Adjust an outlier, or just ignore it in the SCA?

[Swagger2015]

If you need that comp for bracketing purposes, you can include it and then give it limited consideration and minimal weight in the reconciliation with an explanation as to why.

 

[Tom D]

If that sale is going to be noticed by anyone, you need to explain the circumstances. Over priced property tends to shoot past the normal marketing time. And i don't know why, but at some point it becomes invisible on the MLS. Comps 4,5,6 are call secondary comps. They are looked at, but the underwriter is focused on the primary coms #1,2,3. Long ago, very long ago we only used 3 sales.

 

[ZZGAMAZZ]

If that sale is going to be noticed by anyone, you need to explain the circumstances. Over priced property tends to shoot past the normal marketing time. And i don't know why, but at some point it becomes invisible on the MLS. Comps 4,5,6 are call secondary comps. They are looked at, but the underwriter is focused on the primary coms #1,2,3. Long ago, very long ago we only used 3 sales.

Hmmmm. Very interesting, tangible perspective that prompts me to question whether it's necessary to continue to provide a minimum of at leasr 6 comps in virtually Every report, thinking that 5 or 6 sold comps and 2 pending sales indicate that I'm not simply cherry picking 3 to arrive at a preconceived value. Hmmmmm...

 

[Tom4value]

If that sale is going to be noticed by anyone, you need to explain the circumstances. Over priced property tends to shoot past the normal marketing time. And i don't know why, but at some point it becomes invisible on the MLS. Comps 4,5,6 are call secondary comps. They are looked at, but the underwriter is focused on the primary coms #1,2,3. Long ago, very long ago we only used 3 sales.

I heard about that. Me, I use only 3 comps in about 70% of my appraisals. Never get asked for more. I use more only if I need better support of a value or support for an adjustment.

 

[George Hatch]

"Price" is not a property attribute. I don't search by price and I don't adjust for price.

As others have noted, when we run into a transaction that doesn't apparently fit the prevailing trend demonstrated by the other sales, we might as well acknowledge it rather than ignore it and hope nobody notices. The RE markets are imperfect and so are the datasets we run into. There's no point in trying to imply otherwise.

I would even go so far as to suggest that if appraisers are implying a 100% consensus in the RE markets that plays directly INTO the strengths of the machine and away from the appraiser's personal touch in their analyses. You might as well average your sales and save the machine operators the effort.

 

[ZZGAMAZZ]

"Price" is not a property attribute. I don't search by price and I don't adjust for price.

As others have noted, when we run into a transaction that doesn't apparently fit the prevailing trend demonstrated by the other sales, we might as well acknowledge it rather than ignore it and hope nobody notices. The RE markets are imperfect and so are the datasets we run into. There's no point in trying to imply otherwise.

I would even go so far as to suggest that if appraisers are implying a 100% consensus in the RE markets that plays directly INTO the strengths of the machine and away from the appraiser's personal touch in their analyses. You might as well average your sales and save the machine operators the effort.

Just finished another so-called cookie-cutter. Total reconstruction of a SFR heavily damaged by fire, which IMO warranted a new date of construction, of 2026, rather than just a reduced Effective Age, on a lot in which the comp sales closest to the subject [with 1/3 mile] are atop a steep hill in a totally superior location, with a Jr ADU in an extended, upscale, large lot, equestrian area where ADU's "should" be commonplace...but with only one sale in 700 days...and I'm being conditioned by lender to explain why I described the Occupancy as "vacant" rather than "tenant" although the reconstruction isn't even finished yet, but apparently the pending purchase is as an investment property--but I gots no idea how the future use might even be mentioned in an As Is appraisal assignment. So-much for so-called straightforward assignments...so long live the need for our services!!!!

 

[J Grant]

"Price" is not a property attribute. I don't search by price and I don't adjust for price.

As others have noted, when we run into a transaction that doesn't apparently fit the prevailing trend demonstrated by the other sales, we might as well acknowledge it rather than ignore it and hope nobody notices. The RE markets are imperfect and so are the datasets we run into. There's no point in trying to imply otherwise.

I would even go so far as to suggest that if appraisers are implying a 100% consensus in the RE markets that plays directly INTO the strengths of the machine and away from the appraiser's personal touch in their analyses. You might as well average your sales and save the machine operators the effort.

I agree that price is not a property attribute. However, it is a component of value. I do not believe in artificially narrow adjusted ranges of value. If we include a high or a low sale, the value range shows that the prices have a range- which is why I do not adjust a price except for rare occasions.

I have done property searches by price, but only after I have done all my searches for property attributes. I have found that a search by price can bring up a good comp that the other searches did not find. I don't know why- but often times agents have the wrong SF, so a SF living search filtered out a good comp, or the agent placed the property in the wrong GEO area on the MLS etc.

Sometimes, seeing what other properties sold or are listed for in the value range of the subject can indicate something about the subject's position in the market.

 

[J Grant]

I would even go so far as to suggest that if appraisers are implying a 100% consensus in the RE markets that plays directly INTO the strengths of the machine and away from the appraiser's personal touch in their analyses. You might as well average your sales and save the machine operators the effort.

WRT the above, appraisers need to understand certain things to retain our value contribution. MV is defined as the most probable price ( as developed in the appraisal ). However, the most probable price does mean a rote default to the average price. Most probable can be on the high end for a subject that is superior to most comps, the mid or average end when our subject is avg among comps, or the low end when the subject is inferior to many of the comps. The most probable price tends to be higher in a rising market and lower in a declining market as well. Defaulting to an average or a statistical mean is not how the RE market works, as we see from the range of prices and the various factors affecting prices (motivation, concessions, interest rates etc)

A market featuring bidding wars is going to produce the most probable price at a higher end than a market flooded with supply, showing list price reductions.

 

[ZZGAMAZZ]

WRT the above, appraisers need to understand certain things to retain our value contribution. MV is defined as the most probable price ( as developed in the appraisal ). However, the most probable price does mean a rote default to the average price. Most probable can be on the high end for a subject that is superior to most comps, the mid or average end when our subject is avg among comps, or the low end when the subject is inferior to many of the comps. The most probable price tends to be higher in a rising market and lower in a declining market as well. Defaulting to an average or a statistical mean is not how the RE market works, as we see from the range of prices and the various factors affecting prices (motivation, concessions, interest rates etc)

A market featuring bidding wars is going to produce the most probable price at a higher end than a market flooded with supply, showing list price reductions.

For the sake of discussion: can most probable in a strong msrket be higher than the highest sale of a competing property, or does the working definition of "most probable" imply a relationship to a tangible value, or price, to mitigate a subjective decision by the user?

 

[Larry Phillips]

Scenario:
Five of six closed sales, and both of the two pending sales, reported in the SCA adjust into a very narrow range.
One sold comp that was listed below market adjusted about 11% below that range; and the Listing Agent explained that the property remained on the market for a long time because the original list price by a different realtor was way too high, and the seller subsequently was anxious to accept any offer, when the list price was decreased.
Question: Do peers adjust the selling price of that comp upwards, into the range established by the other 7 comps, and explain the adjustment, or leave the adjusted value as it is, and dismiss the sig of that comp accordingly? [Or just exclude it from the grid and explain why the sale Wasn't used.]

Good morning, if all major components of value are bracketed by the remaining sales, it will be appropriate to exclude the outlier. It will be appropriate to discuss the sale and why it is not used in the report to address anticipated Underwriter questions.