How far for comps?

[Robert Dunkle]

We are having a heated discussion in our office concerning how far to go for comps. I have been engaged to appraise a branch bank facility and there just aren't any RECENT sales to be found. LOTS of land sales and buildings being built, but not sales of completed facilities.

We have opposing views of going to other cities (OKC, for instance) for comps. I am going further back in time for the basic 3 or 4 comps, but believe it would be logical to go to OKC or Muskogee, etc. for recent sales.

What is the view of the forum?

 

[George Hatch]

If they're comparable communities with comparable rents and land values and comparable pricing for existing structures, why not? You're not considering it because you want to pull a fast one; you're considering it because you have few other options.

 

[Scott Lanz]

I would agree with George. I work a market where the entrance of some new financial institutions is governed by a charter and requires approval of other financial institutions. I am not sure how common this is outside of my market, and might be something to explore when using comparables in other markets.

Bank Branches can be difficult assignments. The comps I have analyzed indicate a very wide range of prices per square foot. In discussions with financial institutions, the real estate purchase is often considered a cost of doing business opposed to an adequate return on the land and building cost.

Scott J. Lanz

 

[Stephen J. Vertin MAI]

There are no set rules for comparable distances in commercial real estate. My personal believe is the selection of data is based on the property and property type but most of all the markets reactions. Setting up false barriers and guide lines such as set in FANNIEMAE or other type scopes is harmful when dealing with commercial properties. When purchasing such real estate buyers are also limited to the availability of the product. If they need the building for special use (which is defined by availability in this case) market participants may very well have to look into alternative markets (than a certain town exclusively). With that said I have become very familiar with the Midwest market over the last 15 years and it is surprising the homogeneity that exist. An older larger (+100,000/sf) industrial building in Galesburg, Illinois is very similarly priced to one in Petosky, Michigan. That is not to say comps for the two areas should be used to measure value it is only to indicate likeness of similar markets on a larger scale. The reason most appraisers would not use comps interchangeably in the two exampled Midwest markets is because there are most like nearer sales. The point is to narrow your area to the most similar facilities and areas as possible no matter what the distance. The distance of the market is dictated by the number of sales and their proximity to the subject not an appraisers arbitrary decision.

 

[The Warrior Monk]

My personal believe is the selection of data is based on the property and property type but most of all the markets reactions.

That's essentially my approach. I view the problem from the perspective of the buyer. How does the buyer of that property define the market area. That could be anything from a few city blocks to hundreds of miles.

One of the funniest requests we received regarding distance was that we could use comps from anywhere but Scotland.:Eyecrazy: We never found out way.

 

[JT1974]

One of the funniest requests we received regarding distance was that we could use comps from anywhere but Scotland.:Eyecrazy: We never found out way.

Do you suppose it was being funded by the Royal Bank of Scotland?

 

[SharperImage]

We are having a heated discussion in our office concerning how far to go for comps. I have been engaged to appraise a branch bank facility and there just aren't any RECENT sales to be found. LOTS of land sales and buildings being built, but not sales of completed facilities.

We have opposing views of going to other cities (OKC, for instance) for comps. I am going further back in time for the basic 3 or 4 comps, but believe it would be logical to go to OKC or Muskogee, etc. for recent sales.

What is the view of the forum?

I've used comps from all over the US when doing waterparks and waterpark hotels. They just don't seem to be next door to each other, with the exception of the Waterpark Capital of America!

 

[Michigan CG]

Have you considered other properties that are not bank branches. Assuming this is a free standing commercial building why not look for other free standing similar commercial buildings.....or am I being dense (I am dense a lot) in that you are saying that there are no recent sales of comparable commercial properties period?