How Many Comparables Are Too Many

[Deleted member 150397]

...I was recently told that using too many comparables, more than 6 generally (4 closed, 2 active) is an indication that the appraiser doesn't know what they are doing and are "all over the place". I generally disagree with these "rule of thumb" thresholds that try to claim everything under the sun can be quantified by general guidelines, which in this case means using only 4 closed sales. Imagine the most complex property in the most rural community for instance, a manufactured house with a stick built addition and massive shop for instance, the odds of finding comparables which bracket the subject in only 4 sales is highly unlikely (based on my experience). Additionally, I have been made aware of a review assignment with 9 comparables (6 closed, 3 active) in the original appraisal and the client is seeking 2 additional comparables, this definitely doesn't promote using only 6 comparables... I would like to gauge your thoughts on this. My current opinion is that you should use as many comparables as you need to bracket the subject property's improvements and ultimately illustrate the principle of substitution with a thorough summary of why each comparable was included, weighted, or given minimal consideration in the overall analysis. Please share your thoughts, thanks!

 

[chad hampton]

I typically use 5. Any combo of 3-4 sold and 1-2 listings. FHA requires 2 listings, so they get 3 closed and 2 listings.

I would also agree that when you get over 6 comps, then you really don't have any good ones. At some point you are just adding sales to add sales.

I was fine back in the day giving 3 closed sales and moving on. They were every bit as reliable as the 6+ comp monster reports you see today.

 

[Mark K]

I think that if you need more than 6, adding more won't increase the credibility or reliability.

Use the best you have and as a very good reviewer once told me..." If you don't have good comps, use the best you have and tell me a good story".

More explanation beats adding more comps of dubious value.

 

[TRESinc]

i'm similar to chad. i use as many as necessary but i have yet to run into a situation where i needed 6 closed sales. typically 3-5 as needed, same for listings - as needed. i have seen many times while reviewing where appraisers add a sale (not a comp) just to bracket a single feature which results in a lesser appraisal imo because it is not really a comp, just something with more/less of feature X. some even go so far as you explain that "comp 5 was added to bracket the subject's lot" or something similar when it is anything but comparable.

 

[J Grant]

Some appraisals only need 3 closed comps, others need 4-6....my preference is 4 when possible, I feel 3 is "light" but sometimes choices are limited, over 5 comps, well if it is needed it is needed..then add a listing or pending or two , can also discuss other sales as well if relevant, they dont' all have to be on the grid.

Bracketing nonsense or low value features might make an appraiser use more comps than needed, imo bracket key features or defects ..like acreage or facing a lake or dump site...but not silly ones like a half bath or wet bar.

 

[Overimprovement]

It depends on your area as well. In my area, there are more withdrawns and expired listings than listings that actually close. Many others get re-listed under a new MLS # to try and create the fresh impression. Bottom line is that for me, actives are fairly worthless as any sort of value indicator. They typically are listed quite above market value. Even pendings are not much value because our MLS does not allow it to go pending until a closing date is set, which usually means closing is within 5-7 days. So there are very few of those.

The number needed is however many is needed to produce a credible report. You have 3 model matches, last 90 days? Then 3. Adding more is just extra work that may confuse more than anything, reducing the report's credibility. Rural property with a high spread in value indications on your best 3 comps? Maybe add a couple...

 

[Overimprovement]

i have seen many times while reviewing where appraisers add a sale (not a comp) just to bracket a single feature which results in a lesser appraisal imo because it is not really a comp, just something with more/less of feature X. some even go so far as you explain that "comp 5 was added to bracket the subject's lot" or something similar when it is anything but comparable.

Great point. I personally never add a comp ONLY to bracket something, unless it is truly comparable, and something needing to be bracketed as well. I have also found that as long as I point out that such and such was not bracketed because...that U/W's, even FHA, rarely kick it back. They just want to know you are aware, and looked.

I'm doing one right now for FHA--subject is 5 acres, in an area where that is rare. I have support for my site size adjustments, which will just have to be across the board. But I will not add a comp just to bracket site. Just aren't any.

We don't create our environment, we just report it.

 

[chad hampton]

i'm similar to chad. i use as many as necessary but i have yet to run into a situation where i needed 6 closed sales. typically 3-5 as needed, same for listings - as needed. i have seen many times while reviewing where appraisers add a sale (not a comp) just to bracket a single feature which results in a lesser appraisal imo because it is not really a comp, just something with more/less of feature X. some even go so far as you explain that "comp 5 was added to bracket the subject's lot" or something similar when it is anything but comparable.

That's a good point - I know they often ad nothing, but getting call backs and dealing with having to revise a report is a real time killer. I bet that's why a lot appraiser end up with 5-6 sales.

I've gotten requests for revisions to add a comp with a 4 or more bath home when the subject has 4 and all my comps have 3.1. Just as an example.

 

[chad hampton]

And before tres gets a big head, overimprovement might think its a great point, I only think it's a good point, lol

 

[TRESinc]

And before tres gets a big head, overimprovement might think its a great point, I only think it's a good point, lol

where is that half-like button when you need it