How to defend a value to a lender

Your borrower says the house will be worth $400,000 finished. The lender's underwriter has no reason to believe that, and every reason not to. What closes the gap is evidence, assembled the way an appraiser would assemble it.

Comparables carry the whole argument

A comparable is an assertion about somebody else's property that a lender will check. Three rules decide whether yours survive:

• Close. An identical house a mile away is a weaker argument than a slightly different house on the same block, and every reviewer knows it. Distance beats similarity.
• Recent. A sale from two years ago describes a different market. Twelve months is comfortable, eighteen is arguable, twenty-four needs a reason.
• Arm's length. A $35,600 transfer of a $400,000 house is a quitclaim between family, not a sale. One of those in a packet and the whole packet is read sceptically.

Adjust, and show your working

Comparables are never identical, so each one is adjusted toward the subject — for living area, for lot size, for age, for condition. The adjustments are the argument. A grid that shows a comp sold for $240,000 at 1,600 square feet, adjusted up for the 200 square feet the subject has on it, can be checked line by line. A single number with no arithmetic behind it cannot, and will not be.

Show what you set aside

Counter-intuitive and it works: list the sales you rejected and why. A packet that shows four nearby sales set aside as foreclosures reads as careful. A packet showing only the three that help reads as selected, because it was.

The one mistake that ends it

Overstating. An ARV pushed twenty per cent past what the evidence supports does not get you a bigger loan — it gets the file re-read from the beginning with the assumption that everything else in it is also optimistic. You cannot win that back on the same deal, and sometimes not on the next one.

If the sales do not support the number, say so, and bring the borrower a number they can build a deal on instead. That is the conversation that keeps you the broker.

What we do with this

Our desk pulls the county's own recorded sales, scores them for likeness, adjusts them and prints the parcel number and transfer date beside every figure — including the ones it rejected and why. The packet says plainly what that county does not publish. A lender can check any line of it.

It is not an appraisal, and it never claims to be. It is the packet a lender reads before deciding whether to order one.

What to do when the evidence disagrees with itself

Sometimes the nearby sales simply do not agree. Three houses on the same street selling at $210,000, $265,000 and $390,000 within a year are describing three different properties, and averaging them produces a number that describes none of them.

When that happens the honest move is to say so and go looking for the reason — a renovation, a corner lot, a sale between family. An underwriter who is told "these three disagree and here is why" trusts the two that remain. An underwriter handed the average works out for themselves that it was an average, and then wonders what else was smoothed over.

Anyone can try the same research on a property at the property report, or see what a full desk packet covers on the broker page.