Ages of comparable sales

[Peter LeQuire]

We're having a discussion in the office about the requirement(s) concerning the ages of comparable sales transactions. USPAP, we know, requires the appraiser to report and analyze any sale of the subject property that took place in the past 3 years.

Is there a parallel reporting requirement for the age of comparable sales? I know FNMA's requirement(s) - FNMA requirements aren't the issue. I believe USPAP is silent in this issue. The question is, essentially, is there any requirement that rises to the level of a supplemental standard or other "rule" that comparable sales should be no more than 1 year old for a residential appraisal and 3 years old for a non-residential appraisal?

 

[The Warrior Monk]

The question is, essentially, is there any requirement that rises to the level of a supplemental standard or other "rule" that comparable sales should be no more than 1 year old for a residential appraisal and 3 years old for a non-residential appraisal?

Any such requirement would fall under the category of an assignment condition. Or, in other words, it would be something specified by a particular intended user.

The 1-year/3-year "rule" is something I've heard about since before I took my first appraisal class in 1988 or so. It's simply a general rule that appraiser's used to use. Some GSEs (which deal with residential propertites) have time guidelines, but I know of no guidelines for commercial properties...in fact, I've never heard a commercial lender ever mention one.

Fact is, there can be no such requirement. All properties are not created equal, and sometimes the best sale is several years old. As an example, in part of a residential project I working on now, the best sale, and only sale representative of location, is 3 years and 3 months old.

 

[Dennis J. Black ASA IFAS]

Peter,

For real property the best guidance would be 1-4. USPAP does not give a specific direction but the intent is clear. The key word is "relevant".

 

[Mr Rex]

I live in such a rural area that I used a fruit tree in Eden as a comp recently. You should have been there when the AMC called wanting better comps, more recent, within 1 mile, and closer in GLA etc....

I told 'em USPAP doesn't set time limits on comps, and the subject requirement is 3 years, you gotta use whats relevant and available.

 

[Peter LeQuire]

Fruit tree in Eden?

Marvelous!

Thanks, Mr. Rex. I suppose it goes back to the "You pick the subject, I pick the comps" doesn't it.

 

[Terrel L. Shields]

is there any requirement that rises to the level of a supplemental standard or other "rule" that comparable sales should be no more than 1 year old for a residential appraisal and 3 years old for a non-residential appraisal?

Frequently rural properties may require comps that are 10 years older or younger..even more. You gotta use what you got.

 

[Calvin the Airedale]

After reading your post several times, I'm not sure whether you are asking about the sale history of the comps, the dated nature of the comps to current market conditions, or the historical age of the comparable improvements.

My answer will deal with the first instance. For both the subject and comparable properties, I report and analyze the sale and transfer experience of the subject and comparables as long as such history has relevence to the current circumstances.

Obviously three yeas and 1 year are minimum assignment conditions for FNMA transaction reporting. But what if your subject sold for much more than your appraised value, or the current sale price ten years ago? If you failed to answer the questions "how can this be?" you may be missing a trend, an event, or some other question sure to be raised in the mind of the reader. Same thing with the comps. Histories are useful for illustrating trends in any direction.

 

[Peter LeQuire]

Thanks, all.

The question arises because a bank reviewer avers that there is a requirement that comparables sales used for a non-residential appraisal cannot have occurred more than 3 years before the date of the appraisal. We were trying to find where this supposed "requirement" might be: if it's not a matter of regulation, responding to the reviewer is fairly straightforward.

 

[PropertyEconomics]

Thanks, all.

The question arises because a bank reviewer avers that there is a requirement that comparables sales used for a non-residential appraisal cannot have occurred more than 3 years before the date of the appraisal. We were trying to find where this supposed "requirement" might be: if it's not a matter of regulation, responding to the reviewer is fairly straightforward.

I think Id ask the Reviewer to provide the regulation ... hard to rebut a "regulation" that may or may not exist. A "requirement" is quite a different beast and may be simply the condition of the assignment according to the client ... Id get very strong clarification regarding the terms before I would respond.

 

[The Warrior Monk]

The question arises because a bank reviewer avers that there is a requirement that comparables sales used for a non-residential appraisal cannot have occurred more than 3 years before the date of the appraisal. We were trying to find where this supposed "requirement" might be: if it's not a matter of regulation, responding to the reviewer is fairly straightforward.

No such requirement exists, so you won't find it.

One thing that is not often found is requirements (to be differentiatied from guidelines) that interfere with the appraisers ability to value a property. The reason is that if a requirement exists that interferes with the appraisers ability to appraise, then they have to turn down the assignment.