Can a house appraiser (US) use local asking prices as comps?
October 16, 2017 7:04 PM Subscribe
I am in a legal dispute over the value of a house in PA. I want the value to be lower, the other party want it higher. We are therefore using appraisers. The report from the other party's appraiser came in, and it's a little higher than expected. On closer inspection, in calculating value from comparable sales in the neighborhood, it appears that the other appraiser has included some asking prices (i.e. pre-final sale) in the report, and these are being represented as actual closing prices.
Is this normal practice? - I'm assuming not. The asking prices are pushing up the appraisal by about 20%. I'm assuming that final sale prices could be lower. Could I challenge these higher prices? Thank you for any advice!
Is this normal practice? - I'm assuming not. The asking prices are pushing up the appraisal by about 20%. I'm assuming that final sale prices could be lower. Could I challenge these higher prices? Thank you for any advice!
Best answer: I am on my town's Board of Appeals where people dispute the assessed value of their homes. I spend a lot of times talking with listers, homeowners, and assessors. While sometimes people will look at asking prices if there are literally no other equivalent comps or the market is deadly slow, these are not really considered legitimate measures of value and I wouldn't accept them in a situation like this one. Agree with praemunire, they are often looked at but not considered "authoritative"
posted by jessamyn at 7:18 PM on October 16, 2017 [4 favorites]
posted by jessamyn at 7:18 PM on October 16, 2017 [4 favorites]
Response by poster: Thank you, that was quick! - That sounds like a good approach, and a good way to make the argument ('not authoritative') without being too confrontational. I think that I just need to point that out.
posted by life moves pretty fast at 7:40 PM on October 16, 2017
posted by life moves pretty fast at 7:40 PM on October 16, 2017
Best answer: Appraisers look at listings because they can show the direction of the market: lower than recent sales and it's on the decline, higher than recent sales and it's going up. There's also a technique called "time correction" which can make the effective value of the comps go down or up. Time adjustment could be applied against sales that occur after the effective appraisal date, e.g., when a house is being valued as of the death of its owner.
That said, I'm pretty sure there's supposed to be at least 3 closed sales included among the comps in addition to any listings or pending sales they also rely upon. So if homes regularly sell for more than their asking prices, as occurs in overheated markets, the appraiser could potentially justify weighting asking prices more heavily. However, I can not recall ever seeing an asking price "represented as actual closing prices," as you put it. That seems deliberately misleading.
In your rebuttal, don't just point out the listing-vs-sales prices impact. Examine the extent to which the comps are truly comparable: think about the neighborhood, traffic volume, noise or other irritants, and other such factors that go beyond the structure itself. Find better comps that support your position. The reality of appraisal is that it's a low margin profession and there just isn't time to do much more than inspect the subject property and then look up other properties online. If you do some digging, you can probably find other evidence to challenge it. Also look at different ways of interpreting the data, e.g., for example, be mindful of whether square feet are being counted consistently. Lastly, ask your appraiser for help.
You may want to comb through The Appraisal Institute's guidelines to help you craft your rebuttal.
posted by carmicha at 7:42 PM on October 16, 2017 [3 favorites]
That said, I'm pretty sure there's supposed to be at least 3 closed sales included among the comps in addition to any listings or pending sales they also rely upon. So if homes regularly sell for more than their asking prices, as occurs in overheated markets, the appraiser could potentially justify weighting asking prices more heavily. However, I can not recall ever seeing an asking price "represented as actual closing prices," as you put it. That seems deliberately misleading.
In your rebuttal, don't just point out the listing-vs-sales prices impact. Examine the extent to which the comps are truly comparable: think about the neighborhood, traffic volume, noise or other irritants, and other such factors that go beyond the structure itself. Find better comps that support your position. The reality of appraisal is that it's a low margin profession and there just isn't time to do much more than inspect the subject property and then look up other properties online. If you do some digging, you can probably find other evidence to challenge it. Also look at different ways of interpreting the data, e.g., for example, be mindful of whether square feet are being counted consistently. Lastly, ask your appraiser for help.
You may want to comb through The Appraisal Institute's guidelines to help you craft your rebuttal.
posted by carmicha at 7:42 PM on October 16, 2017 [3 favorites]
Response by poster: Thank you everyone - good advice, as always!
posted by life moves pretty fast at 6:03 AM on October 19, 2017
posted by life moves pretty fast at 6:03 AM on October 19, 2017
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posted by praemunire at 7:17 PM on October 16, 2017 [1 favorite]