"Comp Checks" A Survival Guide

Comp Checks, a survival guide.

OK I know, comp checks are a bad idea, they may violate USPAP, they are insulting to the profession. I have heard all of the arguments and I agree completely with all of those points. Don't do them, if at all possible......Now having said that, lets pretend for a moment that you have to do a comp check for a client; perhaps your employer is insisting, if you are self employed, maybe your spouse is making you, or maybe you just need to eat this week and don't want to send another client packing, lastly, maybe you are genuinely want to just help a legitimate client out....how do you deal with comps checks without compromising yourself as a professional? Is it even possible? Yes, I believe that it is.

Try to remember, not every client is gunning for you. Sometimes it is a legitimate request from a legitimate client, sometimes not. A recent visit to blogs and chat rooms regarding this issue illustrates that appraisers have gotten very cynical and many are operating strictly out of fear and self preservation. In my opinion, if the profession is so troubling to you, that you go to bed with a USPAP tucked under your pillow, perhaps you need to think about doing something else for a living.

So herewith is an unofficial guide, in rough order of priority, to dealing with comp check requests.

1. Don't do them. This needed to be re-stated and placed at the top of the list, for reasons you already know.

2. Evaluate the client making the request. Not all clients are created equal. Providing a comp check is a business decision, not an ethics decision (if you do it incorrectly, it could become an ethics problem however). You are giving away free services and you need weigh the benefits. In this respect, I rank the client making the request. If it's a stranger who has called out of the blue, they are usually appraiser shopping and you owe them nothing. If you turn someone like this down you have not really lost a client, you have lost a potential client, but it may be a client you are better off not having. Use the call as an opportunity to engage the client, let them know how good your services are, that you have good turn times, return calls, act professionally, will represent them well in the field, all the real reasons they should consider you.

If on the other hand it is client that you have had a longstanding relationship with, and rarely asks for a comp check, but it just feeling out a loan, consider accommodating them.

Lets say it is that in between client, the one you have known for a while, but asks for one on nearly every order. For this type of client, the comp check is not the issue, it is your relationship with the client that needs re-examination. You have not trained this type of client properly and their expectation is that they get a comp check with every request. Evaluate your history with this type of client......are the requests invariably unrealistic? or do they almost always work out.

If it is the type of client that is always pushing the envelope, dump the client. Its that simple. Even if it your only client.

Let me say that again....dump the client, even if it is your only client.

If it is client who often asks but is never really pushing the envelope; they just want reassurance. Maybe they are covering appraisal fees themselves, maybe they are cheap or cautious or need handholding........these are the clients that I try to save as clients but wean off comps checks per se.....

3. Collect more info than you give. Talk but don't say much. Use the magicians "slight of hand" Sometimes clients just want to discuss an assignment. Don't be afraid to ask questions. Appraisers gather facts, that's what we do. We are like reporters; we observe, ask questions, gather facts. In my view this is the best place to start gathering your facts. You don't need to know anything about a value to know that if you are the 4th appraiser this client has called to appraise this property, it likely isn't worth what the property owner thinks it is ( it is possible that there are some extenuating circumstances and the prior appraisers were less skilled than you and all missed something. It is unlikely but possible). On the other hand, if the client is only looking for a small mortgage and you know the area well, a comp check is not necessary, just ask the client for the order.

You see this often in our area on Martha's Vineyard and many upscale markets. We will get calls from loan officers. They have a small modest ranch, they are from a part of the county where median home prices are say $200,000 and they can not fathom a small ranch selling for say $850,000. They will call and say, "Don't laugh, but I have this house, the borrower thinks it worth $850,ooo and it only has 1,200 sf!! (you can actually hear them pull the phone away from their ear, waiting for the laughing or screaming). Its no big deal we tell tell them, send it over.

Ask questions. Its your job. The more you know the better your work will be.

4. Convey data not opinions. There are two main issues regarding comp checks that can get you into trouble. The first is the rendering of an opinion. Appraisers must be very careful in what they say and how they say it. If you as an appraiser mention anything about a property and a related number, a range of numbers (higher than, at least as much as, etc. ) you have made an appraisal. Don't convey an opinion, don't impart anything subjective into the comp check. For example if the client asks for "nice colonials" respond by just asking just the address of the property. No one can dispute its address, but someone could argue endlessly over whether it is "nice" or not.

