Calling all appraisers, underwriters

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Share your knowledge, bridge the gap . . .

As a newer agent eager to become the best darn real estate agent I can be, I am always reading, learning, watching.  One thing I have learned very recently is that the methods a listing agent uses to come up with their "CMA" is very different from the way an appraiser arrives at their opinion of value. 

Twice now, I have watched as more experienced agents have had to give their sellers the bad news that the appraisal came in below the contract price.  I noticed that both agents used different comps than the appraisers did.  And after looking at some of the differences, I realized that both agents had no clue what the appraisers look for in a comp. 

The seller says, "but my agent said it was worth $xxxx!".  The buyer says, "I'm not paying a penny more than the appraiser says it's worth!"  The agents take to drinking because the deal fell apart. (not really, but it's tempting)

So for the sake of helping us all to be smarter listing agents, I was hoping you would answer a few questions:

  1. What are the most important things to look for in the comps?
  2. How close to the subject property should the comps be?
  3. How much difference in sq. ft. is acceptable?  Also, are you looking at total sq. ft., or only above ground sq. ft.?
  4. How many years age difference is acceptable?

I appreciate your comments.

Posted by

Stacie Colclasure

Real advice. Real answers. It's Real Estate simplified. Helping buyers and sellers negotiate and manage their real estate transaction successfully.  

For real estate help in the Bethalto, Wood River, Alton, Godfrey, Edwardsville areas email Stacie at

Comments (36)

Sara Goodwin
Ashcroft & Associates - Portland, OR
Portland, Oregon Appraiser

Stacie -

You are correct that an appraiser must make some assumptions about the inside of comparable properties, but we are fortunate in the area as most of our Realtors take up to 15 interior photos (possibly more if also listed on their personal web site).  This is a huge improvement on our abilities in comparison to the past when posting even exterior photo on MLS was rare.

Kenneth hit it on the head when he mentioned doing absorption rate analysis in the immediate neighborhood and competing properties.  We can look at blanket city wide analysis provided by our MLS, but that does not look specifically at different neighborhoods and so as appraisers we are expected to dig deeper. 

I wish you the best on your issues, but I see the appraiser's point.  It is difficult to justify using a properties that have over 500 sf of above ground difference. 


Jul 11, 2008 05:39 AM
Stacie Colclasure
Gateway Holding and Referral Company - Bethalto, IL
Realtor, Bethalto, IL

Sara - I wish that were the case in our market.  Unfortunately, we still have a lot of agents who think only one photo of the exterior is all that is necessary.  And of those who do take more, maybe half are not good quality photos.

Anyway, on the rest of the issues with this particular appraisal, I don't necessarily disagree with the appraiser.  An agent can have a "gut feeling" about the value but the appraiser has guidelines to follow in order to justify the value.  They're not supposed to just make stuff up in order to come in at higher value.  Let's just say that I understand these things better than the listing agent.

BTW, thanks for the feature!!  :)

Jul 11, 2008 06:04 AM
Stacie Colclasure
Gateway Holding and Referral Company - Bethalto, IL
Realtor, Bethalto, IL

o.k. confession time.  I started out wanting to be an appraiser but went into sales instead.  I absolutely love what I do and don't think I will ever get into appraising.  But I am still interested in learning all I can about the different aspects of the transaction.   I find the more knowledge I have the more confident I am in what I do.

I appreciate all the comments and hope to hear from more professionals out there.

Jul 11, 2008 06:15 AM
Kenneth M Rossman
Appraiser, Ken Rossman - Boynton Beach, FL
FL Certified General Real Estate Appraiser #RZ3504

An analysis could be as simple as charting at least dozen or so sales on a basis of sales price per square foot for each respective subdivision or neighborhood to offer substance to your argument that one area commands higher prices than another.

I have no suggestions re: appraisers not having as good info (access) as Realtors - all we can do is use the tools we have at our disposal to the best of our ability.

Jul 11, 2008 06:50 AM
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

This is a great discussion!!! As you may know, I got blasted last week because I stated that real estate agents are better at pricing homes FOR MARKET than an appraiser would be. So, this topic is rather near & dear to me.

