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Why Use 10 Comparable Sales for Home Appraisals?

by Guest on Oct 17, 2012 Property Appraisal 1466 Views

As an appraiser I ask myself why would any lender ask for a specific number of comparable sales in an appraisal assignment?  Besides creating a lot of extra work for appraisers, which lenders do on a regular basis without compensating appraisers for the time lost meeting their requirements, one has to ask what is behind a lender requirement of this type? 

1. Lenders who request a specific number of comparable sales are, in my opinion, changing the appraisal process not to increase the accuracy of appraisal reports but to bring down appraised values.  Most appraiser have in the past generally used 3 to 6 comparable sales in their residential reports.  A requirement to expand that number of comparable sales to say 10 forces an appraiser to include sales transacted further in the past, sales located farther from the subject property, REO / short-sales that would have been excluded from consideration and basically sales that are less similar.  The change thwarts market evidence of upward movement in prices, so its a way for lenders to keep values in check. 

2.  Lower appraisals means fewer loans have to be made by lenders, but more importantly lower appraisals restrict the upward movement of prices within a market.  Market participants, because of supply and demand, may agree to higher sales prices, but appraisals based on more older sales and more REO / short-sales force buyers and seller to keep their agreed negotiated prices low, or they risk not being able to finance their transaction.

3. Appraisers should be able to make market value determinations based on recent sales that are in their expert opinions most comparable, and use a sufficient number of sales to establish market value base on their own professional opinions.  Arbitrary lender requirements that force the use of more comparable sales than is typically necessary to establish market value in an appraisal report are simply an attempt by lenders to control the real estate market and restrict the normal, cyclical and at this point upward movement of prices.   

 Each time that lenders subvert the appraisal process, do appraisals improve?  The answer is no.  The requirement for more sales is lenders telling appraisers that they want more analysis that negatively influences value.  My recommendation to appraisers is, add the comparable sales that lenders request, then given them little or no weight in the reconciliation if they are inferior (which they likely are if you picked the best 6 to begin with).

You can't stop them from requesting the additional sales but you still have the power to give inferior sales little or no weight in your reconciliation.  If they take the power to form your opinion away, you are no longer an appraiser, you are just a rubber stamp.

For more appraisal information contact Glenn Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada appraiser who can be contacted via email or via his business website Appraiser Las Vegas  (, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at  

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