, then I would describe it as such. However, you must report in the appraisal the investigation you made just as in your question. Keep in mind that your highest and best use analysis (which is required) must be for a legal use. However, for your value estimate, you can consider the present use, but you will need to include an opinion as to how long you think that use will be permitted and how the market reacts to houses like this. The best comparable sales are other 2 family houses with an illegal third family dwelling unit as well.
H2
315) Comparables from Files
05/11/08
Dear Henry --
I am appraising several condo conversions in the same building, in an area where there are very few. The only conversions suitable as comps are in another building that I did the appraisals for. Is it in violation of USPAP to use my own work as comps?
NWBR
Dear Friend,
The only data you can't use from you own appraisals is information about the subject property that you were given in confidence by the owners or client. In real life, this is quite rare.
If in doubt, you should ask the original client for permission, or see if the data is actually confidential and not also obtainable from an MLS service, assessor's records, etc. If the information is in the public domain, it is not confidential.
H2
I am appraising several condo conversions in the same building, in an area where there are very few. The only conversions suitable as comps are in another building that I did the appraisals for. Is it in violation of USPAP to use my own work as comps?
NWBR
Dear Friend,
The only data you can't use from you own appraisals is information about the subject property that you were given in confidence by the owners or client. In real life, this is quite rare.
If in doubt, you should ask the original client for permission, or see if the data is actually confidential and not also obtainable from an MLS service, assessor's records, etc. If the information is in the public domain, it is not confidential.
H2
314) Comparable Sales
05/10/08
Dear Henry,
I am in the process of completing home appraisals for a bank for a "revocable Trust and Conservatorship. Is it appropriate to use "bank owned" sales or should I exceed the 1 mile limit in order to find concventional or FHA sales. Most of the "bank owned homes" are selling for cash at a much lower price. Bank owned homes are usually foreclosurers and are considered "stress sales".
CHARLES HARVEY CHJRASSOCIATE@AOL.COM
P.S. Again, thanks for all of the information you provide in your publications and your books!
Dear Charles,
I believe it is best to use both "bank owned sales" and regular sales when they both exist in your market area. Who gave you the "1 mile limit?" I believe it is up to the appraiser to look wherever they believe the best comparable sales are located. It is not appropriate for the client to tell the appraiser where to look or what kind of comparable sales to use. While a radius of 1 mile might be preferred if there were a lot of good comps, it is not a hard and fast rule by any means.
H2
I am in the process of completing home appraisals for a bank for a "revocable Trust and Conservatorship. Is it appropriate to use "bank owned" sales or should I exceed the 1 mile limit in order to find concventional or FHA sales. Most of the "bank owned homes" are selling for cash at a much lower price. Bank owned homes are usually foreclosurers and are considered "stress sales".
CHARLES HARVEY CHJRASSOCIATE@AOL.COM
P.S. Again, thanks for all of the information you provide in your publications and your books!
Dear Charles,
I believe it is best to use both "bank owned sales" and regular sales when they both exist in your market area. Who gave you the "1 mile limit?" I believe it is up to the appraiser to look wherever they believe the best comparable sales are located. It is not appropriate for the client to tell the appraiser where to look or what kind of comparable sales to use. While a radius of 1 mile might be preferred if there were a lot of good comps, it is not a hard and fast rule by any means.
H2
308) Extra Comps
05/04/08
Dear Henry,
Recently I have been asked to provide two additional comparables & two current or pending listings. Seven comps in my opinion is ridiculous! I have been providing them at an additional fee; however, should I really just ask them to get another appraisal?
-Kiersten kiergerow@hotmail.com
Dear Kiersten,
As part of the scope of work discussion, the client may ask for as many comparable sales as they are willing to pay for. If they change the number after the scope of work has been established, you have the right to adjust your fee. That said, it is up to you to decide which comparable sales give the best indication of the value of the subject property and how much weight you will give the additional comparable sales (which may be none). Finally, only you can decide when too much work is not worth the fee.
H2
Recently I have been asked to provide two additional comparables & two current or pending listings. Seven comps in my opinion is ridiculous! I have been providing them at an additional fee; however, should I really just ask them to get another appraisal?
