I was conducting an appraisal review recently and I came across a significant omission that highlights the importance of verifying data. Many, and in my observations most, residential appraisers will use comparables and information obtained from the area multiple listing services and verify with county records. This is acceptable if the scope of work is sufficient. However, with the typical residential appraisal assignment, I argue that this practice is insufficient to produce credible results.
This particular omission was uncovered when I called the Buyer’s Agent for the comparable sale. The Agent indicated that the comparable sales price was $297,000; which is exactly what the appraisal under review had reported. However, the omission occurred when the appraisal under review had not reported that the price was reduced by $20,000 so the buyer could install a new well and new septic. The home inspection had identified serious problems with these critical systems making it necessary that they be replaced. This comparable should have been adjusted up by $20,000 to produce an accurate indicator of value for the subject. The adjustment is necessary because the subject had a perfectly acceptable well and septic and the buyer of this comparable was prepared and willing to pay $317,000 for this comparable property with working systems.
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