So when talking about comps for a property, convey only the comp info, do not discuss the subject or how the comps related to the subject at all. The easiest way to do this is just provide the activity on the street, raw data, not filtered by any of your inputs. If there is no activity on the street, then broaden the search radius to adjacent streets, 1 mile, whatever is appropriate but it is important to convey just raw data.

For example lets say a client calls and says " I need a comp check on a property, the property is on 12 Jones Street, and we are looking for $500,000."

You say " According to my data source, there have been 2 sales on Jones Street, 1 for $400,000 and 1 for $490,000. As well there is 1 house on the market for $525,000. I will let you decide if you think you want to order the appraisal.

This is a comp check....legal, moral, ethical, helpful.....nothing wrong with it. I still don't like them, I almost never do them, I am not advocating that you do them, BUT if you have to do them, this is how you should do them.

IF the client persists and wants some sort of reassurance that the appraisal is going to "come in" , this is your red flag, your slippery slope!!! This is not a comp check, this is a contingent assignment. This is simply not worth doing at any fee.

5. Take 2 Zillows and call me in the morning. If there was ever a reason to love Zillow, this is it. I hope it stays around forever if for only this reason. Run the address through Zillow, print it and report back the Zillow results....Always with the pre-emptive "According to Zillow".... Its not your opinion, it's Zillows.

You cannot be held liable for transmitting Zillows opinion, UNLESS you make the opinion your own, convey the impression that it is your own or give your opinion of the Zillow opinion. For example, if you communicate that that according to Zillow, the house is $250,000. The client says "but I need $300,000". If you say "well Zillow is usually low, or Zillow is usually high, or "we can probably make t work" you are operating in violation of USPAP and you have gone beyond a comp check...you are now doing an appraisal (a pre-appraisal is an appraisal)

YOU NEVER GIVE AN OPINION ABOUT THE PROPERTY - IF YOU DO IT IS AN APPRAISAL AND YOU BETTER BE RIGHT.

6. Be careful about HOW you turn down a property on the basis of a Comp Check. This is something many appraisers overlook, but I have seen it cause trouble for appraisers that were only trying to be helpful. Lets say you have a property that is worth $250,000. Its a condo, every condo in the development has at $250,000. The 5 on the market are all asking $250,000. In short, you are pretty confident the value is $250,000. Client calls, wants a comp check, says they need $300,000. You are just bubbling because you know its not worth it, and you cant wait to let this client know how smart you are, so you blurt out " No way, I know that area well, its not worth $250,000." Even if you just want to be genuinely helpful and save them money on a wasted appraisal, guess what....you just made an appraisal. YES even by trying to be helpful you can get into trouble. Worse, you could be accused of some type of bias. I know appraisers who have been sued on the basis of bias because they concluded a property wasn't worth something before they undertook the steps necessary to know for certain (file this under "you cant win).

How to deal with this situation? Same as above, just convey the data... " I checked that address, the past 3 sales were $250,000, $250,000 and $250,000...Oh and there is one for sale, asking price $250,000. You need to decide for yourself if its worth ordering the appraisal because I can't predict how its going to come out".

This last phrase is key "You need to decide for yourself" . Put the risk on the client. If things don't work out, they are less likely to blame you.

7. Avoid email or reducing anything to writing.

I know I will get email on this, appraisers telling me that verbal communication is is the same as written. In theory yes this is true, but in reality, for the day to day appraiser, it isn't the same. NEVER leave a paper trail.

Do not read into this more than is here. I am not advocating that you misrepresent anything, or that verbal communication is a way to get away with anything. Just simple practical advice, in a litigation happy society, never make it easy for the idiot out there that wants to do damage to your reputation.

In summary, don't fear comp checks. Be upfront with your clients, be helpful to them if you can. They are your bread and butter, give them good reliable service, make their life easy-get things to them on-time, communicate. Be confident in your skills and abilities, you are a professional. Don't back away from client requests, evaluate if what is being requested is reasonable.

And the simplest of all....... don't cross the line, you know you know where it is.

Good Luck!

Appraisal Coach