Can You Use Too Many Comps?

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You are using an out of date browser. It may not display this or other websites correctly.You should upgrade or use an alternative browser. Can You Use Too Many Comps?

• Thread starter Thread starter Tom Wilson
• Start date Start date Aug 26, 2005

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Tom Wilson

Sophomore Member

Joined May 3, 2005 Professional Status Appraiser Trainee State Texas I do quite a few reviews and often see other appraiser's work on a more casual basis. I am beginning to wonder about using 5 or 6 comps. Sometimes, you have to use more comps because you have an oddball or some special feature; however, some appraisers always use 5 or 6 comps. Some of the most fraudulent appraisals I have reviewed had extra comps. I especially like it when they have 6 comps and say #5 and #6 aren't really very comparable. So why are they there?. I have noticed that the big boys (the old pros that have big shops and do lots and lots of work) only use extra comps when there is a reason. I am beginning to think using extra comps when they are not needed is a sign of insecurity. But then, I could be wrong. What say you? It would also be interesting if you include in your reply whether you consider yourself an old pro, a beginner, or something in between.  

Tim Hicks (Texas)

Elite Member

Gold Supporting Member Joined Jan 15, 2002 Professional Status Certified Residential Appraiser State Texas I prefer extra comps unless it is cookie cutter, slam bang appraising.  

Ray Miller

Elite Member

Joined Feb 20, 2002 Professional Status Licensed Appraiser State Wisconsin I use extra comparables when I feel I need to make a statement to the LO or UW. Like I did this morning. A what ever owner was calling and calling and saying they were going to call the state and report me if I did not get the report to their lender. (Never mind they put the appointment on hold for two weeks). So I figured that this had better be a jam up appraisal no typeo's, all comparables were tight. I put 7 in the report to show that is where the market is for a 950 GLA log home. One Hundred Thousand below what they needed to make the loan fly. I just knew this Lady would find something worng and report me to the state. By the way she was or is a real estate sales person. You see she had give me comparables over on the lake with the nice new 2500/4500 GLA log homes. Most of the time it is three with the best two held out for when they call and want additional comparables.   J

James Moore

Sophomore Member

Joined Jun 25, 2005 Professional Status Appraiser Trainee State Minnesota For 15 years I used extra comps on almost every appraisal. I also did full floor plans that showed all the counters, plumbing fixtures, etc. Then I began to take note of what others were doing- no extra comps and exterior only sketches. They got the same fee and in many cases a lot more work than I did. So I quit doing the extra work about 5 years ago. I have NEVER had a single call wanting a full floor plan or extra comps (except when the UW thought there was a reason). When you give them the best comps, why add a bunch weaker comps? Edit - I don't care how many comps you use, the UW will want another one anyway.  

Richard Carlsen

Elite Member

Joined Jan 15, 2002 Professional Status Licensed Appraiser State Michigan Working a low density market with comps ranging out to 12 miles or so, it helps to support the market levels with the extra comps. If they are not there, you will be asked for some so put them in anyway. However, they have to be relevant. Unless they are put in the grid to demonstrate something specific about the value of the subject, I would leave them out. When UW ask for listings, I scan the MLS data sheet and insert it in the report that way. I do not want an offering cluttering up my grid and confusing the UW. (We know they read only 10% of the report as it is) I find that 4 to 5 comps will usually suffice in a low density market but as I said, they have to be relevant.   R

Randy Beigh

Senior Member

Joined Jan 16, 2002 This thread is getting to the heart of a problem that I have long felt existed. Appraisers don't understand their clients or even the reasons for appraisals in the first place. It shouldn't need to be said, that if you need extra sales to support your story, then provide those sales. If, what you are doing is providing these extra sales because you think it makes for a better looking report, then you are wasting your time and your client's time. The reasons lenders order appraisals is to help them make their business decisions for making loans, as that is their business. They don't 50 pages of gibberish. If you could tell your story with one sheet of paper, most clients would love you. I used to review work on a national basis, both commercial and residential. The residential appraisers would send us fancy covers, cover letters, etc and that stuff would get trashed, since it took space in the filing cabinets. The commercial appraisers were the worst since they would include spiral binders, pages of bs, and even leather appearing coverss, all of which got trashed. These appraisers just had no understanding of their clients needs. If your client needs a sketch with all the bells and whistles, charge them and provide it. But, indeed, it is a waste of time if they are not looking at it.   T

Tiny280

Sophomore Member

Joined Jan 17, 2002 Professional Status Licensed Appraiser State Ohio Tom: I'm a "tweener" and never use more comps than are necessary. I only include comps beyond the best three when, as you said, there is some oddball feature or when the best comps are not in close proximity to the subject. For instance, the three best comps for a Log Home in this market area might be 10 - 20 miles distant from the subject, so I'll throw in another non-Log comp that is in the same general value range and in close proximity. Underwriters seem to like that little extra bit of support when some of the primary comps are on the other side of the county. Manufactured and Berm homes are treated similarly. Is it possible that the reports you are reviewing have already been through more than one underwriter before you see them? It's possible that the underwriters have already requested, and been given, additional comps before the reports hit your desk. ============= Fred Holtsberry Mid-Ohio Appraisal Services  

Judy Whitehead (Florida)

Senior Member

Joined Jan 20, 2002 Professional Status Certified Residential Appraiser State Florida The theory around here is - if you send 3 they want 4. If you send 4 they want 5 and so on. Actually, unless I exceed the "guidelines" a lot, I usually just use the best 3 I have. I try not to whine when the lender asks for another comp. My biggest clients are large banks and their loans are usually highly qualified borrowers. Some of the mortgage brokers call back so often asking for absolutely ridiculous things - had one last week that wanted us to use a $$$ estimate for the improvements the homeowner had done to the house during the last year. Huh? I told them that new improvements (carpet, paint, etc.) was market driven and did not contribute dollar for dollar and that was not part of my job. They are usually just looking for an excuse to turn down the loan.  

TC

Elite Member

Gold Supporting Member Joined Jan 31, 2002 Professional Status Certified Residential Appraiser State Pennsylvania If a house sold next door to the subject or on the same block but closed 7-12 months ago, I'll use it as a 4th. I think always using 4-5 comps looks suspicious. TC   J

Jerry Lieb

Junior Member

Joined Aug 14, 2004 Professional Status Certified General Appraiser State California Tom, I once had an underwriter tell me that if I couldn't convince him of the value with 3 comps, 4, 5 or 6 weren't going to help. (For what it's worth). There might be some special circumstances that justify more than 3, but it's rare in my opinion.  

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