My Appraiser Friend, Tom Horn, SRA, in Birmingham AL, recently wrote about how real estate agents and the public may believe that appraisal value is just the average of three (3) home sales. This is an article of value I wanted to share with readers. Can Pending Sales Be Used In An Appraisal? What is bracketing and why should Realtors do it? Tom’s article is here.
MY OPINION: NO, appraisal value is not the average of 3 home sales or comps. For example, just this morning I completed an appraisal in University Hills near Gates of LSU. After applying “market adjustments” for differences, the adjusted sales prices were $231,700, $243,800, $247,100, $228,300, $243,800 and $216,600. While the average of these 6 sales was $235,000, I estimated $240,000 because of some superior updating to subject home that some comps lacked.
In a group of 6 comps or home sales, some are going to be updated and some not. Some, in this location and price range, may have slab granite and some not. Some may have updated Kitchens and Bathrooms and some not. The Appraiser’s Job is not to estimate based on averages but to spend hours if needed to derive the market driven differences and preferences (condition, quality, location, size) and figure out which of those 6 to 9 comps used is most like subject and best supports value. And Yes, now 2-3 listings are part of Appraisals, preferably pending listings, because lenders want to know what’s going on right now in the market, not what took place 6 months ago. Bill Cobb, Appraiser
Image Source is from Tom’s Birmingham Appraisal Blog