Insufficient comps

[J Grant]

Imo, in some cases.... a pocket listing or private sale not n MLS is reasonable market exposure - is only offered to one buyer sold in one day typical dom maybe not but it was reasonable enough to get the property sold within th prevailing price, then it was -

I would not use the sale if it sold at a crazy price or very high or low - but if it sold within the prevailing price range, then it showed the buyer and seller were well informed and well advised despite the brief or one- person showing exposure ot the market --

 

[George Hatch]

Absolutely agree with you, "conceptually". As a practical matter however, using those transactions as comparables in an appraisal report is "un-advisable", for the reasons I described.

Definition of Market Value​

Market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• buyer and seller are typically motivated;
• both parties are well informed or well advised, and each acting in what they consider to be in their own best interest;
• a reasonable time is allowed for exposure in the open market;
• payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
• the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

B4-1.1-01, Definition of Market Value (04/15/2014)

This topic contains information on the definition of market value.

selling-guide.fanniemae.com

So what's a reasonable time and manner of exposure for that combination?

 

[George Hatch]

Imo, in some cases.... a pocket listing or private sale not n MLS is reasonable market exposure - is only offered to one buyer sold in one day typical dom maybe not but it was reasonable enough to get the property sold within th prevailing price, then it was -

I would not use the sale if it sold at a crazy price or very high or low - but if it sold within the prevailing price range, then it showed the buyer and seller were well informed and well advised despite the brief or one- person showing exposure ot the market --

A lot of high end SFRs and other specialty property types sell between brokers whose clients operate in that manner.

The conventional lending programs are just one aspect of the real estate business. User-driven criteria appraisal requirements play a role in those assignments but they don't define the outer limits of how the markets work.

 

[Mike Ault]

So what's a reasonable time and manner of exposure for that combination?

It's an "assemblage sale". There is no reasonable time and manner of exposure which would render that particular combination as acceptable evidence of "market value". There is an industrywide prohibition against adding the price someone paid for piece of land, plus the price of installing a manufactured home on said land, and then using the combined "price" someone paid for both as a comparable when forming a market value opinion.

• The appraiser must not create comparable sales by combining vacant land sales with the contract purchase price of the home. This type of information may be used as additional supporting documentation.

What are the comparable sale requirements for manufactured homes?

selling-guide.fanniemae.com

 

[George Hatch]

First off, User-driven criteria

Secondly, "There is no reasonable time and manner of exposure which would render that particular combination as acceptable evidence of "market value". " would not apply to the appraisal of similar combinations at the time of their sale.

If your subject is a combination package it's most directly comparable comps in the market would be other sales which sold under the same conditions. Not existing SFRs. Now a lender might not accept that type of combination for one of their programs, but that's a lending decision, not a MV application.

As for how the market participants react to these different terms of sale that's an adjustment to be developed; not an assumption to make.

 

[Vermonter]

There are only one comp sold in last 90 day. another comp sold in last 90 days will be 3 miles away AND 30%+ larger GLA.

{Rural appraisers shaking our heads in unison}

Report on my desk has 1 comp within 90 days and it's 12 miles away, 40 years older and on 10 additional acres....and that's my BEST comp!

 

[Mike Ault]

Secondly, "There is no reasonable time and manner of exposure which would render that particular combination as acceptable evidence of "market value". " would not apply to the appraisal of similar combinations at the time of their sale.

What market participants might pay for something which isn't properly exposed to the market is an example of "price", not "market value" as commonly defined.

 

[George Hatch]

Like I said, what's "adequate" for a property type is defined by what normally happens with that property type, not some external benchmark set by other property types.

 

[Mike Ault]

Like I said, what's "adequate" for a property type is defined by what normally happens with that property type, not some external benchmark set by other property types.

And like I said, I agree with you "conceptually". However, since this thread was about insufficient "comparables" to be used for an appraisal assignment, the best advice is not to use sales which don't meet the definition of market value. To do so is just opening yourself (and your client) up for future trouble from some downstream investor who is picky about such things.

 

[Tim Hicks (Texas)]

I can't remember the last time I did a 2055 report.