-Kiersten kiergerow@hotmail.com
Dear Kiersten,
As part of the scope of work discussion, the client may ask for as many comparable sales as they are willing to pay for. If they change the number after the scope of work has been established, you have the right to adjust your fee. That said, it is up to you to decide which comparable sales give the best indication of the value of the subject property and how much weight you will give the additional comparable sales (which may be none). Finally, only you can decide when too much work is not worth the fee.
H2
294) Comparable Sales & Listings
04/07/08
Dear Henry,
Whenever I had a tough question, you have always come up with an appropriate answer! OK, here's another one...
In today's changing market place, I have a large client that now requires us to use comps under 90 days old and within 1 mile. If not, they want a comment on why. I feel this is just good practice. If these "rules" are not met, they also request the use of a "pending" or "active" listing to validate the current value estimate in this changing market place. The issue comes when they also require these "pending" and/or "active" listings be used in the value estimate of the subject. My contention is that the prices in these listings are not the sold price, which may vary from the listing price and is usually unknown. Until the deal is closed, it is not a "sold" price. What is your take on this?
Thanks,
Larry Kowitt AppraisalOne@aol.com
Dear Larry,
It is well established that as part of the scope of work, the lender or client can request that you gather and consider any data you both agree upon. The USPAP says it is up to you to select the data you use to make a credible appraisal and how much weight you put on each comparable. It is a fine line but not unreasonable. The client may not tell you what comparable not to consider, use or report.
H2
Whenever I had a tough question, you have always come up with an appropriate answer! OK, here's another one...
In today's changing market place, I have a large client that now requires us to use comps under 90 days old and within 1 mile. If not, they want a comment on why. I feel this is just good practice. If these "rules" are not met, they also request the use of a "pending" or "active" listing to validate the current value estimate in this changing market place. The issue comes when they also require these "pending" and/or "active" listings be used in the value estimate of the subject. My contention is that the prices in these listings are not the sold price, which may vary from the listing price and is usually unknown. Until the deal is closed, it is not a "sold" price. What is your take on this?
Thanks,
Larry Kowitt AppraisalOne@aol.com
Dear Larry,
It is well established that as part of the scope of work, the lender or client can request that you gather and consider any data you both agree upon. The USPAP says it is up to you to select the data you use to make a credible appraisal and how much weight you put on each comparable. It is a fine line but not unreasonable. The client may not tell you what comparable not to consider, use or report.
H2
272) Adjustments
03/16/08
Dear Henry:
If you have one comparable with a concession and the other comparables have none, is the amount of that comparable's concession deducted from the sold price of all comparables? Another appraiser told me the adjustment has to be to all comparables, whether or not they have a seller concession.
Your website is very helpful, thanks for all the information.
Name Withheld by Request
Dear Friend,
Each comparable sale is adjusted separately, relative to the subject -- NOT to each other.
H2
If you have one comparable with a concession and the other comparables have none, is the amount of that comparable's concession deducted from the sold price of all comparables? Another appraiser told me the adjustment has to be to all comparables, whether or not they have a seller concession.
Your website is very helpful, thanks for all the information.
Name Withheld by Request
Dear Friend,
Each comparable sale is adjusted separately, relative to the subject -- NOT to each other.
H2
245) Updated Value Opinion
02/18/08
Dear H2,
I did an appraisal about 3 months ago, and now the cleint is asking for a recertification of value (on form 1004d). It appears that the value has gone down.
My question is when i do the 1004D, do i just let them know the value has gone down? Or do i need to provide new comps?
anthony gonzalez anthony10998@sbcglobal.net
Dear Anthony,
Whenever you are asked for a new value opinion, the USPAP requires that you make a new appraisal. However, you can incorporate any parts of your old appraisal you wish, including the comps, as long as you believe they are the best comps available as of the date of your new appraisal.
H2
I did an appraisal about 3 months ago, and now the cleint is asking for a recertification of value (on form 1004d). It appears that the value has gone down.
My question is when i do the 1004D, do i just let them know the value has gone down? Or do i need to provide new comps?
anthony gonzalez anthony10998@sbcglobal.net
Dear Anthony,
Whenever you are asked for a new value opinion, the USPAP requires that you make a new appraisal. However, you can incorporate any parts of your old appraisal you wish, including the comps, as long as you believe they are the best comps available as of the date of your new appraisal.
