Insufficient comps

[J Grant]

One thing we can remember to help us in situations with oddball comps in market exposure is the MV definition references the most probable price - not the highest or lowest price ( unless the property characteristics of a subject earn it the highest or lowest as the most probable )

But focusing on the comps, high or low sales where the price affected by special or creative financing or atypical marketing times are better off either not used or with little weight pu ton them
The test of whether the market exposure was reasonable for a very short (or long ) DOM or a pocket listing etc, is to see if the price is among the prevailing range of similar sales with more typical DOM or financing....both raw price and as adjusted. If so, then the market exposure was reasonable enough to produce that most probable price.

The answer to our questions is out there in the market, and in the MV definition which is a gold mine to use to vet sales ....( and to vet our own subject value opinion )

 

[Fernando]

Got an 2055 assignment from AMC. 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. How to proceed? Any suggestion? Client / Lender is off hour already. Due tomorrow evening. Thanks!

My grasshopper, whenever I get orders, I preresearch and if there are few comps available, I charge a premium.
It will require more work and that includes more than 3 comps. You will have to put in as many comps as you can convince the reader. Be creative.

 

[andrew81]

WRT public records data, should appraisers be expected to disregard a FSBO or a broker's pocket listing with similar attributes on the basis of there being no exposure in the MLS?

This response is directed to those in the thread that believe only MLS sales can be used.

TLDR: an opinion of market value is based on market prices of properties that compete with the subject disregard of sale type.

............

My incompetent opinion based solely on my personal experience is that the use of MLS only sales is not required and non-MLS sales can be used when appropriate. With the absence of other better or similarly comparable MLS sales, the use of pocket listings, spot sales, FSBO, private sales, and any other type of sale is perfectly acceptable.

In fact, in my market, most sales are off market. FSBO or private word of mouth sales are the majority.

The definition of value relates the the type of value that the appraisers opinion of the subjects value is based. A definition of market value is not related to the comparable sales used and does not limit the appraiser to only consider sales which were listed on the open market at the appraisers opinion of exposure time. Market value is based on the pricing of similar properties that compete with the subject, not their sale type.

Whether or not a sale was listed on the open market with a selling agent, or its days on market, is not a measure of its selling price being reasonably comparable to other similar sales in the market and pricing trends . Research of the market pricing and how the sale relates to market pricing is the measure if a sales price is considered reasonable.

The appraiser researches the market. During research develops an opinion of value. The sales used in the report should be those that are most comparable with similar physical and legal characteristics. The sales used should be competitive and appeal to the same market participants that would also consider purchasing the subject property.

The use of off market sales or even MLS listed sales, should not only be judged by physical and legal characteristics, but also by how the price of those sales fit into the pricing trends of the market. The use of an off market sale that falls into a price range that is reasonable for the majority of the market pricing is acceptable. The same as the use of an MLS sale that is an outlier of the market pricing is, typically, not acceptable.

 

[Mike Ault]

This response to directed to those in the thread that believe only MLS sales can be used.

TLDR: an opinion of market value is based on market prices of properties that compete with the subject disregard of sale type.

............

My incompetent opinion based solely on my personal experience is that the use of MLS only sales is not required and non-MLS sales can be used when appropriate. With the absence of other better or comparable MLS sales, the use of pocket listings, spot sales, FSBO, private sales, and any other type of sale is perfectly acceptable.

In fact, in my market, most sales are off market. FSBO or private word of mouth sales are the majority.

The definition of value relates the the type of value that the appraisers opinion of the subjects value is based. A definition of market value is not related to the comparable sales used and does not limit the appraiser to only consider sales which were listed on the open market at the appraisers opinion of exposure time. Market value is based on the pricing of similar properties that compete with the subject, not their sale type.

Whether or not a sale was listed on the open market with a selling agent, nor its days on market, is not a measure of its selling price being reasonably comparable to other similar sales in the market and pricing trends . Research of the market pricing and how the sale relates to market pricing is the measure if a sales price is considered reasonable.

The appraiser researches the market. During research develops an opinion of value. The sales used in the report should be those that are most comparable with similar physical and legal characteristics. The sales used should be competitive and appeal to the same market participants that would also consider purchasing the subject property.

The use of off market sales or even MLS listed sales, should not only be judged by physical and legal characteristics, but also by how the price of those sales fit into the pricing trends of the market. The use of an off market sale that falls into a price range that is reasonable for the majority of the market pricing is acceptable. The same as the use of an MLS sale that is an outlier of the market pricing is, typically, not acceptable.

Interesting discussion regarding such matters on this thread…

Utilizing Custom Built Homes as Comparables

How many appraisers have been asked by lenders to utilize custom built homes as comparables? It is my understanding that these are not acceptable as comparables as they do not truly reflect an "Arms Length Transaction" due to the fact that they are built for a specific buyer without being...

appraisersforum.com

 

[George Hatch]

I don't know why you keep using this example in a discussion about finding other sales in the public records. Land+home combos aren't even that common in many areas of the nation.

What about new construction subdivision homes that aren't listed in the MLS? That's going to be a far more common example of relevant data without a listing.

 

[J Grant]

I don't know why you keep using this example in a discussion about finding other sales in the public records. Land+home combos aren't even that common in many areas of the nation.

What about new construction subdivision homes that aren't listed in the MLS? That's going to be a far more common example of relevant data without a listing.

Mos builder offices allow outside RE agents to show and sell their inventory - even if there is not an individual listing, the house is available to the agents to bring their buyers to.

 

[Mike Ault]

I don't know why you keep using this example in a discussion about finding other sales in the public records. Land+home combos aren't even that common in many areas of the nation.

What about new construction subdivision homes that aren't listed in the MLS? That's going to be a far more common example of relevant data without a listing.

I keep bringing this example up because we are supposed to be using "arm's-length transactions" as comparables. Not transactions where the builder is selling the first two homes in a subdivision to their buddies to "juice" future appraisals.

 

[George Hatch]

That's a fair exclusion but I've seen entire subdivisions sold out without MLS exposure, and so have you. Not to mention how non-residential properties are commonly sold. Frequently without any internet exposure.

The point remains that online exposure isn't the only way properties are sold in the market, and it's the arms-length that counts, not necessarily the manner of exposure.

 

[J Grant]

That's a fair exclusion but I've seen entire subdivisions sold out without MLS exposure, and so have you. Not to mention how non-residential properties are commonly sold. Frequently without any internet exposure.

The point remains that online exposure isn't the only way properties are sold in the market, and it's the arms-length that counts, not necessarily the manner of exposure.

My point is most often time, these builder developments DO have an equivalence of MLS exposure - often, they list one of each model home , regardless, most of them allow and pay a comission to RE agents to bring their buyers over to show and sell

And dont' forget their websites, which can outperform MLS in reaching buyers -

 

[George Hatch]

Stop chasing rabbits. The point is that valid sales can sometimes show up in public records, especially when considering different property types and locations. Not to mention what's going on with brokerage fees and MLS systems at the moment.