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  • Writer's pictureJesse Ledbetter

Why did the appraiser use THAT comp?!

The appraisal report is in, you give it a read, and there is one comparable sale that you just can't figure out. THAT property isn't like my house... why would they use that?! Today we look at some of the reasons why.

In the process of an appraisal, the appraiser must keep in mind the intended use of their client regarding how the report will be used. If that is for a mortgage to be sold on the secondary market, there are considerations that the appraiser may need to consider. For example, if there hasn't been a sale in your neighborhood in the last 90 days and the loan is for FHA/USDA, the appraiser will need to go outside of your neighborhood to include two sales from within 90 days. Those properties might stick out like a sore thumb, but there is a good reason that they are there - your loan wouldn't close without them.

Likewise, if your home is larger/smaller, lower/higher in condition or quality, has a unique feature (ie. 2 x's as many garage bays, water/railroad frontage, etc) the appraiser will likely include a sale that "brackets" this single amenity. In an ideal world, the three houses next to yours are all identical and sold yesterday, but the reality is far different. Appraisers will bracket the amenity by including a property in the report that is a little better, and a little worse in every regard in order to extract the market impact. The more unusual the property characteristic the more extreme the search for a bracketing comp becomes (expanding the search in the distance, time, and overall similarity).

Appraisers don't just include sales for no reason. Each property in the analysis is there for a purpose. With this explanation in mind, if you look at the grid long enough, the reason why will likely jump off the page.

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