How do you determine market reaction for location

[robert higgins]

Question, how do you determine market reaction for location, comps that are in a different town, some distance away?

I did an appraisal a few months ago on a unique property that the client is now asking for some more supporting comps. Problem is there are only a few comps in the subject’s market area that matched the subject and most of the closed sales were dated. Now the next set of comps is 20-25 miles away in a different town that would be considered superior to the subject’s town, superior location, and views. How would you go about determining supported adjustments for comps in a different market place?


Thanks

 

[Marcia Langley]

Robert,

The only way to do it is to find similar houses in both towns that sold about the same time.

It's a paired sales type of analysis but shouldn't depend on only one paired set.

The paired sets don't have to be recent unless something affected the locational values recently.

What you are after is a logical comparison of prices of similar properties that sold about the same time.

It's harder to do if the market is volatile. And good data may or may not reveal difference in prices.

 

[Lawrence R.]

Also, if there are any vacant land sales to compare, that can be helpful.

 

[robert higgins]

Thanks Marcia,

I was thinking that at first and still may for some adjustments. But what keeps getting in the way is the uniqueness of locations; they are almost one of a kind estate properties. All the comps I used had the same views, water, bay, acreage. Now I am looking at same type of property, but now in a superior town and all that goes with it, and unique superior views – water and NYC skyline.

I can break down the smaller parts like land values, location (town), and so on like you said, but that premium location is going to kill me.

 

[Mr Rex]

I agree with Marcia. I work in 1 county that is 443 square miles and had 50 sales in the MLS last year. So I have to go to the next county over for comps. While vacant land prices are not that far apart between the 2 areas, when the land is improved with a house, the differential is much more substantial, due to the limited demand in the area.

 

[robert higgins]

Also, if there are any vacant land sales to compare, that can be helpful.

There are not any, not for this type of unique water front property with acreage.

 

[Kevin A. Spellman]

Look at the price per square foot with like homes. Extract percentages or the dollar differences.

 

[robert higgins]

Look at the price per square foot with like homes. Extract percentages or the dollar differences.

Sorry Kevin won’t work, even though they are all custom builds’, most of the value is in the land.

 

[Webbed Feet]

Mr. Higgins,

It is time to think out of the box. The box you are in is one that demands you separate out the elements of market value into their own separate compartments and quantify each one into a supposedly perfect module of measurement. This is brought on by staring at Fannie forms for too long...

Give yourself persmission to recombine the most influencing elements so that you can extract them out as a single quantity that represents them all. Then adjust for all of them in one single adjustment and dare a review appraiser, UWer, or anyone else to be the person to separate them out individually with any claim of competency in so doing.

Recombining the elements of view, site utility, site size, and location with its unique sub-influencing categories such as economy. Make one single adjustment for the entire shebang and tell the readers of your work of art all the elements are in the pudding. Ask yourself once you extract out the depreciated cost of the main structures from a sale price what does the resulting number contain in total that the market is reflecting? Compare these results to proxy percentage adjustments, and any land sales you can lay your hands on, for your proof of checks and balances to show the crediblity of your development. The real art comes after that in your Standard Two reporting as you play the Pied Piper leading all the readers down the path you just created for them.

Webbed.

P.S. Always remember the motto needed when appraising the tough ones. "If you can't solve the problem, change the problem."

 

[davetheappraizer]

Don't forget to compare the school districts in each municipality. Theoretically, if there is a value difference between 2 identical properties 25 miles apart, the variance could be the municipalities, the school districts, or both.