Age of Comparables

[Julia Young]

:?: I need some feedback as to whether there is a growing trend to use older comps in today's market, particularly on high-end properties? We always had a rule of protocol, not to exceed one year on Conventional, give or take a few days. Is the one year rule still accepted by the majority as the norm or is there a trend, particularly on high end properties to extend the limits in age of the sale? Homes in the million + range are near the top of our local market and scarce at that. There seems to be some pressure to exceed these time frames in the recent slower market on high-end type appraisals. Comments-caveats please?

 

[bradellis]

Julia,

The only place one year exists as a RULE is for HUD, and even for them, you can use older comps as additional data. However, since you are talking about high end stuff, FHA lending is not involved (most likely). Note" your client may also have a guideline on this so check with them.

The 1 year deal is a Fannie guideline- note: guideline. You may always depart from their guidelines when you must so long as you explain yourself and do not violate USPAP.

If you think the older comps are the best indicators- go for it and explain why. But be very careful as prices in some markets will be going down on the high end stuff, so you better check current listings as well- maybe even include them in your report.

Brad Ellis, IFA,RAA

 

[rtubbs]

Dittos to Brad's response. However, I don't think older sales are applicable only on high-end homes. The use of older sales is also appropriate to any property (atypical, rural, etc.) where current comparable sales are not available. You will need 3 sales within the past year and as many as you want that are older than 1 year. Like Brad said, just explain.

 

[Jo Ann Meyer Stratton]

Let me shade Ron's answer a little bit. The client might like to have three sales that have closed in the past year--but that is not always possible. In some areas (especially in mine), comparables over one year old may be the only thing available or even remotely applicable. In situations where one or more of my first three comparables are over twelve months, I include current active, pendings, withdrawns, expired, canceled or even older sales for #4 and higher. The most important factor is to describe everything and explain everything. In my one county with only 20 residential sales per year, a two or three year old sale very similar (and the only similar property in existence in the county) to the subject is a miracle and is one of the best indications of the market value range. It also illustrates to any reader that the subject is not the only one of a kind property, there are at least one other property in the area with at least one of the features of the subject and somebody was willing to spend money for it. So use what ever is available that is most indicative of the subject and the markets reaction to the subject---and then explain, explain, explain and then explain some more!

 

[Julia Young]

The product doesn't quite fit in the box--in the million dollar sales category.
We may have 7-8 sales a year with many factors affecting why they sold in that range such as location, acreage, size, whether they had been in a Home show with all the gingerbread, etc. Maybe we aren't picking up the the full complement of what is available in the custom market. Perhaps the cost approach may need to be the heaviest approach to value. Just doesn't seem to fit the usual criteria. Lots of room for opinion of the local market maybe? I was asked to evaluate differences between Viking kitchens, granite countertops and marble floors, or baths, etc. but wouldn't you pretty well speculate that many homes in the upper range have top of the line products? I cannot see inside the comparables.

 

[Caterina Platt]

Julia,

I would be very cautious using the cost approach to value these homes. Often times, these dwellings are trophy homes with highly personalized improvements. What the owner may value, may not be valued equally by the general market.

You are correct in your statement that these high end homes would all most likely have high end gourmet kitchens. Talking with custom builders may provide non-MLS comps, but again be cautious of these as they are not 'arms length' sales generally. I would personally feel more comfortable using older sales, even several years old if necessary as they make a more representative reflection of true market value. Value in exchange is your goal, not the owner's value in use. (or value in ego???)

Talking with heavy hitter Realtors in these cases has really proven valuable in my experience. These homes are often difficult and expensive to market. When the Realtor is successful in moving them, it's kind of a trophy for them if you will. I recognize them as 'appearing to be the specialist' in these cases and go from there with my questions. They are usually more than happy to talk to you about the homes. Generally, the Realtor who can consistently land these listings and move them will also be more knowledgable of the trends, typical buyers, and improvements that add or detract from the value.

Hope you quoted a good fee. Guidelines are often thrown out the window. Mucho addenda to explain, explain, explain. Good luck.

 

[Julia Young]

I agree with the idea that using older comparables to evaluate celebrity homes is probably more on target than trying to stay within the run of the mill guidelines. We just don't have many celebrities in Memphis. Does fame or infamous need a value adjustment? Its a little like trying to appraise Graceland! Reminds me of a funny story, however, several years ago we were asked to appraise a home that backed to Elvis' home. It was a very modest home, in less than $100,000 range, as are most of the homes that surround Graceland. It was filled with Elvis momentos and standup cardboard images of the "King." The owner told us Elvis used to visit, sneaking through the back fence of Graceland, at the kitchen table of her home. She claimed the sliding glass patio doors contained Elvis' image in a frosty outline. (It looked a little like him to me too.) She was disappointed when we valued the house from the surrounding market, sans Elvis' Graceland or his image. She wanted us to give value for the celebrity status(or ghost)of the house. At this point I was tempted to say,
"Elvis has left the building," but of course there he was outlined on the glass doors. :wink: True Story. Julia