Complaint from State of Michigan

[J Grant]

OP-My report used the subject as a comparable and adjusted for the updates and time.

Unknown if the above is part of the problem - deserved or not, quite often UW and reviewers have an aversion to it and can red flag a report ( and/or owner gets upset seeing it there , especially if the appraisal value is not the fantasy realm an owner envisioned )

Though we analyze prior subject sale in the appraisal,, and may comment on it in relation to current eff date MVO, putting it on the grid as its own comp creates a benchmark status and attracts scrutiny..

 

[Tim The Enchanter]

OP-My report used the subject as a comparable and adjusted for the updates and time.

Unknown if the above is part of the problem - deserved or not, quite often UW and reviewers have an aversion to it and can red flag a report ( and/or owner gets upset seeing it there , especially if the appraisal value is not the fantasy realm an owner envisioned )

Though we analyze prior subject sale in the appraisal,, and may comment on it in relation to current eff date MVO, putting it on the grid as its own comp creates a benchmark status and attracts scrutiny..

Maybe they are not happy the spent $xxxx on the place and you only "gave" $zzz adjustment?
Don't think I have ever used subject as a comp. This seems like a good reason to avoid it.
And just comment if needed that cost does not = value.

Good luck solving the problem.

 

[WestMichiganCG]

I've used past sales of a subject property in a grid and a pending sale in a grid. I only do it for pending sales when they are strongly bracketed by the market though. If a sale is between an educated buyer and seller, it's easy to prove. If the pending sale is off in left field I don't put it in the grid and then explain why the sale is outside the expected range as necessary. My scope of work requires analyzing past sales and pending offers of the subject. I don't see a USPAP issue with the methodology.

 

[J Grant]

I've used past sales of a subject property in a grid and a pending sale in a grid. I only do it for pending sales when they are strongly bracketed by the market though. If a sale is between an educated buyer and seller, it's easy to prove. If the pending sale is off in left field I don't put it in the grid and then explain why the sale is outside the expected range as necessary. My scope of work requires analyzing past sales and pending offers of the subject. I don't see a USPAP issue with the methodology.

USPAP requires we analyze past sales and pending offers, but putting them on the grid is not just analyzing, it's considering them into the value opinion as a comp . I've heard of (and done on two occasions) using a past subject sale as its own comp , but never heard of grd it as a pending !Nota USPAP issue, rather a personal SOW to grid it. I can see it for an assignment with scant similar sales or listings, otherwise I have reservations about doing it - we already analyze it and can comment in narrative, seems double dipping ( and possible other issues ) to also put a prior sale or pending of subject on grid.-

 

[ZZGAMAZZ]

I did an appraisal of a waterfront property for an AMC. The subject had been recently purchase about 1.5 years earlier. My report used the subject as a comparable and adjusted for the updates and time. The subject previous sale was an arms length sale. The AMC had someone to come in and appraise the property for 100k more than the sale 1.5 years earlier. My sale was 50k higher than the subject sale 1.5 years ago. The AMC filed a complaint and my E&O company assisted with me in getting an attorney to respond. Now the Attorney General of Michigan is pursuing the matter further. It is to the point where my the AMC is going for blood, because I would not give them the higher value. I did 50+ appraisals for this AMC over a 2 year period and now this over 1 report where I would not give them the value they wanted. My E&O (Navigators Insurance) may not help me at this point, but I was checking to see if anyone had any suggestions for me now since I may have to represent myself and defend my report in court.

The AF is being surprisingly amenable in its response to the original post despite that the premise is implausible. An AMC would not be foolish enough to pursue a value-based claim, nor would the State follow suit.

 

[Terrel L. Shields]

If the subject was used as comp 1, 2, or 3. that is a no no. But using as 4th or later, it is appropriate. In fact, before licensing, the "historical" price was considered to be the 4th approach.

 

[WestMichiganCG]

USPAP requires we analyze past sales and pending offers, but putting them on the grid is not just analyzing, it's considering them into the value opinion as a comp . I've heard of (and done on two occasions) using a past subject sale as its own comp , but never heard of grd it as a pending !Nota USPAP issue, rather a personal SOW to grid it. I can see it for an assignment with scant similar sales or listings, otherwise I have reservations about doing it - we already analyze it and can comment in narrative, seems double dipping ( and possible other issues ) to also put a prior sale or pending of subject on grid.-

It's something I have done when I have a large amount of data. If you have five comps that bracket a sale within a close reconciled range and the subject falls into that range, it is not going to skew the dataset. I've found this to be a helpful way to explain why the sale falls into the middle, upper or lower end of the range. I used the term "strongly bracketed" as a sale not strongly bracketed could skew the results and provide a misleading result. Five sales ranging from 67 to 69 per square foot and a sales price of 68 per square foot would be an example. Taking the pending offer out of the grid will produce a similar result but leaving it allows an easy way to compare your subject to the comparables within the market. If the pending sale were 80 per square foot in the above example, I would leave it out of the grid and explain that it is at the high end of the anticipated sales price. Keep in mind I'm doing narrative reports for commercial property, not residential and I take the necessary time to explain my method.

 

[djd09]

too bad we are not getting the whole story. this could be a game changer.

the subject property is a perfect match as a comparable.

 

[ZZGAMAZZ]

too bad we are not getting the whole story. this could be a game changer.

the subject property is a perfect match as a comparable.

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I remember a heated AF exchange several years ago concerning the propriety of prioritizing the subject's pending sale as a comparable in the SCA grid in a report based upon the subject's pending sale. Lots of AF members felt that the fact that an offer was made was empiracal data reflecting market reaction to the subect, itself. (Never made sense to me but others felt it was the only logical thing to do....)

 

[J Grant]

too bad we are not getting the whole story. this could be a game changer.
the subject property is a perfect match as a comparable.

the story is missing something... if no changes were made to a subject it is a "perfect match " in property characteristics, but that means no characteristics superior or inferior to compare with to extract value - That leaves only its prior price which now is there as a benchmark - what if the prior sale paid high or low, what kind of benchmark is it then, and then what about any changes in the market since then - I don't know Michigan but OP made time adjustments, in many regions or states market was flat all year when interest rates were higher ( true here, just bouncing back now after a year flat)

OP ::My report used the subject as a comparable and adjusted for the updates and time . Time adjustments will stick out like a sore thumb on a 1.5 year old subject prior sale so better be well supported and then there are updates- If subject had substantial updates , making it a different condition/appeal now, why is it still a good comp ? ( though there may be other issues with report who knows ) As with anything else, using a subject prior sale as a comp might be skillfully used by some appraisers, and a mess by others.