Appraisers face particular challenges when appraising properties located in small towns and rural areas or structures that are unique in design. So much so that Fannie Mae recently released a Lender Letter addressing these challenges.
The availability of suitable sales for comparison can be challenging due to limited market activity and possible scarcity of sales. An appraiser can only use what is available to them, which sometimes means the comparable properties will be dated, distant, and have adjustments that exceed industry guidelines. It’s common to see comparable properties as far as 20 miles away, greater than one year old and with over 50% gross adjustments. Rural areas or unique designs are also challenging for the underwriter, since they don’t fi t into the idealistic appraisal box where every comparable property 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 comparable properties that demonstrate the as many of the same dominant features as the property being appraised. For example, if the property is on 25 acres, the comparable properties need to be on similar acreage to support value and demonstrate marketability. If the property is a geodesic dome, it needs to be compared to properties of similar design. The underwriter needs to see that the property value is supported by the comparables used.