Anyway, I have some software that somewhat mimicks (sp?) the appraisal process. I was trying to price a $600,000ish home. By just adding (or subtracting) one comparable, the "value" changed by $25,000. SO MUCH depends on the comparables chosen. This doesn't really apply in your situation since you don't have any, but when you do, this is one of the most critical pieces of the puzzle, it seems.

Jul 11, 2008 12:13 PM
David Hintz
Accurate Appraisals & Consulting of AZ - Maricopa, AZ

Jennifer  -  Good to see you here!!!!!  I do believe I was one of the blasters and I did try my best to be nice about it, more so than some of the others I read.  Much does depend on the comparables chosen and appraisers are required to abide by the governing process when preparing an appraisal, whereas Realtors don't for CMAs.

Kenneth  -  What I was trying to do is provide a condensed version without going into a lengthly detailed appraisal seminar.  I also do an absorption analysis on all appraisals covering both all comparables and all residential properties in the neighborhood, market area, and zip code area levels and in some areas the city level, R/E cycle trend analysis covering the past 10 years, and include adjusted active listings, LPSP ratio, regression and time adjustments.  I also automatically include the cost approach in all appraisals even though it is not requirered and in most cases not requested.

Paired sales is a flawed technique (contribution and buyer preference is better) due to the fact that no two properties are identical even in a track home development with limited models for buyers to choose from, but it can be used to get a reference as to what a particular component contributes to the overall value and an understanding of what the market in general dictates as a contributing value to form a final opinion, also based on acceptable procedures and/or techniques by one's piers within an appraisers region or area of operation, which differ from one region to another.  As you said - "all we can do is use the tools we have at our disposal to the best of our ability".

Sara  -  Regarding split-level or tri-level homes, in my area the portion below grade is included in the GLA.  Again, as stated above, it is acceptable and common practice to do so.  There are a limited number of subdivisions with these types of homes and were buildt during a time when the builders (at that time) were building homes with a more modern appeal for that era from the post war cracker box style.  That style is no longer considered practical or "in vogue".  Some builders have included regular basements in new homes over the past 10 years or so, and in those cases the basement is not included in the GLA.  There again market preference and influence of buyers relocating from other regions.

Stacie  -  I'll contact you about your question.


Jul 11, 2008 03:07 PM
Loreena and Michael Yeo
3:16 team REALTY ~ Locally-owned Prosper TX Real Estate Co. - Prosper, TX
Real Estate Agents

This blog definitely deserves a feature and its overwhelming GREAT comments/ responses!

Jul 11, 2008 03:53 PM
James Graner
Residential Services: - Saint Charles, MO


Glad you are thinking and you have the right questions. Each answer is subjective and would depend on the market area of the property being appraised. The best answer I have found over 15 1/2 years is if you find an identical comparable, it might be a good one.

Jul 12, 2008 08:20 AM
Phillip Dwyer
Dwyer Home Appraisal, LLC - Las Vegas, NV


Here are a few more things to consider:

1.  Market exposure/days on market.  In the market analysis done in the appraisal process, appraisers are looking for typical marketing times.  A property that has sold in an unusually quick time may have been a distressed sale.

2.  Seller Motivation

3.  Exterior obsolesence.  Does the house have lake frontage or does it back to a busy street?

Jul 16, 2008 07:03 AM
Stacie Colclasure
Gateway Holding and Referral Company - Bethalto, IL
Realtor, Bethalto, IL

Question: What about using foreclosures as comps?  Would those be considered "distressed" sales?  Or let's make the question a little more challenging.  Suppose you have a bilevel and in the same neighborhood, only two other bilevels have sold in the last 6-12 months.  However, they were both foreclosures.  Is it fair to use them as comps? 

Jul 16, 2008 10:33 AM
Stacie Colclasure
Gateway Holding and Referral Company - Bethalto, IL
Realtor, Bethalto, IL

James - In your 15 1/2 years experience, how many times have you been lucky enough to find an identical comparable?  That seems kind of like finding a needle in a haystack!

Phillip - As far as seller motivation or property that sells quickly, how does the appraiser know the answer to either of those?  I had one property sell the same day it went on the market because the seller told his co-worker that he was going to sell his house and that person told another co-worker who he knew would be interested in the house.


