An ARV comp that ages past twelve months by the refinance date is not a comp the appraiser can use

Question

This is worth walking through as an illustration. An operator underwrites a duplex to a 187,000 ARV on the strength of a comp that closed at 191,000 in April 2023. The refinance appraisal happens in March 2024, by which point that sale has aged out of the twelve month window most appraisers work inside. The appraiser pulls two comps the operator had never looked at, both smaller and both on the other side of the same zip code, and returns 163,000. That is a 24,000 gap. A 75 percent LTV refinance modeled at 140,250 comes back offered at 122,250, so 18,000 stays trapped in the deal with no clean path to pull it. The question that never got asked before the purchase is what the appraiser will be permitted to use on the day of the appointment, which is a different question from what the market looks like today. A comp already eight months old at acquisition becomes twelve months old after four months of rehab, which puts it right at the edge, and an appraiser standing at that edge will usually make the call that was made here. The discipline that follows is running two ARV figures, one using only comps under six months old and one using everything available. When those two numbers sit more than about 8 percent apart, that gap needs to be understood before the earnest money is wired.

kevin_lombard · Answer

That 6-month cutoff is the one I keep seeing people skip.

cody_ahn · Answer

Eight months old at purchase is the real mistake, not the appraiser's call.

petrov_dan · Answer

The thing that does not work is modeling the refi date as if the appraiser will meet you halfway on a borderline comp. They will not. In that position the appraiser almost always goes the other direction, finds the two sales that make the report defensible, and those sales are rarely the ones that flatter the model. Akron east side versus west side inside the same zip is also not a minor adjustment. To a lot of appraisers that reads as a different submarket and they weight it accordingly. On any small infill in a similarly granular market, comps are worth pulling by street corridor instead of by zip, because the zip tells you almost nothing useful. Your two number test is the practical version of stress testing the appraiser's toolkit rather than your own optimism.

lucia_ferrari · Answer

The 8% threshold you landed on is worth stress testing in northeast Ohio specifically. The spread between a 6 month comp pool and a 12 month comp pool in Akron adjacent zip codes was running closer to 12 to 14% through late 2023, because transaction volume fell off hard and the comps that aged out were from a hotter period. If 8% is your wire, you might still be carrying a gap, just a smaller one than you had here. The number that stands out is $163,000 from two comps, both smaller, both concentrated on one side of the zip. That is a thin pool problem layered on top of an aging problem, and those are two different failure modes with different fixes. The consistent finding on reconsideration of value submissions is that the window to fight a number is almost entirely closed once the appraisal is delivered, 30 days at best, and the lender controls whether they even forward the request. The leverage sits before the appraisal appointment. Getting a third comp in front of the appraiser while the inspection is still happening, even a pending sale, changes what they feel obligated to address in the writeup. After the number is locked, you are basically asking a favor.

nadia_rahman · Answer

The east side / west side distinction inside the same zip is what gets people. Appraisers can and will draw a submarket boundary that your spreadsheet never knew existed, and two comps on the wrong block can quietly justify a $20k swing with zero recourse on your end.

I had a similar hit in Memphis, appraiser split a zip code along a rail line, and my comp was literally 0.4 miles away on the other side of it. Nothing I could do after the fact.

Before refi I now pay for a desk review from an independent appraiser and specifically ask them to flag any geographic boundaries they'd expect the subject appraiser to defend.

An ARV comp that ages past twelve months by the refinance date is not a comp the appraiser can use

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