Using subject as comparable

[TerryRohrer]

Right. I always analyze the contract for sale and explain the contract sale price and its relationship to the opinion of value developed in the appraisal. This is a separate issue from actually using the subject property against itself in the adjustment grid. I think Roher above missed the point of my question.

How so? I'm in full agreement with you?

 

[Don Jones]

How so? I'm in full agreement with you?

Sorry, I was looking at another post, not yours. I'm with you.

 

[Don Jones]

The subject of the appraisal is the fee simple interest?

Is the land leased, if so then the conveyed interest is leased fee, is there an adjustment needed for that?

Has it been planted? Does the purchaser need to wait to utilize the land until after the ag is harvested?

Rights appraised is Fee Simple less any recorded encumbrances. There is no lease and no need for an adjustment.

The land is not planted, no personal property is being appraised, possession is immediate.

The point of my question is simple: Is it correct to use a property being appraised that is under contract for sale in an appraisal of that very property. In my opinion, logic and common sense say no, it is not proper.

 

[George Hatch]

I've done it and explained exactly why I've done it. But I've also not done it and explained it outside of a grid.

I'm not familiar with any user that would criticize an appraiser for doing it either way.

 

[glenn walker]

I would appreciate opinions on the following. Say we have a property, in this case farmland, that is under contract for sale. This property is the subject of an appraisal. What is your opinion about using the subject of an appraisal as a comparable sale in an appraisal of the subject that is s under contract for sale?

My personal thinking is that doing this does not make sense. The subject of the appraisal should be compared to suitable comparable sales that reflect market value. It is possible that the subject’s current sale price could be higher, or lower, than a reasonable market valve based on other sales. The appraisal is a test of the property being appraised as it relates to market value based on arm’s length sales of similar properties. Using the sale against itself does not compare it to the historical market data.

One argument for doing this that I have heard is that if the appraiser was doing another appraisal where this sale (used against itself) was in the same area then this sale would be used as a comparable. Well, maybe it would and maybe it would not. It would depend on whether, or not, the sale price represented reasonable market value.

I have also heard it said that, “What better comparable than the subject itself.” This goes against the definition of the meaning of comparison. To compare one item to another requires at least two of the items. One is the subject and the other is used to make comparison. When the subject is used against itself there is no comparison being made. The very definition of “comparison” is negated. This makes absolutely no sense to me. With this kind of logic why even do an appraisal. Just say the current sale price is market value and be done with it.

Yes it can be done -But Should it be used ?
In my opinion the few times In my life when I have done it was when It was out of complete desperation. Later on in life when I started doing appraisal reviews we would get one or two of these a year and in all cases the appraiser was clearly reaching for anything and everything to prove or support his value.

As far a that old saying " what better comparable than the subject itself " that's often the same guy who took his first cousin to his high school prom because he couldn't get a date. When your pinned in a corner with no way out it's amazing how the human mind can make you delusional : ) LOL

 

[TerryRohrer]

Yes it can be done -But Should it be used ?
In my opinion the few times In my life when I have done it was when It was out of complete desperation. Later on in life when I started doing appraisal reviews we would get one or two of these a year and in all cases the appraiser was clearly reaching for anything and everything to prove or support his value.

As far a that old saying " what better comparable than the subject itself " that's often the same guy who took his first cousin to his high school prom because he couldn't get a date. When your pinned in a corner with no way out it's amazing how the human mind can make you delusional : ) LOL

I agree with this. Can you? I am not aware of anything that prohibits it. Should you? I can't imagine a circumstance where it adds anything to a report. It certainly doesn't add credibility for a reader who understands what an appraisal is. It reminds me of a relatively useless employer I once worked for. One of his favorite sayings, regarding wearing a suit and tie when testifying in court, was that it gave him "unearned credibility." Unfortunately, he didn't have any credibility beyond that. I view the use of a pending sale of the subject as a failing effort to produce that same effect.

 

[Don Jones]

Rights appraised is Fee Simple less any recorded encumbrances. There is no lease and no need for an adjustment.

The land is not planted, no personal property is being appraised.

The point of my question is simple: Is it correct to use a property being appraised that is under contract for sale in an appraisal of that very property. In my opinion, logic and common sense say no, it is not proper.

I don’t know of many users of appraisals that know enough about proper appraisal methods to criticize anything in an appraisal except their belief that the opinion of value is too low.

 

[George Hatch]

There you have it.

 

[apt20]

It appears your question is missing details, or you are confused on when using the subject as a comparable is done.

Using the PRIOR SALE of the subject as a comparable can help convey many points about current market conditions. Using the CURRENT SALE, which you are talking about in the OP is never done.

 

[Mark K]

I could see using a prior sale in the grid, however, especially if the conditions of sale were relevant. If it was a market sale, and you have nothing better, it's a good idea to illustrate the current value by making a market conditions adjustment and, if relevant, conditions of sale as well.

Agree completely.

With this kind of logic why even do an appraisal. Just say the current sale price is market value and be done with it.

Hopefully you'll have additional comps to support your appraised value and not just say that the current sale price is the market value.

I've always included prior sales in the grid as a comp. What's it going to hurt by doing so? For R/W work for the state, their reviewers insist that it is included in the grid in the narrative reports. I agree with their logic that it is likely one of the best, if not the best, comps assuming the prior sale was analyzed and determined to be arms-length and market value at the time.