Prudent?

[residentialguy]

Did you not read the post # one in this thread? The op cited sales in project of same units of 96k, 98k and only one at 100k. They alluded to reaching 102k by fudging adjustments and using less similar sales.

Nothing wrong with using some less similar sales, as long as the variances are adequately adjusted. Fudging adjustments, however...is wrong.

However, OP stated that the comps were the same, therefore, going by that, 102k has adequate market support.

 

[George Hatch]

The only time I limit my sales comparison to 3 sales is when there are literally no sales data to use. No actives or pendings, no recently expireds/withdrawns, no outside sales from nearby competing markets.

That's almost never the case among ANY of the types of properties I appraise; least of all residential properties. So all this talk about trying to make something out of little/nothing is overblown. If you didn't have ANY of these closed sales then what would you do? You'd expand your search parameters until you could come up with enough sales data to work with, and I would certainly hope you wouldn't stop with just 3 sales.

In my view, the sales you present in your Sales Comparison are just the tip of a much larger iceberg that you've already sussed out prior to even getting to the Sales Comparison.

 

[J Grant]

I typically use more than 3 sales - typically 4 sales unless more are needed...and I analyze many more that go in a folder, report usually also has 1 or 2 listings or pendings.

No matter how many sales we include or exclude, the premise of appraising and comp selection is the most similar and competitive comps to subject are what a buyer would consider as a subsitute

 

[Sid Holderly]

Pending price is generally not the selling price. Looks like a 3% list to sell discount. Not large but should be considered.
What was the average selling discount to the slightly broader market?
Plot the data, is the increase supported?

 

[George Hatch]

We sometimes run into sale prices that are in excess of listing prices. Because I control the entirety of my report formats I'm able to grid the DOMs, list price and sale/list ratios on their own lines in my grids so I can see more clearly how to "adjust" pendings and actives. If/when properties are commonly not selling at 100% of their list price.

 

[residentialguy]

Pending price is generally not the selling price. Looks like a 3% list to sell discount.

Should never adjust to some median sp/lp. I've seen variances of +/- 35% from list orig price. You adjust it to the market prices of similar sales that have just sold.

 

[Terrel L. Shields]

Prices typically rise for a reason.

Speculation is a reason, but not a good one.

, it is the aprpaiser's job to stop real estate bubbles.

It certainly should be our job to identify them. Any inflation than exceeds the income inflation in the same market is doomed to slow, and slow soon or people get priced out of the market, which leads to entrenchment and the market will rebalance. And if prices exceed the replacement cost plus land value, it violates the axiom that a prudent buyer will not pay more than it costs to replace. Which makes me curious about a phenomenon I see. Building cost = $120/SF....stable slow increase. Rapid price increase. Cost same, therefore the value must accrue to the underlying land (non-improvements, amenities, intangibles), but in sales grid, a GLA "adjustment" might be $150/SF. How can that be? GLA adjustment cannot exceed replacement cost new without ignoring what is really driving the price...

 

[timd354]

Speculation is a reason, but not a good one.
It certainly should be our job to identify them..

I agree, but it is not the appraiser's job to stop them or do anything else to try to influence the market

 

[Terrel L. Shields]

do anything else to try to influence the market

Trying to lead the market anticipating an unsustainable trend in price appreciation is "influencing" price and perpetuating increasingly higher prices. Realtors typically price just above their last closed sale and we can act as enablers unconsciously. The "bandwagon effect" is a common attribute to consumer psychology. It's not rational and this year's Bank of Sweden Nobel in economics was award to someone exploring this phenomenon.

 

[djd09]

but it is not the appraiser's job to stop them or do anything else to try to influence the market

Is this in USPAP or in fannies guidelines?