Does a Comp Have to Go Through the MLS to Be a Valid Comp?

[Terrel L. Shields]

Reading between the lines in another Working RE Mag article. Tim Andersen wrote "USPAP and the State Board" and seems to imply a comp not in the MLS is not a comp.

I mean I work an area where we have brokers who are not members of the local board. We have a high percentage of rural land tracts that are not sold via the MLS and some developers don't list their lots for sale. They are all private transactions. Further, in commercial property and poultry farms, specialized brokers may list these farms and live 100 or more miles away, not even in the same MLS if they are even a member local to them. The implication is these are not valid sales because the board will want to see the MLS printout.

Comments anyone? Rural appraisers, what do you encounter in your market? I probably find 1 in 4 or 5 sales are not listed even when I search Zillow et al, and it's not listed in an adjacent MLS either. (I live in an area where I encounter 4 MLS's routinely and occasionally one from Missouri where I am not even licensed.

 

[Mike Ault]

Reading between the lines in another Working RE Mag article. Tim Andersen wrote "USPAP and the State Board" and seems to imply a comp not in the MLS is not a comp.

I mean I work an area where we have brokers who are not members of the local board. We have a high percentage of rural land tracts that are not sold via the MLS and some developers don't list their lots for sale. They are all private transactions. Further, in commercial property and poultry farms, specialized brokers may list these farms and live 100 or more miles away, not even in the same MLS if they are even a member local to them. The implication is these are not valid sales because the board will want to see the MLS printout.

Comments anyone? Rural appraisers, what do you encounter in your market? I probably find 1 in 4 or 5 sales are not listed even when I search Zillow et al, and it's not listed in an adjacent MLS either. (I live in an area where I encounter 4 MLS's routinely and occasionally one from Missouri where I am not even licensed.

A knew one appraiser here who consistently was able to drag up a FSBO comparable that he had appraised which sold for more than everything that was properly exposed through the MLS. I took him to task on it one day and he said "these are smart people who know how nice their houses are and don't need any realtor to sell them". In reality, I suspected they had huge seller concessions which weren't disclosed anywhere. However, being in a nondisclosure state, he was the only one who knew the truth.

 

[Tom D]

Seriously, the MLS has chicken farms. Me thinks the thought there is single family not located in cow country. Is anything really easy with rural work. It's the wild west of appraising. Now us city folks got more than enough MLS sales. My priveleged easy urban appraising life.

 

[shrubberyvaluation]

Reading between the lines in another Working RE Mag article. Tim Andersen wrote "USPAP and the State Board" and seems to imply a comp not in the MLS is not a comp.

I mean I work an area where we have brokers who are not members of the local board. We have a high percentage of rural land tracts that are not sold via the MLS and some developers don't list their lots for sale. They are all private transactions. Further, in commercial property and poultry farms, specialized brokers may list these farms and live 100 or more miles away, not even in the same MLS if they are even a member local to them. The implication is these are not valid sales because the board will want to see the MLS printout.

Comments anyone? Rural appraisers, what do you encounter in your market? I probably find 1 in 4 or 5 sales are not listed even when I search Zillow et al, and it's not listed in an adjacent MLS either. (I live in an area where I encounter 4 MLS's routinely and occasionally one from Missouri where I am not even licensed.

I'm not rural but I use plenty of comps that are not in MLS, plenty of builder sales are not in MLS, some communities a large portion of the sales are FSBOs. I check recent sales recorded online to see if anything wasn't put in MLS.

 

[George Hatch]

I always search for transactions in my public records feed and I always check up on expired and withdrawn listings. I often find a subsequent sale at or within reason WRT that previous listing price. Far more common among the non-SFRs than for the SFRs. I also google addresses to see if they ever have been listed for sale or rent. It's time consuming but sometimes the extra effort reveals another datapoint.

I don't give more weight to a transaction I don't trust but I also don't completely ignore them. Same as all the other data I run across that might not be as directly comparable. The additional context helps me to better understand the sales that I can use.

 

[Tim Hicks (Texas)]

I thought market exposure was needed to be a valid comparable sale.

 

[Gobears81]

It depends on the market and the intended use. For ad valorem appraisals, there could be some criticism if sales were used that were not openly marketed. With that said, some property types usually sell off-market, and sticking to only openly marketed sales would result in a severe reduction.
Might be worth mentioning that properties can be openly marketed without going on MLS, though. Also, when I appraised residential, I recall several "overpays" being when a property was sold FSBO. Not sure if anyone else has seen that happen more frequently also.

 

[JTip]

Many land sales don't go through the MLS. Gotta make calls and verify.

 

[George Hatch]

I thought market exposure was needed to be a valid comparable sale.

That's the definition of MV for the subject. Technically what we're looking for among the sales are arm's length transactions and typical motivations.

If I'm reviewing I would never hassle an appraiser for including a FSBO in their report unless that sale didn't fit the prevailing trend and the appraiser was giving it undue consideration. Nor would I hassle an appraiser for omitting that non-MLS sale from their analysis. I also wouldn't hassle an appraiser for using a sale that was entered into the MLS after the fact "for comp purposes only". No one sale makes or breaks. Others may disagree.

Some data is easier to use than others. The most expedient course is to use the easiest data but sometimes the datasets are so small that we're scrambling to even assemble enough datapoints to present in a report. If we're working in some rural area or with some atypical attributes where there have only been a couple sales in the last 18 months we're going to take what we can get and try to make the most of it.

 

[Tim Hicks (Texas)]

That's the definition of MV for the subject. Technically what we're looking for among the sales are arm's length transactions and typical motivations.

If I'm reviewing I would never hassle an appraiser for including a FSBO in their report unless that sale didn't fit the prevailing trend and the appraiser was giving it undue consideration. Nor would I hassle an appraiser for omitting that non-MLS sale from their analysis. I also wouldn't hassle an appraiser for using a sale that was entered into the MLS after the fact "for comp purposes only". No one sale makes or breaks. Others may disagree.

Some data is easier to use than others. The most expedient course is to use the easiest data but sometimes the datasets are so small that we're scrambling to even assemble enough datapoints to present in a report. If we're working in some rural area or with some atypical attributes where there have only been a couple sales in the last 18 months we're going to take what we can get and try to make the most of it.

Putting a "For Sale By Owner" sign is market exposure. The MLS does not corner the market in "market exposure."