I'm struggling with the process of our internal evaluation staff requesting real estate agents to provide them w/comparables in certain areas. I've always assumed that when someone completes an evaluation they need to pick the comparables. Wouldn't this be a situation where an appraisal should be ordered because the evaluator doesn't really know the market or am I off base?

The evaluator needs to be able to support his value, so it would make sense for him to collect comp information.

I studied the December 2011 Guidance last week because I thought this question was rather interesting. It appears to me that getting these comparables could be documented as a source. I'm not so sure that it would be a violation. Study that guidance and tell me if anyone else see it the same way I do, specifically:

XIII. Evaluation Content

An evaluation should contain sufficient information detailing the analysis, assumptions, and conclusions to support the credit decision. An evaluation’s content should be documented in the credit file or reproducible. The evaluation should, at a minimum:
• Identify the location of the property.
• Provide a description of the property and its current and projected use.
• Provide an estimate of the property’s market value in its actual physical condition, use and zoning designation as of the effective date of the evaluation (that is, the date that the analysis was completed), with any limiting conditions.
• Describe the method(s) the institution used to confirm the property’s actual physical condition and the extent to which an inspection was performed.
• Describe the analysis that was performed and the supporting information that was used in valuing the property.
• Describe the supplemental information that was considered when using an analytical method or technological tool.
• Indicate all source(s) of information used in the analysis, as applicable, to value the property, including:
o External data sources (such as market sales databases and public tax and land records);
o Property-specific data (such as previous sales data for the subject property, tax assessment data, and comparable sales information);
o Evidence of a property inspection;
o Photos of the property;
o Description of the neighborhood; or
o Local market conditions.

• Include information on the preparer when an evaluation is performed by a person, such as the name and contact information, and signature (electronic or other legally permissible signature) of the preparer.

Personally, I do not like it. If the evaluator does not know the area, then they should not be performing the evaluation. Plus, you are going to allow a realtor who has a very real benefit in the transaction, to cherry pick the comps they want you to use?

That said, I suppose it could be how they finesse it: are they only and always just using the comps provided by the realtor without verifying whether or not they are the best comps, or are they taking what they are provided and using it as a tool to understand the area and to pick others, while possibly using one or two the realtor provided?

Either way, I would not allow it in my shop.

I see what you are saying Jay and I agree with you. From some unknown reason I didn't wholly digest the part where they say the comps come from a realtor.

And I am making the assumption that they are asking the agents involved in the transaction. The post isn't overly clear, but possibly they could also be contacting other non-involved agents to get possible comps. This I could understand, but again, while not directly connected to the transaction in hand, they too have an indirect benefit by providing choice comps as well, as it helps keep their market up, and potentially their commissions. It may be a stretch I know, but I just do not feel the bank is doing itself any favors by going this route.