Site Comp Sale Date After Effective Date

[alebrewer]

Couldn’t the appraiser easily move the effective date forward and eliminate any issues?

True - and a couple of days either direction wouldn't have much impact (most likely). I think one of the reasons the inspection date is generally contemporaneous with the effective date is that the appraiser knows the condition of the improvements as of the date he/she inspected the property. To use an effective date different than the inspection date, I'd think you'd have to invoke an assumption that the improvements were still in the same condition as when you inspected them...

 

[Functional Obs]

July 19/20, 2021 is my reading

I should have been more clear. Both of these sales were recent and in 2021.

 

[Basically Rectangular]

I'm working on a report for a court case, and I've decided to develop the cost method as support for the sales comparison. The effective date of the report (date of the inspection) is 7/19. The very best site sale (though there are several others) took place 7/20. Am I going to run into a problem using this property?

If it is only a one day difference, why would it be a problem? Does that sale support what you would derive as a site value by using the other land sales, and extraction (if applicable; I don't know the assignment scope of work or if there are even improvements on the property).

I would argue that if I had to use sales from two years ago (which are less similar) and apply adjustments to these sales for market conditions, then the sale which is similar but occurred one day after the effective date is a better indicator of the current value.

I don't see how you can go back in time for settled sales but not forward in time for settled sales?

I would ask a local appraiser who does cases similar to this purpose/intended use and users. The answer might be different in other states and jurisdictions. I can see how you would want to avoid any hang-ups since this is a court case, but you should discuss this sale, even if you don't rely on it. I would be concerned that leaving it out could open the door for someone questioning why it wasn't in there.

Editing my scope of work comment... I see the OP is going to use the Cost Approach.

 

[sputnam]

There is nothing in USPAP that says you can't use a sale that closed after the effective date of the appraisal as a comparable. There is an AO that addresses exactly this issue. You do have to make sure that you make appropriate market to market adjustments... if needed.

 

[CGinMN]

To use an effective date different than the inspection date, I'd think you'd have to invoke an assumption that the improvements were still in the same condition as when you inspected them...

I would argue even that is up for debate.

 

[Terrel L. Shields]

Lots of difference in one year and one day... I guess I should not have ASSumed it was month/year and not THIS year day month...

 

[alebrewer]

I would argue even that is up for debate.

Up to each person to decide what is right or wrong. No reason to argue... For me personally, if my effective date is different than the inspection date, I really don't know if the improvements are the same as when I visited, so I'm gonna invoke an assumption that they were/are. If someone doesn't share my view, that's completely up to them. Remember - you're the one signing your reports.

 

[CGinMN]

Up to each person to decide what is right or wrong. No reason to argue... For me personally, if my effective date is different than the inspection date, I really don't know if the improvements are the same as when I visited, so I'm gonna invoke an assumption that they were/are. If someone doesn't share my view, that's completely up to them. Remember - you're the one signing your reports.

Sorry, I read this as extraordinary assumption when I replied. I agree an assumption is advisable. Even so I would check with the property contact to make sure no significant alterations or changes were made between the two dates. Seems like a pretty easy workaround for anyone that needs this to be a closed sale on or after the effective date.

Every once in awhile I will intentionally postpone my inspection to make sure my best comp has closed prior to my inspection/effective date.

 

[Sadie]

Read Ethics Rule under Management, #5, An appraiser must not accept an assignment, or have a compensation arrangement for an
assignment, that is contingent on any of the following: #5.. the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the
assignment’s purpose. The use of a sale that hasn't closed is relying on a subsequent event-the closing of the sale. It can be support but not the basis of your MVE.

 

[alebrewer]

Read Ethics Rule under Management, #5, An appraiser must not accept an assignment, or have a compensation arrangement for an
assignment, that is contingent on any of the following: #5.. the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the
assignment’s purpose. The use of a sale that hasn't closed is relying on a subsequent event-the closing of the sale. It can be support but not the basis of your MVE.

Is that still a valid interpretation in the case where you KNOW what the eventual sales price of that sale is? IOW, it's one thing to base your opinion on an unknown, but in the case where the sale settles prior to the signature date, even though it wasn't settled as of the effective date, it is/was a known prior to the report being released...