Reconciling Three Sales Against a Contract Price
You are appraising a 1,850-square-foot, three-bedroom/two-bath ranch on 0.35 acre in a Morgantown subdivision. The subject has an updated kitchen, a covered carport, and no garage.
- Comp A - 1,900 sf, 3/2, 0.30 acre, updated kitchen, two-car garage; closed at $312,000, 25 days ago, conventional financing.
- Comp B - 1,780 sf, 3/2, 0.50 acre, no garage, original 1988 kitchen; REO sale closed at $268,000 four months ago.
- Comp C - 1,860 sf, 4/2, 0.36 acre, no garage, updated kitchen; closed at $295,000, 60 days ago, with the seller paying $6,000 of the buyer's closing costs.
The purchase contract on the subject is $305,000. The buyer's agent has emailed asking you to "hit the contract" because the buyer's loan is already locked.
1. Which closed sale is the best indicator of the subject's value, and why? Identify the adjustments you would apply to that sale.
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Best indicator: Comp C.
The governing principle is that the comparable requiring the smallest net and gross adjustment to become the subject is the most reliable. Comp C matches the subject on gross living area (1,860 vs. 1,850 sf), bath count, garage situation (none), condition (updated kitchen), lot size, and is a recent arm's-length sale.
Adjustments to Comp C (illustrative dollar amounts derived from the local market - the reasoning, not the exact figures, is what is graded):
| Feature | Subject | Comp C | Adjustment to C |
|---|---|---|---|
| Seller concession | none | $6,000 | −$6,000 |
| Bedrooms | 3 | 4 | −$5,000 (superior) |
| Carport/garage | carport | none | +$3,000 (subject superior) |
| GLA / lot | 1,850 / 0.35 | 1,860 / 0.36 | $0 (within tolerance) |
Adjusted value of Comp C ≈ $287,000.
Why the others rank lower: Comp A is a strong sale but its two-car garage is a major superiority over a carport, forcing a large (roughly $12,000) adjustment, and large adjustments erode reliability. Comp B is four months old, a distressed REO with atypical seller motivation, and its dated kitchen requires a large upward adjustment - it supports a floor, not the concluded value.
2. How must the $6,000 closing-cost concession in Comp C be treated, and what weight should the REO sale (Comp B) receive?
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Concessions must be adjusted out. A seller-paid closing cost is a financing incentive, not an attribute of the house. If it is left in the sale price, every comparable sale with concessions pulls the subject's value upward and the appraisal becomes a value-inflation tool rather than an opinion of market value. The $6,000 is deducted from the $295,000 sale price, so the comp enters the grid at an effective $289,000, with the concession noted in the sales-comparison comments. If the concession were typical and customary for the market rather than an inducement, the appraiser would still analyze it - the test is whether it changed the buyer's net price.
Comp B (REO): still a valid closed sale and admissible, but it is the weakest indicator because of three compounding factors - atypical seller motivation (lender liquidation), condition deferred during foreclosure, and age (four months). The appraiser uses it as a low-end bracket / floor and, if market data support a time adjustment, applies one; if the appraiser cannot support a time adjustment with paired sales or market statistics, the adjustment must be zero rather than a guess. Concessions, motivation, and market change are all analyzed in the narrative rather than buried in a net adjustment.
3. The contract is $305,000. What is your obligation in reconciling the sales-comparison approach, and how should you respond to the request to "hit the contract"?
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Reconciliation range. Weighting Comp C most heavily and Comp A secondarily yields a range of roughly $287,000 to $299,500 with a point value near $292,000 to $295,000 - below the $305,000 contract price.
Obligation. The contract price is a data point that must be analyzed and reported, including a statement on whether it influenced the final opinion, but it is not evidence of value. Appraisal practice (USPAP) requires independence, impartiality, and objectivity: the appraiser is not an advocate for the transaction closing. "Hitting" a contract price reached before the analysis is a pre-agreed result, and it is a reportable violation.
Response to the agent. Decline in writing and explain: (1) the value opinion is supported by the closed-sale grid, (2) the contract is a negotiated price reflecting a particular buyer and seller, not market value, and (3) all three comps, including the largest and smallest, were analyzed.
The buyer's real options after a low appraisal: renegotiate the price, bring additional cash to close (recalculating LTV on the lower value), request a Reconsideration of Value with supporting data submitted through the lender, or use any appraisal contingency in the contract. Every one of those turns on the contract's specific contingency language and deadlines, not on pressure applied to the appraiser.