Appraisal comparables refer to the final price that properties or rentals similar to the property currently being appraised sold for. However, the operating expenses of similar properties may also be used as an appraisal comparable.
What Are Appraisal Comparables Used For?
When an appraiser is forming a professional opinion concerning the value of a property they are assessing, he or she will use comparable properties to arrive at a valid market value as opposed to pending sales or active list prices.
Pending sales and active list prices reflect the figure a buyer is seeking for their property; however, this figure is generally based more on intrinsic value rather than what the property is actually worth in the market.
Therefore, it is not deemed as a true value by appraisers because it can not be verified. Instead, the appraiser will compile a list of recent sales of properties with similar features and within the same area to estimate the market value of a property.
For loan purposes, an appraiser is required to use the closed sales of at least 3 similar properties as comparisons.
Comparable Sales Standard Guidelines
There are various standard appraisal guidelines that govern the use of comparable sales for evaluating the market value of a property, including:
Recent Property Sales
Ideally, when evaluating a home’s worth, appraisers will use comparables that have sold within the past 6 months up to a year, which will better reflect a current market value.
However, if no comparables sold within that timespan, the appraiser will go however far back the last sale occurred to find details he or she can use.
Appraisers can also only use comparables that have closed prior to the inspection date of the appraisal.
Condominium and Cooperative Housing Project Comparables
When evaluating the worth of a single unit in a housing cooperative or condominium, the appraiser will use the final sales from similar units in the same complex, as well as the final sales from similar units outside the complex.
This is because, even though the property of comparison may be similar, it may be located in a different complex that includes different amenities; therefore, the two units may not be deemed as similar.
Same Property Size and Lot Size
The appraiser will also consider the size of the recently sold property when compiling their list of property comparisons, during which time they will only select the property as an equivalent if it is the same size as the real estate being appraised.
However, in some cases, properties that are no more than 20% smaller or larger than the subject property may also be considered.
The appraiser must also consider the size of the lot as well as the lot use in the comparison of properties.
To use a property as a comparable, it must also be located in the same area as the property under evaluation.
This means it needs to be in the same city/town as the subject property, and it should also be no more than a mile away.
Similar Location Influences
If the subject property has adverse influences, such as it is located on a busy street or near a highway or railroad, etc., the appraiser must use at least one comparable with the same adverse influences to determine if they were a factor in the final sale price of the comparable.
If so, it means it will also affect the market value of the property being appraised.
The appraiser must also evaluate the comparison property’s view when considering it as a comparable. For instance, if the subject property has no view, but the identical property has a view, it can not be used as a comparable.
In other words, the appraiser may only use other properties with the same views to arrive at a value of the subject property.
To actually arrive at a value for your property, appraisers use what is called bracketing.
Bracketing is when the appraiser uses at least one comparable that is a lower price than the subject property and at least one property comparison that is a higher price than the subject property.
This enables the appraiser to include properties that are similar to the subject property, except they differ by perhaps just 1 feature, as a comparable simply by subtracting or adding the price of the feature to arrive at a market value for the comparison property.
However, the appraiser will also use the final sales price of a property with the exact same features as the subject property to support the modification.
3 Tips for Ranking With High Appraisal Comparables
The appraiser might have already evaluated a list of similar properties in your city or town before arriving at your property or they may do afterward. They will use this to form the bulk of their appraisal, there are still a few things you can do in the meantime to help increase your ranking with high comparable properties, including:
- Minor Renovations – Reports show that minor renovations, such as wood floors, energy-efficient windows, a new garage door, an outdoor deck, and landscaping, can help increase the market value of your home. However, experts warn you should also know which renovations don’t add value, so you don’t waste money.
You should also keep your receipts for any renovations, as well as take before and after photos of the additions and then present them to the appraiser, if they are not already documented in the county records, so that he or she can make the proper adjustments to your appraisal.
- Tidy Up the Interior and the Exterior – A well-groomed property adds to its appeal, which makes the property look more valuable. On the other hand, a dingy, disorganized property can look washed out and aged beyond its years, which can decrease the value.
Therefore, be sure the property’s exterior is neat and tidy and the yard is well trimmed before the appraiser arrives. Likewise, get rid of any clutter and wash away any dinginess indoors to help make your interior appear more modern to help add to its worth.
- Research Your Own Comparison Properties – Now that you know what are appraisal comparables, you can research similar properties in your area on your own to get a general idea of what your property is worth in the market before the appraiser shows up.
This will help prevent any surprises and frustration when the appraiser presents their value estimate. In the event you feel that the appraisal is too low, you can simply present the appraiser with your own property comparisons, which may help them reconsider their result.
However, remember the appraiser’s opinion is based on meticulous guidelines, so be courteous, and if you still disagree with their conclusion, you can always obtain a second opinion.
If you are eager to know the market value of your property, either because you are selling your property or refinancing it, or you just want to know the appraised value of your property at this time, feel free to contact us for a free quote at 1-801-882-2292!