Comps distance question

[David S]

Working on an 1004 assignment now. Due to subject is newer and low sales volume in the area, I have to extend the search to the whole city, only one zipcode. But the city is an rectangle sharp, the comps are spread into 5 miles range. It is suburban area. How to explain this to the client/ bank? In the before, I did see a couple of appraisal reports using whole city as search area, spread into 6 miles range without any commentary. Any suggestion(s)? Thanks!

 

[Surf Cat]

Typically what I do, is explain the Crux of the matter right below the sales comparison grid. For example....

"An extensive search was made to find newer construction sales like that of the subject in the subject's immediate market area of ( your neighborhood name). The appraiser searched one year back, 25% difference in GLA however, no newer construction sales similar to that of the subject were found. Therefore, the appraiser expanded the search to 5 miles out to alternative, competitive areas of (name of those areas). Please see addendum for analysis of sales comparison of the comparables utilized in this report which were the best available as of the effective date of this report.

Now you've set the client up for what they're in store for reading your report.

You're going to have to do a separate market analysis, a 1004MC for example, of similar construction, GLA, bedroom bathroom count, Etc.) for each neighborhood section you utilized comps from in the report to dechiper location and market adjustment differences. A lot of data downloading from your MLS for sure.

Be sure to use a sale or two from the subject's immediate neighborhood, even though they're not newer construction and adjust them up in condition derived from the new construction comps from 5 miles out, and going back in time and finding new construction sales in comparison to older construction sales in the immediate neighborhood.

In other words, you have to dig for data and explain. Make sure to keep everything in your work file you used for your analysis.

 

[Tom D]

It's called the marketing area. The wanter of something newer is gonna look everywhere to find it. Surf cat is right. Using an older house is fine. If you can find a recent rehabd house, it's a condition match, typically i ignore age in that situation and explain.

If there is newer construction, then there should be some remods/rehabs there. They typically are at the higher end cause them has been made younger inside. You just need to look at the interior photos, especially kit and baths. Should be seeing c3 or even c2. Got become a c3 hunter.

My big old urban city had nothing but c2 rehab sales because the 3% interest rate made it economically feasible to make the interiors new.

 

[James Micozzi]

Due to the lack of closed sales with similar condition, GLA, lot size and utility as the subject, it was necessary to utilize some closed sales that were outside the client's assignment conditions of using closed sales within a 3 to 6 month time frame. For the same reason, the preferred one mile guideline were exceeded.

 

[Terrel L. Shields]

 

[Joe Flacco]

The number of miles radius doesn't even need to be mentioned in an appraisal report. It is a useless way of describing comparability.

What is the neighborhood and it's boundaries? What subdivision is it in? What is the market area? what school district is it in? What is the zoning? Is it walkable to the neighborhood commercial area or no?

Above are the things that should be discussed and compared. Miles radius is irrelevant and the use of it seems to imply or be accepted to imply that all of the geographic location differences are the same. This is not typically the case.

Never search based on radius and just stop discussing radius at all.

 

[David S]

Thanks all. I got one good comp just next to the street, very similar charterers, purchase price is just around that sold price. Another one is around 2 miles. That should be also good. Then, the rest comps has to be around 5 miles always. That at least better, right? Then per suggestion here, dig out a similar older house within 2 miles? What about active / pending comp? That will be more relax, right? 5 miles away ok?

 

[David S]

The number of miles radius doesn't even need to be mentioned in an appraisal report. It is a useless way of describing comparability.

What is the neighborhood and it's boundaries? What subdivision is it in? What is the market area? what school district is it in? What is the zoning? Is it walkable to the neighborhood commercial area or no?

Above are the things that should be discussed and compared. Miles radius is irrelevant and the use of it seems to imply or be accepted to imply that all of the geographic location differences are the same. This is not typically the case.

Never search based on radius and just stop discussing radius at all.

But engagement letter said all comps must be within one mile. Otherwise specify... True, all comps, even up to 6 miles, are all within the same city, same zipcode, same school district, compete with same type of the buyers. Just because it is rectangular or strip area.

 

[Dublin ohio]

Getting ready to turn one in where my third comp is 11.50 miles away. Dare them to find a better one closer. Comp #1 is 0.25 miles and #2 is 2.5 miles

 

[Dublin ohio]

But engagement letter said all comps must be within one mile. Otherwise specify...

So does "specify" mean explain? If they are truly limiting your comp distance top a max of 1 mile with no exceptions. I would consider that an unacceptable assignment condition. If they are just asking "why". Tell them why