How are rural and unique properties appraised?

Some of the most difficult appraisals to do and the ones we get the most questions on are the rural and unique properties.

As we know, appraisers face unique challenges when appraising properties located in small towns and rural areas or properties that are unique in design. So much so that Fannie Mae released a Lender Letter addressing these challenges in 2014. What we also know is that, the availability of suitable sales for comparison can be challenging due to limited market activity. A favorite example we always like to use is a log cabin on 40 acres in the hills of Montana. An appraiser can only use what is available to them, which sometimes means the Comps will be dated, distant, and have large adjustments.

It’s common to see comps as far as 20 miles away, 1 ½ years old and with over 50% gross adjustments. Rural areas or unique designs are also challenging for the UW, since they don’t fit into the neat little appraisal box where every comp is within 1 mile, sold in the last 6 months and has minimal adjustments.

In these cases, it’s important for the appraiser to locate comps that demonstrate the same dominant features as the Subject. The UW needs to see that the property is marketable and value is supported in order to make a lending decision.