It is pretty common knowledge that appraisers should select the most recent home sales as comparables. The question then becomes why would an appraiser use old comps?
Fannie Mae Guidelines on Age Comparable Sale
First, let’s take a look at what Fannie Mae guidelines say about the age of comparable sales.
“Comparable sales that have closed within the last 12 months should be used in the appraisal; however, the best and most appropriate comparable sales may not always be the most recent sales. For example, it may be appropriate for the appraiser to use a nine-month-old sale with a time adjustment rather than a one-month-old sale that requires multiple adjustments. An older sale may be more appropriate in situations when market conditions have impacted the availability of recent sales as long as the appraisal reflects the changing market conditions.
Additionally, older comparable sales that are the best indicator of value for the subject property can be used if appropriate. For example, if the subject property is located in a rural area that has minimal sales activity, the appraiser may not be able to locate 3 truly comparable sales that sold in the last 12 months. In this case, the appraiser may use older comparable sales as long as he or she explains why they are being used.”
Fannie Mae acknowledges the use of older sales may be appropriate; however, the appraiser must explain why.
Rogers Park Single Family Home Example
Let’s take a look at detached single-family homes in Rogers Park. Is there a reason an appraiser might use older sales? The answer is yes. Rogers Park predominantly consists of multi-family dwellings which include condos, apartment buildings, townhomes and co-ops that makeup approximately 85% of the overall land. Approximately 5% of that land is detached single-family homes. On the surface, this may not mean much, so let’s take a look at some data.
Since January 1, 2019 to May 20, 2021 there have been 91 sales of detached single-family homes in Rogers Park. Adjacent communities during the same period have the following number of sales.
|Edgewater: 170||West Ridge: 323||Evanston: 1,139|
Other nearby communities have the following number of sales.
|Lincoln Square: 281||North Center: 521||Lake View: 359|
Rogers Park has 1,125 sales of multi-family dwellings during the same period. At this point, you might be thinking that when compared to 91 sales, the data seems limited in Rogers Park, and you would be right.
Let’s take it a step further and say a 3,600 square foot home is being appraised. What do you think the availability of data might look like then? Houses over 3,000 square feet are even rarer as Rogers Park predominantly consists of homes ranging between 1,500 and 2,500 square feet. There were 16 sales of homes over 3,000 square feet. Let’s not forget to factor in that these 16 sales encompass all design/style types, brick construction homes, frame construction homes, all condition types, all age ranges, foreclosure sales, short sales, conventional sales and probably a few more factors not included here. Is it unreasonable for an appraiser to use old comps in this situation?
If you have a detached single-family home in Rogers Park, there is a higher probability that it is appropriate to use older sales and hopefully it does not come as sticker shock should you see them in an appraisal.
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