Jul 16, 2008 10:51 AM
Michael Zollo
Coral Springs, FL
Certified Residential Appraiser, South Florida, FH

Stacie- One thing you need to look at, are foreclosures and short sales the most common sales in the subject area? If so they must be used, if not you can use them as distress sales. You could put in an addendum stating why you did that and the underwriter will still ask for 2 similar style comps that closed in the past 3 months!! I just finished a report last night, in a depressed area, that 3 of the 4 closed sales I used were foreclosures. The home was also in disrepair and was down the block from a EPA Super Fund site. Talk about hitting the trifector!

Jul 16, 2008 10:52 AM
Stacie Colclasure
Gateway Holding and Referral Company - Bethalto, IL
Realtor, Bethalto, IL

Michael - Foreclosures and short sales are not common in the subject area.  And the challenge is still that there were no other bilevels that sold in the past 12 mos.  So now what?

I bet you were glad to get that report done!

Jul 16, 2008 11:01 AM
Phillip Dwyer
Dwyer Home Appraisal, LLC - Las Vegas, NV


Appraisers should verify the sales data with parties to the transaction.  This can usually be done with a simple phone call to the listing and/or buyer's agent.  Although, sometimes it may be necessary to knock on some doors.

In the market analysis, expired and withdrawn listings may also be considered.  If a property was listed on the market for $200,000, had typical market exposure, but was withdrawn or expired sometime after, is it worth $200k?

Jul 16, 2008 11:24 AM
Michael Zollo
Coral Springs, FL
Certified Residential Appraiser, South Florida, FH


I won't be out of a declining market for 3-5 years, unless I move out of state. As for that report, it took almost a ream of paper to complete, with the EPA reports and all, not very green friendly.

For your report are there any active or pending? If so get 3 closed sales of homes similar in size and bed and bath count, use them as 1-3, add the pending or actives as 4 or 4 & 5 if more then 1, and use the foreclosures as your last comps. You need to explain in detail why you used those comps and all adjustment you made. If you are in a declining market,, I would not make an adjustment for time or date of sale, because the sales price has already been discounted, again disclose it in the addendum.

I hope this helps, I would listen to any answers, Sara, David or Kenneth have, as they have more experience then I do.

Jul 16, 2008 11:47 AM
Richard Glesser
North Country Appraisal Services - Gaylord, MI

Here's a couple quick ways to understand the appraisal process:

1) Take a (or several) appraisal classes.  They're generally offered locally and are plentiful on the internet.  Since education requirements for licensing and relicensing have substantially increased, there are many from which to find interesting topics.

2) If you have some slow time (winter is a dormant season in Northern Michigan), seek out a local appraiser and shadow them.  We spend hours driving and generally welcome the company and conversation.  Spend a couple days riding with me and I'll tell you more than you wanted to know about appraising - as well as many other topics on which I have opinions.

3) Probably the easiest, when taking the prelicensing class for your real estate license, actually pay attention and learn as much as possible.  Too often these classes are viewed as an obstacle to entering the business.  Every location I've visited has the school or classes known to be the easiest to get through to get your license.  Skip those and take the hard ones taught by qualified instructors.  I personally believe classes are best when taught by a professional trained and practicing in that field.  Paris Real Estate School in Burton, Michigan (near Flint) is designed on that theory.

Jul 18, 2008 09:58 AM
Stacie Colclasure
Gateway Holding and Referral Company - Bethalto, IL
Realtor, Bethalto, IL

Richard - Thank you for your comments.  I really would like to find a good appraiser to hang around with.   I do know what you mean about the prelicensing classes.  I was fortunate enough to have an instructor who's been a realtor for 20+ years.  But there was another instructor who rumor has it that he would tell the students ahead of time what the answers would be for the final test!

Jul 18, 2008 10:12 AM
Greg Myers
G L Myers Real Estate Services - Chapel Hill, NC

Stacie, obviously I don't have the specifics of your bilevel sale, but it sounds to me like the appraiser failed to do a good job. Improperly valuing space that is partially below grade is a common flaw for poorly educated appraisers. I've seen appraisers be so foolish as to not attribute any value at all to the lower portion of a bilevel in spite of how typical buyers view the space.

