Comparable sales are used to appraise residential properties in the same area. Such a sale is generally known as a comp sale, and is an important factor in determining the value of homes is similar neighborhoods
Fundamentally, when appraising a property, an appraiser will check out the selling price of homes of the same size that have recently sold in the same area. The area generally taken is a half mile radius from the home being appraised, and only sales over the previous 180 days will be taken into account. If no homes meet these criteria, then the appraiser will use his discretion and either extend the time period and radius or use another method of appraisal.
While the appraiser will be seeking recently sold homes with identical room counts, sizes, amenities, lot sizes and so on, although will often have to make do with similar features and adjust the appraisal accordingly. It is this adjustment that can have a significant impact on your home appraisal.
Here are some ways in which comparable sales can affect your appraisal:
Abnormal Comparable Sales
A comp sale may have been a short sale or a foreclosure. In fact, in some areas, there can be a number of short sales or foreclosures that bring down the appraisals of residential properties close by. A similar problem is where there have been few or even no recent sales of properties in a neighborhood, and an appraiser with no local knowledge has extended the area.
This could be extended to another housing area where low prices have been the norm for many reasons such as those above. It is not unusual for one neighborhood to be relatively wealthy and another less so, but to have similar housing. While the real estate in the first area is of good standing, that in the second may have been sold after foreclosure and repossession actions or short sales.
If you feel that you appraisal is abnormally low because of this, there are things you can do about it. Among these is that you can pay for a reappraisal, asking your lender to use someone with knowledge of your geographical area. You can also provide the appraiser with written details of the reputation of neighboring areas with poor home ownership records.
It is not only local distressed home sales that affect your home appraisal. Appraisals based upon comparable sales may not have taken into account the relative state of repair between other homes in the area and yours. Perhaps you have maintained your house in excellent condition, but this has not been taken into consideration.
An appraiser will not necessarily take your home improvements into account when comparing your home with others that have recently been sold with no improvements. It is important that you inform the appraiser of any work you have carried out, including improvements such as loft restorations, conservatories and other forms of remodeling. Bring these to his or her attention and provide receipts to indicate the scale and cost of the work carried out.
By providing the appraiser with written material explaining how your home has been improved, and any other reasons why it should be categorized higher than others in the area, you are more likely to receive a comparable sales appraisal that you would be happy with. The lender is not permitted in law to communicate with the appraiser, but the buyer and seller are. You should take advantage of this before the appraisal has taken place – not after.