When it comes to appraising a property, the appraiser must look for comparable properties to establish a fair market value. These comparable properties are also known as comps. So, how far back do appraisers look for comps? Appraisers are primarily required to look only at sales that occurred within the past 90 days. However, if there isn’t enough data, a lender could allow appraisers to look back six to twelve months. Here are some formatted bullet points to help you understand the concept better:
In short, appraisers are primarily required to look at sales that occurred within the past 90 days to find comparable properties or comps. If there isn’t enough sales data, appraisers could look back six to twelve months with the lender’s approval. Real Estate is always changing and fluctuating, so it’s best to trust an experienced appraiser to deliver an accurate appraisal based on market trends and data available.
The Importance of Comparable Sales in Appraisals
The job of an appraiser is to determine the value of a piece of property, and one of the most important factors in determining property value is comparable sales. Comparable sales are properties in the same location with similar features, that have sold recently. Appraisers use this data to establish a fair market value for the property being appraised. Without comparable sales, appraisers would have a difficult time answering the question What is this property worth?
How Appraisers Determine Property Value
An appraiser uses a variety of methods for determining property value, but the most common method is the sales comparison approach. This approach compares the subject property to recently sold properties in the same area that are similar in size, amenities, and condition. Appraisers make adjustments to reflect differences between the properties, such as square footage, number of bedrooms, and location. The adjusted sale prices of the comparable properties give the appraiser a clear idea of what the subject property is worth.
The Timeframe for Comp Search in Appraisals
When looking for comparable sales, appraisers are required to look at sales that have occurred within the past 90 days. This is known as the 90-day comp rule. However, there are some exceptions to this rule. If there aren’t enough sales within the past 90 days, a lender might allow the appraiser to look back as far as six to twelve months.
The 90-day Comp Search and Its Limitations
The 90-day comp search has its limitations. For example, if the local housing market is slow or there aren’t many recent sales, it can be difficult to find comparable properties that sold within the past 90 days. Additionally, if the subject property has unique features that make it stand out from other homes in the area, finding comparable sales can be challenging. In these cases, appraisers might have to use their professional judgment to make adjustments and determine the value of the property.
The Exceptions to the 90-day Comp Rule
While the 90-day comp rule is the standard, there are situations where appraisers can look back further than 90 days. For example, if the subject property has been on the market for an extended period of time, the appraiser might need to look back six to twelve months to find sales that are more comparable. Similarly, if the local housing market is slow, there might not be enough recent sales to provide an accurate appraisal. In these cases, the lender might allow the appraiser to look back as far as six to twelve months.
The Role of Lenders in Comp Search
Lenders play a significant role in the selection of comparable sales. Lenders want to ensure that the property is worth the amount of money they are lending. They provide the appraiser with specific criteria for selecting comparable sales, such as location, size, and condition. The appraiser uses this criteria to search for comparable sales and to determine an accurate appraisal value.
The Six to Twelve Month Comp Search for Inadequate Sales
If there aren’t enough comparable sales within the past 90 days, a lender might allow the appraiser to look back six to twelve months for sales data. However, appraisers prefer to use recent sales data to determine fair market value, as older sales data might not accurately reflect current market conditions. Older sales data can also be subject to changes in the housing market, such as increases or decreases in property values.
In conclusion, appraisers play a crucial role in the process of determining the value of a piece of property. The 90-day comp rule is the standard, but appraisers might have to look back further than 90 days in certain situations. It’s important for appraisers to use their professional judgment when selecting comparable sales to ensure an accurate appraisal value. Buyers and sellers rely on the accuracy of appraisals to make informed decisions about property purchases and sales.