Outlier Comp - to use or not to use?

[eyches]

Working on an appraisal of a site (single family) and most of the comps are within a fairly tight range. There is one outlier that sold for considerably more than any of the others. In addition, the outlier was purchased by the same builder that is purchasing the site I am currently appraising (and for a similar price). This outlier is literally across the street and just closed 6 weeks ago, but as I can't find any other sales that would support that value I don't know if I should include it at all, let alone give it the substantial weight I otherwise would for a comp that is nearly identical to the subject. I assume some of you have had a similar experience - any thoughts? Thanks in advance.

 

[TerryRohrer]

I would probably include it and then talk at length about all the other data telling a different story (and include extra comps). What you describe is the very essence of the "most probable" aspect of the definition of market value.

 

[Joe Flacco]

How good are the other comps?

 

[eyches]

How good are the other comps?

They're good - all within the last 9 months, located within a few blocks, similar in terms of dimensions and characteristics

 

[Joe Flacco]

I dunno. Obviously the issue is it is you have one buyer paying that price.

 

[Surf Cat]

There is one outlier that sold for considerably more than any of the others. In addition, the outlier was purchased by the same builder that is purchasing the site I am currently appraising (and for a similar price).

Why did your client pay considerably more for both sites? Due to being across the street from each other? Did you ask him/her?

You have to include, and disclose the sale across street and state within the report that your client was the buyer. Especially since the the other sales (aside for your outlier which your client purchased Lol) doesn't support the purchase price.

Also, the sale across the street as you state, is nearly identical. Why wouldn't you include it? It's a 6 week old recent sale....If you don't include it it's like you're trying to hide something.

If your client overpaid for both properties as the other sales do not support either of them, then it is what it is.

 

[sputnam]

You'll need to decide for yourself. I never include sales that aren't comparable in my appraisal reports. I do include comments explaining the extent of my research. If the property seems highly similar to the subject but, sold at a very different price point... then, you need to find out why somone was willing to pay more than the market for the property (or why a Seller was willing to take less).

 

[J Grant]

Working on an appraisal of a site (single family) and most of the comps are within a fairly tight range. There is one outlier that sold for considerably more than any of the others. In addition, the outlier was purchased by the same builder that is purchasing the site I am currently appraising (and for a similar price). This outlier is literally across the street and just closed 6 weeks ago, but as I can't find any other sales that would support that value I don't know if I should include it at all, let alone give it the substantial weight I otherwise would for a comp that is nearly identical to the subject. I assume some of you have had a similar experience - any thoughts? Thanks in advance.

The market value definition is our friend - it references the most probable price that a typically motivated buyer would pay. Why would a typically motivated buyer pay considerably more for one site if they could buy other, similar sites for less?

Either the site is atypical ( better than the others ), or this particular buyer is atypical, willing to pay more than everyone else for X reason , or hiding/laundering money in these transactions. The fact that the same buyer is a builder and each time is paying considerably more shows that the buyer is not typically motivated.

If the sale terms, such as buyer motivation, do not meet the market value definition terms, then that sale or that price is not a reliable MV indicator.

 

[J Grant]

The market value definition is our friend - it references the most probable price that a typically motivated buyer would pay. Why would a typically motivated buyer pay considerably more for one site if they could buy other, similar sites for less?

Either the site is atypical ( better than the others ), or this particular buyer is atypical, willing to pay more than everyone else for X reason , or hiding/laundering money in these transactions. The fact that the same buyer is a builder and each time is paying considerably more shows that the buyer is not typically motivated.

If the sale terms, such as buyer motivation, do not meet the market value definition terms, then that sale or that price is not a reliable MV indicator.

It makes sense to comment on an outlier sale across the street if you do not use it and comment on why you did not use it ( X $ higher than typical price ).

You live in Texas, I live in Florida. Note that Texas and Florida are the only two states that allow homeowners unlimited bankruptcy protection in their homestead ( assuming they did not commit a criminal act to allow seizure) . Thus, in both states, we might see people paying odd prices for very expensive properties because if they declare BK, those assets can not be seized. They have to establish residency, live there for X months or years, but half of them fake it, IMO. It might have nothing to do with your higher-than-typical price lots in this case but it is something to be aware of..

 

[Tom D]

You have an similar match outlier sale. Obviously higher sale price is always better than lower, to not gum up the value. That sale is too obvious to overlook. Comps #4,5,6 are secondary comps which the underwriters may look at, but not care about. This sale is being used for support However, insufficient data to determine if this is a new trend. Put it in now, easy now, more work later if it comes up.