How do appraisers choose comps for a property?
I am curious how this process works. I know it isn't an exact science, and I'm sure each appraiser and appraisal is a bit different. My neighborhood hasn't had any sales since 2009 (it is a small neighborhood of about 30 houses and everyone is pretty content I guess!) There is one short sale that is currently on the market, but not sold.
So two questions basically: Can the appraiser use the short sale as a comp since it is listed but not sold and not under contract?
Question 2: If you go .25 miles right of here, there have been 4-5 houses similar in age, style, condition, and size to ours that have sold in the last month or 2. If you go.25 miles left of here, there have been several homes that are similar that have sold. However, there is about a 30,000 price discrepancy between these neighborhoods. On a side note, our neighborhood is probably more like the one where houses are selling for more (off the beaten path, no thru street, park at the end.)
So given this situation, which comps would be chosen? Or would he or she pick comps from both generally speaking?
P.S. Confusing business, my hat is off to all of the appraisers out there!
Update:Everyone, thank you again for all of your help. I think I may have worded my original question poorly. The 30,000 price discrepancy isn't between my home and a more expensive neighborhood. It is between the sales of a neighborhood on my right and on my left.
Comments
Appraisers usually look at comparable sold (within recent months) homes within a certain distance from your home. They compare size, bedrooms, bathrooms, construction, exterior, yard size, features, amenities, etc. It's not an exact science but they do have things they look at in each case then try to reason between situations that might differ. A short sale is more of a take over of the current owner's mortgage which likely started years ago-so not much of a help in calculations. Neighborhoods and subdivisions even next to each other can vary greatly in what individual homes within them can be appraised at. I live in a very nice neighborhood but just because a much more expensive subdivision is one road over from me doesn't necessarily make my home excessively more expensive than a comparable home 3 roads the other direction...then again, it doesn't hurt. It gives me a little more piece of mind that my home may keep it's value better just because of it's proximity to better homes-but that's not foremost in an appraiser's calculation.
Houses in the general area (usually in the same zip code) and similar in size, # of rooms, etc. Usually the sales are no more than 6 months old (comps are homes SOLD, not listed). A list price would not be used as a comp, nor would something merely under contract (1 - not able to know what the agreed sale price is and 2 - sale price is not final).
$$$ usually wins