Assignment conditions - Use At Least One Comparable Outside of Subject Neighborhood

[shrubberyvaluation]

Client has in the engagement letter for new construction that at least 1 comparable is to be used inside the subject neighborhood and one comparable outside of the subject neighborhood. Using a sale outside of the subject's neighborhood would have little to no relevance to the valuation. Would you just explain it noticeably, something like " comp 4 added due to client conditions to include a sale outside of the subject's neighborhood as defined on page 1. This sale is not a good indicator of value and has been given no weight in reconciliation." It seems like this could be misleading by including it on the comp grid. The client has this under sales comparison approach. Should I just mention it in the comments of the sales comparison approach but not grid it since it could be misleading? Seems like a silly request, I have sales from a competing community in the neighborhood and a resale in the subjects community.

 

[J Grant]

Client has in the engagement letter for new construction that at least 1 comparable is to be used inside the subject neighborhood and one comparable outside of the subject neighborhood. Using a sale outside of the subject's neighborhood would have little to no relevance to the valuation. Would you just explain it noticeably, something like " comp 4 added due to client conditions to include a sale outside of the subject's neighborhood as defined on page 1. This sale is not a good indicator of value and has been given no weight in reconciliation." It seems like this could be misleading by including it on the comp grid. The client has this under sales comparison approach. Should I just mention it in the comments of the sales comparison approach but not grid it since it could be misleading? Seems like a silly request, I have sales from a competing community in the neighborhood and a resale in the subjects community.

If you have sales from a competing community, then that is an 'outside" the subject neighborhood - I think they mean outside the builder's subdivision, rather than "neighborhood" - probably they just worded it wrong - check with the client.

 

[jay trotta]

Client has in the engagement letter for new construction that at least 1 comparable is to be used inside the subject neighborhood and one comparable outside of the subject neighborhood. Using a sale outside of the subject's neighborhood would have little to no relevance to the valuation. Would you just explain it noticeably, something like " comp 4 added due to client conditions to include a sale outside of the subject's neighborhood as defined on page 1. This sale is not a good indicator of value and has been given no weight in reconciliation." It seems like this could be misleading by including it on the comp grid. The client has this under sales comparison approach. Should I just mention it in the comments of the sales comparison approach but not grid it since it could be misleading? Seems like a silly request, I have sales from a competing community in the neighborhood and a resale in the subjects community.

Are they asking for the same builder (outside) ?

Is the neighborhood competitive ?

How would it be misleading ?

Its part of the SEL you accepted it, does not appear to be a silly request.
Good Luck

 

[sputnam]

The Client condition is that you must include at least one sale from outside the subject neighborhood. The condition DOES NOT require you to give that sale any weight in reconciling your Sales Comparison Analysis. If you accepted the assignment with that condition then you need to include an outside sale.... relevant or not. If you simply can not find an outside sale that is even remotely similar to the subject then, you will need to say that in the report.

 

[alebrewer]

That's always been a F/F requirement. From the selling Guide, section B4-1.3-08:

"If the subject property is located in a new (or recently converted) condo, subdivision, or PUD, then it must be compared to other properties in the neighborhood as well as to properties within the subject subdivision or project. This comparison should help demonstrate market acceptance of new developments and the properties within them. The appraiser must select one comparable sale from the subject subdivision or project and one comparable sale from outside the subject subdivision or project. The third comparable sale can be from inside or outside of the subject subdivision or project, provided it is a good indicator of value for the subject property. Two of the sales must be verifiable from reliable data sources, other than the builder. Sales or resales from within the subject subdivision or project are preferable to sales from outside the subdivision or project provided the developer or builder of the subject property is not involved in the transactions."

 

[The Warrior Monk]

The underlying reason for this is that lender's don't want the comparison based on only sales that are direct from builder to purchaser. New homes often involve extras whose contributory value and actual costs may be two different things.

If there is arm's length resale activity in the subdivision, then this requirement is not necessary. If there is resale activity, I need to know specifically why the client is requiring me to use sales other than the most comparable sales available.

 

[alebrewer]

The underlying reason for this is that lender's don't want the comparison based on only sales that are direct from builder to purchaser. New homes often involve extras whose contributory value and actual costs may be two different things.

If there is arm's length resale activity in the subdivision, then this requirement is not necessary. If there is resale activity, I need to know specifically why the client is requiring me to use sales other than the most comparable sales available.

Not exactly. It seems to me the word 'must' implies that it is necessary, no?

 

[shrubberyvaluation]

Are they asking for the same builder (outside) ?

Is the neighborhood competitive ?

How would it be misleading ?

Its part of the SEL you accepted it, does not appear to be a silly request.
Good Luck

It would be misleading because I am skipping over all the comps in the subject's neighborhood to use a sale that is not relevant for the valuation.

 

[shrubberyvaluation]

That's always been a F/F requirement. From the selling Guide, section B4-1.3-08:

"If the subject property is located in a new (or recently converted) condo, subdivision, or PUD, then it must be compared to other properties in the neighborhood as well as to properties within the subject subdivision or project. This comparison should help demonstrate market acceptance of new developments and the properties within them. The appraiser must select one comparable sale from the subject subdivision or project and one comparable sale from outside the subject subdivision or project. The third comparable sale can be from inside or outside of the subject subdivision or project, provided it is a good indicator of value for the subject property. Two of the sales must be verifiable from reliable data sources, other than the builder. Sales or resales from within the subject subdivision or project are preferable to sales from outside the subdivision or project provided the developer or builder of the subject property is not involved in the transactions."

No where in that does it say the appraiser must select a comparable sale outside the subject's neighborhood.

 

[alebrewer]

No where in that does it say the appraiser must select a comparable sale outside the subject's neighborhood.

Interpret however you'd like. You're the one signing the report after all.