When real estate agents provide relevant comparable sales to appraisers, it certainly benefits both parties. Agents can ensure that appraisers are reviewing comparables that match their properties and, hopefully, meet the seller’s desired price. Additionally, while appraisers still must verify the information, it can save them time. Here are some dos and don’ts to follow as agents and appraisers work together on establishing comps for appraisal properties.
Don’t use comps based on price
If the agent has a predetermined value in mind, they will find comparable sales to support that biased opinion.
Do focus on characteristics of the property
Find properties that have similar square footage (including finished basements), number of beds and baths, lot size, view (e.g., waterfront), and features. Using price per square foot is ideal, especially in neighborhoods where the actual square footage of homes varies considerably.
Don’t go outside the neighborhood
Other neighborhoods may be less or more desirable, and that can affect overall value. Comparable sales should come from only the direct neighborhood in which the house is located—even if that means choosing homes that are slightly smaller or bigger to use as a comparison. Agents should never use sales from a “better” neighborhood to boost the value of an appraisal property.
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Do consider neighborhood attributes
Agents and appraisers should consider neighborhood attributes that may increase or decrease the opinion of value, including but not limited to:
The school system
Style and quality of the homes in the neighborhood
Price range of the homes in the neighborhood
Amenities (e.g., public parks, greenways, or pools)
Access to major highways and public transportation
Don’t pull comparables on old sales
If agents pull data from 6 to 12 months ago, they may be tempted to choose the highest sales and focus on those. That’s a mistake, because recent factors could be driving down home values in the area.
Do use comparable sales from the past 3 months
A tighter window will provide a clearer picture of what’s happening in the market right now. If more recent comparables aren’t available, go back further. For example, that’s common in sought-after neighborhoods where turnover is low.
Agents sharing comps with appraisers can benefit both parties. However, be sure to follow these dos and don’ts to help ensure that relevant comparable sales are established.