Lack of 'Comps' Hurting Appraisals and Loan Closings

Many proposed refinancings and purchase loans have been scuttled because the appraiser could not find enough comparable sales of similar homes. Part of the problem is that lenders have narrowed their definition of an acceptable comp in the past year as part of an overall stiffening of standards. Many appraisers have failed to find the requisite two comps within the prior three months, or even three comps within six months, because there have been so few sales in a given area. This could create a self-fulfilling cycle, where fewer sales lead to fewer comps, which in turn lead to still fewer sales. At the same time, as distressed sales make up a greater portion of the real estate market, lenders also fear those sales will become the only comps, resulting in lower home values and hence smaller loans.