To not include any sales in the same subdivision is a serious flaw IMHO. At a minimum one should be included to demonstrate the relationship between the subdivision where the property is located and the subdivisions where the more physically similar sales are located.

While you cannot chose an appraiser for the lender, you should insist on the use of a local appraiser. If the appraiser's office is located more than a 30 minute drive from the property in a typical suburban or urban area, they likely do not know your market well. Appraisers that are not familiar with the local market don't usually chose the best comparable sales, they chose sales based solely on some arbitrary formula like within ±150sqft., within the last 6 months or other mindless nonsense in order to avoid questions from an underwriter rather than giving the best supported opinion of value.

As MLS systems consolodate, many appraisers expand their teritory to match whether it makes sense or not. Whenever possible check, or have someone else check, the appraiser's ID when they inspect the property. Many less than honorable appraisers will send a trainee to do the job, and then lie on the report claiming they inspected the property. That will often result in very poor comparable sale selection too. Such appraisal reports should be turned in to the state appraisal board with a complaint.

The most common flaw I see in comparable property selection by agents doing a CMA is fail to include slightly inferior properties to balance the view of the market. If every property compared is as good or better than the one you want to sell, the list price will likely be too high. As much as a high list price appeals to a seller the first couple of weeks their house is on the market, it depresses them doubly so when their house sits on the market for months or the deal falls through do to appraisal problems.

Jul 18, 2008 10:43 AM

As an appraiser, I think it's also important to point out that because of recent economic factors, the lenders we are hired by are now requesting that we include at least 3 closed sales within 90 days.  Fannie Mae already requires us to comment if we use a sale over 6 months old, or over a mile away from the subject, but in areas where prices have declined the lenders tend to add their own additional guidelines.  Most lenders are also requiring that appraisers include active listings as well as closed sales.  Of course, as an appraiser, I will include the closed sales which are the most similar in my opinion, and I will make adjustments for GLA, site, amenities, etc, based on the available data.  Because the market has cooled in our area, there are fewer sales available to utilize as comps. In a market like the one I happen to work in, the Florida Keys, there is not a lot of uniformity to start with, so it is not uncommon to utilize sales which require adjustments that will exceed Fannie Mae guidleines.  The appraiser has to be able to clearly communicate the reasoning for selecting specific sales as comps and also has to justify the adjustments for differences between the comps and the subject.  The appraisal is subject to review, and the appraiser has to be able to defend the opinion of market value provided.  If you think the appraisal is flawed, you could hire an appraiser to provide a USPAP compliant review, and submit that to the lender.  Of course, the review appraiser may agree with the original opinion of value. 



Jul 19, 2008 10:05 AM
Sara Goodwin
Ashcroft & Associates - Portland, OR
Portland, Oregon Appraiser

Hi Stacie -

I'm finally responding to your question dated 7/11 on bi/tri-levels.  It sounds like not only do the Realtors in your area give full GLA credit to subterranean square footage, but tax records in the area might also.  This used to be the case in an MLS area that I work in until the data was corrected.   

As I would have no way of knowing the exact basement square footage verses above ground square footage I would either

  • 1)give all comps above ground GLA and make a big addenda statement (if comps are all similar in above/lower GLA)
  • 2)give all comps above ground GLA but make large adjustments in the Design (Style) grid (which would in turn weight the more similar bi/tri level comps higher than the ranch/traditional, etc.)
  • 3) Make extraordinary assumptions about the above ground vs subterranean square footage and separate out the SF on the grid (in the case of a split level, the above and lower SF are nearly equal less about 20 SF in above ground bump outs and approximately 200 SF per garage bay). 

In this case, it sounds like the appraiser felt like they needed to only search for comps of the similar style.  I would have to be in his/her shoes to know if I felt the same, but because it seemed that the subject neighborhood may have been superior, I would definitely raise an eyebrow at their tactics.

I did a review appraisal a couple of months ago that was a very similar situation but in reverse.  The original appraiser went far outside the neighborhood to find other tri/bi-level homes and he bundled all the square footage together into the GLA.  They also added in one level homes that were in the subject neighborhood.  The result was a good $30,000 higher than what I came up with using virtually the same comps and adjusting them (what I determined to be) correctly.

Jul 20, 2008 04:37 AM