So you might be thinking how an appraiser selects comps for your San Diego Real Estate Appraisal. There are guidelines that appraisers have to follow when choosing comparable sales. I will share you with the five principles that are used from the Fannie Mae Seller’s Guide from pages 597-598. This will help you understand some of the guidelines that an appraiser will use to select comparable properties to your home as well as give you some direction in case you are planning to share sales data with an appraiser during an inspection.
This is straight from Fannie Mae on comparable property sales selection.
Bare Minimum: Real estate appraisers must use at least 3 closed sales in their report
One Year: Comparable sales must have sold within the past 12 months. There is an exception to go over 1 year from sale, especially if they are completely relevent and there are a lack of sales in the area of comparable homes. (custom homes, no similar sized homes, views, proximity to the ocean, etc.)
Subject as Comp Four: In some instances the subject can be used as an additional comparable property if it has sold recently. This might seem strange, but it is sometimes used when sales are limited.
No 90-day Rule: Real estate appraisers do not have to use sales in the past 90 days. If there are better comparable sales outside of the 90 day period, the appraiser still has the option to use them. Fannie Mae states that it may be appropriate to use an older sale with a time adjustment rather than a mor recent sale that requires multiple adjustments. Many lenders do have a 90 day comp rule, but this is not a Fannie Mae rule.
No One-Mile Radius: Many lenders would like the appraiser to stick to comparable selection within 1 mile, but this is not a Fannie Mae rule. Appraisers should always use the most competitive sales available. Sometimes the best comparables are available within a few blocks, up to a mile, but in other instances, the best comparables can be up to a couple miles away. It is up to the experienced appraiser to locate the best comparable sales within the subjects market area or competitive neighborhood. You have to consider if buyers are looking for homes in competitive areas outside the immediate neighborhood of the subject, this can also be considered a good comparable property.
Estate and non-lender appraisals can be different. Fannie Mae and lender rules do not apply to private appraisals used for divorce, estate planning, bankruptcy, date of death, etc… Many of these guidelines are reasonable and many appraisers apply these same rules to all of their appraisals, but the proper comparable selection to determine the opinion of value is always the number one rule. We simply use the best sales to help show the market.
If you would like more information on comparable selection in the San Diego real estate market, feel free to call me at 858-232-3348