“Hi Gary. I’m refinancing and the bank’s appraiser used a trustee sale as a comp. Is that normal?”
Answer:
Absolutely not.
I’m no appraiser and don’t know official appraisal rules and guidelines. But in my opinion, that appraiser should lose his license!
Why?
Market value is defined as the price a willing buyer and willing seller would agree upon.
Thus comps should be sales with willing buyers and sellers. Short sales, bank REO sales, and sales by sellers in foreclosure can be used when other non-distress sales comps are unavailable.
But a trustee sale is when the lender forecloses on a home and it is auctioned off for cash (only) on the courthouse steps.
That’s about as far from a willing seller as you can get.
Further, due to the extra work involved and the inherent risk in buying homes at trustee sales, they almost always sell well under market value.
(Forrest Gump would say buying a home at a trustee sale is like a box of chocolates…you never know what you’ll get.)
If I were you, and the home appraised lower than you need it to, I’d demand the bank re-appraise the home at no cost to you.
