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

[ZZGAMAZZ]

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.]

 

[shrubberyvaluation]

I would exclude it if there is enough good market data.

 

[sputnam]

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.]

The first thing to do is to try to determine why the sale appears to be above or below market. The definition of market value includes the concept of a typical buyer and typical seller each informed and acting in their own best interest. If you find out, for example, that it sold under market because the Seller owed a lot of $ to a loan shark... that isn't a typical situation. In a case like that, or others, exclude the sale.

 

[J Grant]

I might exclude it but comment on it, since it will show up on a search if it is similar to the subject. Or inlcude it but give it little weight and comment that it sold on the lower side of value because ( explain ). I don't like the idea of adjusting it up. This assumes the other comps are good, that this sale is a true outlier just for price and terms.

 

[ZZGAMAZZ]

The first thing to do is to try to determine why the sale appears to be above or below market. The definition of market value includes the concept of a typical buyer and typical seller each informed and acting in their own best interest. If you find out, for example, that it sold under market because the Seller owed a lot of $ to a loan shark... that isn't a typical situation. In a case like that, or others, exclude the sale.

I agree... but the AF tried to beat me up recently for trying to determine seller and buyer motivation...

 

[Overimprovement]

If I have 5 strong comps, I'm not gonna spend any time figuring out variance on a 6th. Outliers have myriad reasons, some you may never know. Side deals still go on in the world. Not everything shows up on a HUD or recorded deed.

 

[Tom4value]

You have 5 different opinions here but all five are reasonable ways to tackle it. Personally, I would include that sale and call it what it is, an outlier in your reconciliation. You were thorough and found out why it sold for less so definitely explain why it did and why you gave it less weight.

Appraisers tend to think outliers are useless but they can have value in support of your work. Many times you find there is no concrete reason why an outlier sold for less or more than what the other comps are telling you. Sometimes the buyer just loved the house. Sometimes the seller, though not being stiffed, just wanted to let it go. Either way, the outlier can help show what the top or the bottom value range is for the subject property.

 

[ZZGAMAZZ]

You have 5 different opinions here but all five are reasonable ways to tackle it. Personally, I would include that sale and call it what it is, an outlier in your reconciliation. You were thorough and found out why it sold for less so definitely explain why it did and why you gave it less weight.

Appraisers tend to think outliers are useless but they can have value in support of your work. Many times you find there is no concrete reason why an outlier sold for less or more than what the other comps are telling you. Sometimes the buyer just loved the house. Sometimes the seller, though not being stiffed, just wanted to let it go. Either way, the outlier can help show what the top or the bottom value range is for the subject property.

Always fascinated that IMO about 90%++ of all value factors can be explained with enough due diligence although real property has more nuances than I have fingers & toes....

 

[Trihard]

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.]

I try to do my SCA to show a market range for the subject then put a comment in like, comparable five was utilized to show the lower end of market range opionion and no adjustment was warranted. That is, if there are enough comps. Sometimes you gotta use the shiz that is out there.

 

[ZZGAMAZZ]

You have 5 different opinions here but all five are reasonable ways to tackle it. Personally, I would include that sale and call it what it is, an outlier in your reconciliation. You were thorough and found out why it sold for less so definitely explain why it did and why you gave it less weight.

Appraisers tend to think outliers are useless but they can have value in support of your work. Many times you find there is no concrete reason why an outlier sold for less or more than what the other comps are telling you. Sometimes the buyer just loved the house. Sometimes the seller, though not being stiffed, just wanted to let it go. Either way, the outlier can help show what the top or the bottom value range is for the subject property.

Interesting & positive perspective . . . kinda like the potential value of unsuccessful listings that can help to identify max potential value, or to clarify supply-demand ratio, i.e., is the volume of sales down because listings are failing or because there were no listings...