Will You Do Comps?

The Question of Every New Client

As appraisers, we are not allowed by our ethical standards to provide a value without performing an entire appraisal. However, clients request these FREE services because they don't want to pay for an appraisal they can't use.

As an honest appraiser, it is important that I carefully follow the ethical rules. However, I need to balance that with the needs of my clients.

Background information

1. Appraisers are not allowed to accept an assignment if we are required to "HIT A VALUE." A comp check implies that we are hitting a specific dollar amount the lender has in mind. Performing comp checks have serious potential to violate our legally binding ethical rules. They are also very time consuming. It takes a minimum of 30 minutes to perform each appraisal. I could easily spend my whole day performing free tasks.

2. On the other hand, most lenders can't afford to spend the money on an appraisal before they know if a loan will even work. I don't blame a loan officer or company for requesting this information. It is a perfectly logical request.

Comps Can Lead the Appraiser and Lender into Hot Water

If not done properly, comp checks can cause an appraiser to appraise to a predetermined value which violates the basic principals of our ethical code.

It is also has potential for loan officers and lenders to keep looking for a higher value. As a lender, you could inadvertently place yourself in legal danger by asking several appraisers about the value of a house. If you get an unethical appraiser to give you a higher value, you could put yourself in line for legal ramifications.

Some appraisers will argue very strongly that "comp checks" are illegal. However, under certain conditions, I don't believe comp checks are illegal. The Advisory Opinion from the Appraisal Institute seems to agree, but I do think that lenders need to understand what they are asking for.

Here's How I Do It

I ask that people start first with one of the free home valuation services, especially if the subject is located in an urban area like Colorado Springs, Pueblo, or Denver.

I have noticed that YAHOO REAL ESTATE usually provides a pretty good range of values. Please start here.

If you are still not satisfied, I will provide pre-appraisal information for my clients. When I deliver an opinion of value, it is legally an appraisal. I include a disclaimer and explanation with every comparable request. I treat each comparable request as an appraisal, keep the file as required by USPAP, and I do the work necessary to provide a credible opinion.

DON'T MISS THIS

When I do perform such an appraisal (comp check) I am assuming the information you provide is correct. I am assuming information about the condition of the subject, the size of the subject, etc. It is necessary to use these extraordinary assumptions to provide a credible opinion. However, (and this is the important part) if my assumptions are wrong, my opinion of the value of the subject could be completely wrong! I can't do anything about that. You assume the risk when you ask me to perform an assignment under these conditions.

If you subsequently order a full appraisal, you will be responsible for the cost of the appraisal no matter what the results. I cannot and MUST NOT appraise to a pre-determined value.

Please note that due to restrictions inherent to the nature of the assignment, I can only provide a range of values in a comparable appraisal report. If this does not prove adequate for your needs, I will perform a desktop appraisal. The fee for the desktop appraisal for comparable purposes is $125.00. That amount will be applied to a full appraisal if one is ordered.

Results are reported by oral report with documentation kept at my place of business.

This is free service I provide to clients who are in the lending business. I do not provide this service to homeowners or real estate agents.

If you want to request a comp, please use the comp request form located here or click on the link to the right.

Uniform Standards of Professional Appraisal Practice - Advisory Opinion on "Comps"

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