Why Standard Appraiser Rules Are Still the Sure and Trusted Way to Comp
Updated: Nov 17, 2022
There’s no denying it – we’re in a strange time right now. The market, while not at all crashing, is still unlike anything we’ve seen before.
As such, there are some exceptions to the rule when it comes to buying properties and one of those exceptions is appraiser rules.
If you’ve been reading this blog or following any of my social platforms, you know I’m a huge proponent of comping properties the right way and it’s one of the fundamental methods I teach my Astro members.
I recently had a coaching call where a member asked about something I had previously said about most appraisers allowing for comping at 250 square feet on a property.
However, recently I’ve been seeing appraisers allow for 300 square feet.
Jamil, what exactly is the problem?
Why is that such a big deal?
Appraisers Will Tell the Story, Not Your Story
Here’s something you need to know about appraisers – they will always tell the story and not your story.
That is to say, if there’s another comp that’s closer in square footage to the property you’re looking at, they’ll always go with that because it’s a closer comparison.
I discuss that more in the coaching call below:
Now as I said, recently I’ve been seeing appraisers allow for about 300 sq ft, but to be honest, I actually don’t like that as a rule of thumb.
The reason being, as I state in the video, just because one appraiser allows for 300, doesn’t mean they all will.
So it’s always, always better to follow the set appraisal rules when considering your ARV because you want to be as exact as you can.
But Jamil, what if I have a property that doesn’t have any comps?
That’s a great question!
I actually had a previous coaching call where this came up and it’s something that does happen from time to time.
Let’s say you’ve got the biggest house in the neighborhood, but all the other homes are smaller in comparison.
Do you take the dollar per square foot of what the highest sale in the neighborhood was and use that?
Unfortunately, you can’t and here’s why.
You know that the smaller the house, the higher your dollar per square footage will be; however, the inverse is true the bigger the home.
So even if the previous home that sold was close to the square footage of your property, you can’t actually use that as a comp.
Now, some appraisers – when this happens – will add an additional $10-15K for the additional footage, which can mean your additional 100K square footage only has a value of $10-15K.
And unfortunately, for a lender, that’s what determines what the close value is because there’s no other home to compensate or compare to.
That’s definitely something to keep in mind if you find yourself with a large property.
That’s it, guys!
Your lesson for today is, regardless of what you’re hearing about appraisers allowing for more square footage, keep to the standard appraiser rules to keep within safe estimates for ARV.
If you’re wondering about comping like a pro, then come learn the methods I’m teaching in AstroFlipping!
We have a growing community of beginning and seasoned investors, wholesalers, fix and flippers, and more that are helping each other succeed in this business.
We also have another Mastermind coming up, this time in October and if our last one was any indication, this one is gonna go fast!
So be sure to get your seat before they’re all gone!