First Exposure Draft - Identifying Comparable Properties

[Randolph Kinney]

https://appraisalfoundation.sharefile.com/d/sfa8ed4dc1784f4da

39 Sales information: Before a property can be considered a comparable, the appraiser must
confirm the type of sale transaction. In other words, did the sale occur under conditions
40 commensurate with the type and definition of value under consideration? In the case of market
41 value, the following factors must be considered:
42 1. Did the sale convey property rights similar to the property rights being appraised? Were
43 the property rights similarly encumbered or unencumbered at the time of sale?
44 2. Were both the buyer and seller typically-motivated?
45 3. Were both parties well informed or advised and each acting in what they considered their 46 own best interests?
47 4. Was the property allowed exposure in the open market for a reasonable length of time?
48 5. Was payment made in cash or its equivalent?
49 6. Was financing, if any, on terms generally available in the community at the time of sale
50 and typical for the property type in its locale?
51 7. Did the price represent normal consideration for the property sold unaffected by special
52 financing amounts and/or terms, services, fees, costs, or other credits incurred in the
53 transaction?
54 The appraiser’s experience and skill in consistently observing the market coupled with ongoing
55 interviews with buyers, sellers, and brokers as to what factors drive local values assist in
56 providing credible value indications by comparison.
57

 

[Terrel L. Shields]

Were both the buyer and seller typically-motivated?
Were both parties well informed or advised and each acting in what they considered their own best interests?

I am all for identifying such factors, but the truth is that it isn't always possible to determine and some buyers / sellers, particularly in a private transaction, may not wish to disclose. My limited experience is that when it is a non-disclosure state, they are even less inclined to discuss the terms of the sale. So you are back to square one, hoping the Realtor isn't a liar.

 

[Randolph Kinney]

I thought this APB on comparables properties was elementary. So what if you don't have "comps" that line up to produce a value without large adjustments or can't be verified by a disinterested party?

 

[Meandering]

49 6. Was financing, if any, on terms generally available in the community at the time of sale
50 and typical for the property type in its locale?

Sure, let's all do it again. See this article about typical mortgages in 2006.
http://www.businessweek.com/stories/2006-09-10/nightmare-mortgages

It's one of my favorite articles, unfortunately it leaves out the part that the mortgages were recorded as MERS transactions and there was no way to verify the teaser rates in the public records.


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[Meandering]

For the longest time I've always wondered why we are supposed to adjust for creative financing but nobody mandates the banks record their creativity for us to have for analysis.

Oh I know, it's only when individuals are creative. But they don't have to record it either.

Maybe this time it will be different because there are no mortgage brokers to say we're shopping the loan and won't know what "program" the borrower will be in, so we can't possibly tell you what their rates will be. Just go with what the Realtor put on the agreement of sale. Like Realtors have a clue.


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[Workbox]

For the longest time I've always wondered why we are supposed to adjust for creative financing but nobody mandates the banks record their creativity for us to have for analysis.

Oh I know, it's only when individuals are creative. But they don't have to record it either.

Maybe this time it will be different because there are no mortgage brokers to say we're shopping the loan and won't know what "program" the borrower will be in, so we can't possibly tell you what their rates will be. Just go with what the Realtor put on the agreement of sale. Like Realtors have a clue.


.

Realtors have a clue, but are blinded by closing the deal not matter what it takes.

 

[Terrel L. Shields]

For the longest time I've always wondered why we are supposed to adjust for creative financing but nobody mandates the banks record their creativity for us to have for analysis.

Amen sister Marion

 

[hastalavista]

Now I really understand what was going on with the Appraisal Institute - Appraisal Foundation's dust-up.

IMO, this is appraisal 101 best taught in recognized texts and appraisal courses.

Do we need the APB to spend its resources on such an elementary issue as comparable selection and identification?

Let the foundation set the standards and qualifications.
Let the foundation issue clarification statements when necessary.
Let expert course developers identify how best to structure course presentations to meet the requirements set by the foundation.

I'm in favor of the APB's role of providing some guidance in best practices; especially on controversial or challenging issues (and I don't consider comp identification and selection to be a contraversial issue).
I'm not in favor of it become the course provider for basic education (no appraiser left behind).

 

[Ms. Janet]

Do we need the APB to spend its resources on such an elementary issue as comparable selection and identification?

Let the foundation set the standards and qualifications.
Let the foundation issue clarification statements when necessary.
Let expert course developers identify how best to structure course presentations to meet the requirements set by the foundation.

I'm in favor of the APB's role of providing some guidance in best practices; especially on controversial or challenging issues (and I don't consider comp identification and selection to be a contraversial issue).
I'm not in favor of it become the course provider for basic education (no appraiser left behind).

Agreed...how many ways can you spell similar? Good grief.

 

[George Hatch]

One of the big criticisms of the appraisal profession is that although we have professional standards governing conduct we haven't had a best practices reference for the different applications. What exactly are the "recognized methods and techniques"?

That's the gap the APB is aimed at.

Developing non-Standards courses in direct competition with the professional orgs - as well as the private CE providers - is going to cause some conflicts.