H2
212) Value Trends & Over-Improvements
01/16/08
Dear Henry,
I suppose I have two questions in one. I am working on a house that is good quality, they have added a detached garage ( that could be converted into living area), and they have an upgraded poolhouse with a bathroom, kitchen, etc . and a covered deck, along with a patio. I cannot find any comps with these things, other than the inground pool. Do you think this could be an over-improvement? Also, this neghborhood is not declining but it is not increasing either: one comp sold in June of 2006 for $ 550,000 and just resold for $ 550, 000.
How would you address that issue, if at all?
Victoria victoria28@cox.net
Dear Victoria,
Over-improvements are always a problem. I would not make an adjustment for the over improvements unless I had some basis to make the adjustment like you seem to have had for the pool adjustment.
The neighborhood value trend should be based on more than one resale. In many places the best evidence about value trends can be found in the MLS system that covers the market area.
H2
I suppose I have two questions in one. I am working on a house that is good quality, they have added a detached garage ( that could be converted into living area), and they have an upgraded poolhouse with a bathroom, kitchen, etc . and a covered deck, along with a patio. I cannot find any comps with these things, other than the inground pool. Do you think this could be an over-improvement? Also, this neghborhood is not declining but it is not increasing either: one comp sold in June of 2006 for $ 550,000 and just resold for $ 550, 000.
How would you address that issue, if at all?
Victoria victoria28@cox.net
Dear Victoria,
Over-improvements are always a problem. I would not make an adjustment for the over improvements unless I had some basis to make the adjustment like you seem to have had for the pool adjustment.
The neighborhood value trend should be based on more than one resale. In many places the best evidence about value trends can be found in the MLS system that covers the market area.
H2
207) One Family or Four
01/11/08
Dear Henry,
I am appraising a property that has very large living area on a relatively small lot. It was used as a 4-unit mutifamily and has been converetd to single family. Legal description stll shows a multifamily but the request is for single family. Can I use multifamily comps for single family? If I use mixed comps to get the value, having diclosing all facts, do I violate USPAP or Fannie Mae guidelines?
GENE geneshiao@earthlink.net
Dear Gene,
First, as part of the scope of work discussion, determine if the client wants the property appraised as a single family or four family dwelling. Then use only comps for the use you are appraising. Unless you determine that the Highest and Best use is a reconversion to a four family, you would value it as a single family dwelling using single family comps.
H2
I am appraising a property that has very large living area on a relatively small lot. It was used as a 4-unit mutifamily and has been converetd to single family. Legal description stll shows a multifamily but the request is for single family. Can I use multifamily comps for single family? If I use mixed comps to get the value, having diclosing all facts, do I violate USPAP or Fannie Mae guidelines?
GENE geneshiao@earthlink.net
Dear Gene,
First, as part of the scope of work discussion, determine if the client wants the property appraised as a single family or four family dwelling. Then use only comps for the use you are appraising. Unless you determine that the Highest and Best use is a reconversion to a four family, you would value it as a single family dwelling using single family comps.
H2
163) REO Comps
11/24/07
Hi Henry,
First let me take a moment to thank you for all of your help in growing my career in appraising. I own most of your books and i have learned so much through them.
My question pertains to appraisals that are reo's. When appraising a subject that is an reo sale for john q. Public which are the right comparables to use?
Andrea veit andiee22@aol.com
Dear Andrea,
If all the sales in the market area are reo sales then i would only use reo sales comparables. However, usually both kinds of sales exist in a market area. In this case i would use both kinds of sales.
Keep in mind your appraisal is of market value.
H2
P.s. i am glad that you have found my books so useful.
[editor's note: for all of henry's books, check out our distributor: www.formsandworms.com]
First let me take a moment to thank you for all of your help in growing my career in appraising. I own most of your books and i have learned so much through them.
My question pertains to appraisals that are reo's. When appraising a subject that is an reo sale for john q. Public which are the right comparables to use?
Andrea veit andiee22@aol.com
Dear Andrea,
If all the sales in the market area are reo sales then i would only use reo sales comparables. However, usually both kinds of sales exist in a market area. In this case i would use both kinds of sales.
Keep in mind your appraisal is of market value.
H2
P.s. i am glad that you have found my books so useful.
[editor's note: for all of henry's books, check out our distributor: www.formsandworms.com]