From: Freddie E. Taylor, MBA Chicago, Illinois Subject: How To Select Comparable Properties

Dear Colleague,

I am writing you this because I understand how frustrating it can be to not understand how real estate appraisers select comparable properties, and wonder where they get their number from. Believe me, it is not magic and you can understand these concepts as well.  I have put a lot of work into making it very easy to understand and follow in this step by step manual.

For years, the real estate appraisal process has been shrouded in secrecy. I am sure you have experienced this. You meet the appraiser at the property that is to be appraised, have some casual conversation, and try to engage them in a conversation about value. Only the appraiser begins to withdraw from the conversation and really avoids all of your key questions. What is up with that?

Let me tell you from experience that appraisers are taught from the first day of learning the profession not to discuss value, comparable sales, sale prices, payoff amounts, judgments, or anything else that may have a barring on value with anyone, especially anyone tied to the property that is being appraised. I know this has frustrated many homeowners, real estate agents, buyers, sellers, and investors during my years of appraising in the Chicagoland market. However, this is something that USPAP, Uniformed Standards of Professional Appraisal Practice, takes very seriously and every good appraiser knows not to violate USPAP rules and recommendations.

 

 

You might be saying, I don't live in the Chicago area, so how could Picking Comps tell me what appraisers in my market are doing?

You have a valid point, if you are talking about the individual values in your particular market. However, I am not discussing individual neighborhood values in this book. I am covering the procedure an appraiser basically follows or goes through when selecting comparable properties. These uniform procedures are valid in every market from Maine to California and every state in-between.

The neighborhoods might be different, but the procedures you follow as you are weeding out comparable properties are the same sound principals that every appraiser should use. Now over my years of experience as a Certified Residential Appraiser, I have had the opportunity to do some review work for many of the major banks in this country and I can  tell you that some appraisers don't follow these rules all the time. And when they don't, typically the valuation conclusions are questionable. If you understand what an appraiser should be doing, then you may have some recourse to engage the appraiser and ask them to reconsider in light of the evidence that you put forward. If you understand the lessons taught in Picking Comps, then you will be able to rebut a bad appraisal. If not, you will just have to grin and bare the judgment. Think about how you or your clients would feel if you could present some additional information to the appraiser and get them to change their mind on a valuation conclusion.

Now as an appraiser, I can tell you that at times we make mistakes. It happens. At times, you might over look a potential comparable, miss a bedroom during the inspection, or discount a comparable for whatever reason. In light of this understanding, sometimes I will hear the investor or real estate agent out in their argument for an higher value, but there must be evidence and facts that support this information that was originally missed or discounted. Don't come to the appraiser talking about the value should be higher because you believe it should be. Prove the value should be higher with facts, evidence, and comps. Picking comps will give you the understanding and insight to do just that. Understand the appraisal and even select comparable properties that may have gone unnoticed by the appraiser.

 

I can hear you know, Freddie, I don't want to be an appraiser and it sounds like you might be over loading us with information. Believe me, I understand where you are coming from. Although I cannot understand it, there are people out there that don't find the same level of excitement in real estate appraisals as I do and might not want to spend hours, upon hours studying to be an appraiser.

Well, I wrote this book with you in mind because this is not a drawn out book, full of every single appraisal and valuation detail known to man. This book is lean, mean, and straight to the point. You are not studying to be an appraiser and I am not trying to make you one. I am providing an easy to understand outline of a procedure to follow every time to select comparable properties. You may not be able to nail down the value exactly, because that takes years of experience to fully understand and work in a particular market. However, you will be able to get down to a handful of properties that are undeniablely similar to the property being appraised and therefore, must be at least considered.

Does Picking Comps Address Comparables in a Down Market?

This is an obvious question, so I must address it.  The simple answer is YES! We are not in the real estate market of the 1990s and the early 2000s. This market is different, completely different. If I didn't address these issues then I would be neglegent in my effort to show you how to select comparable properties.

I discuss the difference in this market and how to attach the situation. There are a few extra things to keep in mind when selecting comparable properties in the current market. Again, I am not trying to make you an appraiser, but I am covering all the bases so you have have solid understanding of how real estate apprasiers go about selecting comparable properties even in a down market. You might thing the solution is as easy as looking at only properties that are on the same block as the the property being apprasied or even considering active or pending sales, but that is not necessarily the case. And if there were always similar sales on the same block, then I don't think there would be a need for the appraisal profession. One thing that we understand is that every appraisal question is different and many different factors must be considered. It is my charge to show you these various factors that must be considered despite the market values are increasing, decreasing, or staying the same. It is the basics that I want to impart to you.

 

 

 

But first, allow me to illustrate how I understand your situation by giving you some examples of the situations that you might be dealing with....depending on where you stand in a transaction.

Real Estate Agents: Imagine you have done the two step, been all over town with a client, dealt with the lender, negotiated with the seller, organized the home inspector, and dealt with the finicky feelings of your buyer only to have the appraisal to come in $25,000 short of the sales price and kill your deal. Frustration only puts how you might feel in this situation lightly.

Real Estate Investor: Imagine you finding the perfect property. Your plan is to buy a mutli-unit building, complete some cosmetic work, locate a renter, and earn yourself a $1,100 monthly cash flow in the process after PITI, principal, interest, taxes, and insurance. Not a bad deal, right? Well, the appraiser comes out and valuates the property for $15,000 below what you made your purchase bid and the deal falls apart. You are very frustrated with the appraiser, but seems like nothing you can do. You thought the value was going to be one number, but the appraiser found something totally different. What are the appraisers looking for to determine value.

 

 

I am writing this for you to know how to edit this template. First of all thank you for purchasing the WSO Secrets! :) Now here are the important parts of this. Please do not edit the DIV structure of this, or everything will go out of wack.

Please keep your sales letter inside the DIV named: Content_Template_Wrapper. You can add anything in there. This letter is in that div. The sales headline and content are two different divs, so its important to Make sure you note that! :)

You are going to need some html or atleast know a good html editor. This should work with xSitePro if it is a decent editor. The design view in most editors wont look right. But please do not be alarmed by it! The design views are not browsers, so they don't render things right. It works in Firefox, and IE and thats all that matters!

I have styled all the basic html tags, so you should be able to go in and add your sales letter with everything looking great! There is some special classes I put into so you can spice up your sales letter. Here they are:

Class: "highlight" - this is meant to highlight something important.

 

	This is for lists of points, or lists of questions. To Add to this list you need to copy and paste the <tr> list item here </tr> in the code. Then it should add new a list item. Please note that is a table and not a list tag <li> or <ul>
	This is for lists of points, or lists of questions. To Add to this list you need to copy and paste the <tr> list item here </tr> in the code. Then it should add new a list item. Please note that is a table and not a list tag <li> or <ul>

 

Heres What a H1 Tag looks like!

Well Hello! I am a H2 tag :-)

Alright now you can start adding your sales letter, and adding the graphics. You can find the graphics in the WSO Secret Weapon root folder!

If you have any question you can PM, or email me at: dylan@monetizedesign.com