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Justifing use of active comps

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cridgely01

Thread Starter
Sophomore Member
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Sep 6, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
I have a former model waterfront two story colonial home (7 years old) located in an older well established mixed water accessib le community of smaller homes. The subject is located in a new section that consists of 11 custom built homes all of various sizes, quality of construction and builder ammenties...Oh, one more thing--no recent sales within past 12-24 months. I have the neighbors home active and its much larger same view (probably dont want this one (too many differences) and another 2 active sales smaller, located within the community , different style dwellings and older --Heres my question....

How does one justify weighting active comparbles in this volitle market????I typically use actives as comps 4 5 or six to demostrate marketing trends and give no weight even after I adjust them....Any help will be welcomed:leeann: None are under contract..

I have very limited other sales outside the community because not many newer waterfront homes have been built on water in the area----
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
My response is not going to be very helpful to your specific.

First, you have a complex appraisal, IMNSHO.
Second, the only way to do it is to conduct some significant market analysis. One process of solving the problem is this:
A. You need to determine what your subject would have sold for in the past based on past comparable sales, and then compare that price to the past sales of the smaller homes. You need to analyze the relationship in values. This is the easy part.
B. You then need to bring that forward and place it into today's market environment. You said "volatile market" which is similar to many of my markets. The difficulty here is that the past relationships of prices may not be the same. While it is probably reasonable to assume your subject will still sell for a higher price than the other, smaller homes, it is not reasonable to assume that the ratio will be the same. If the past market was rising (or even stable) and the current market is declining, that difference may be compressed. What did sell for a 30% premium in 2005 may only sell for a 20% premium going into 2008. The only way to figure this out is significant analysis (and I'd recommend interviewing some agents- look to see if any of those other custom homes were listed and expired or canceled recently. Also call and talk to the current listing agent of the larger home next door).
C. You could try to skip this, go outside the development, go back in time, find comparable sales then, and see if there are any comparable sales in those competing neighborhoods now. Almost as complicated with the same caveat- what may have been true in the past (similar sales price) may have changed (properties no longer are similar in value)- neighborhoods change too!

There are other ways, but mostly along the same lines: Find some historical benchmark and bring it forward. Again, this could be making a comparison using the smaller sales in the subject's development or going outside the development. Probably what will be necessary is both. Complex assignment no matter how you cut it.
Obviously I see your license level as "licensed". My unsolicited advice on this front is to get assistance (including a co-signature). The lender may throw out the appraisal based on complexity without a certified co-signer even if you do all the right things and your report is credible.

Good luck!!
 

Mr Rex

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Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
To add to Denis comments, I can see a certain direction in your thought process in your post. When you find yourself leaning one way, lean the other way for the same amount of time and research (hint: walk at least a mile in the opposite direction). The answer lies between the 2 "leanings".
 
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hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
How does one justify weighting active comparbles in this volitle market????I typically use actives as comps 4 5 or six to demostrate marketing trends and give no weight even after I adjust them....Any help will be welcomed:leeann: None are under contract..

I have very limited other sales outside the community because not many newer waterfront homes have been built on water in the area----


Sorry, I wrote a lot but didn't answer your specific (bolded above); shame on me!!

You justify giving weight to listings by analyzing the market, concluding that they are accurate indicators of value and making persuasive arguments to that effect.
If the listings are lower than the prior sales, this is not especially difficult.
If they are higher, this is much more difficult in this market environment.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
When dealing with water front homes in the Annapolis area, usually the land value is way above 50% of the total value. The water front location and view is the major factor dealing with the value of the home. Your active listings are good data because they have the same water location. They will show you the current value ceiling for your subject. Annapolis is a very difficult market to appraise in, because there are three different rivers, hundreds of little coves and tribuataries and the bay. Therefore there are hundreds of differences among the water views available. When researching comps, you can use the whole Annapolis market, no matter the distance, but try to match the water view amenity. It is better to have comps of different styles and sizes but similar water views / utility then the other way around. Private piers and water depth can be major factors as well. You also want to make sure they have similar water rights as well as views, etc. This is a complex assignment for sure. If you are not very familiar with the Annapolis market, you could spend many hours driving the comps to compare views, etc., because it is hard to do just on the computer :) I've seen assessments where 90% of the value is attributed to the land because of the water location.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Sorry, I gave you that long answer and forgot to mention, don't be totally hung up with the actual age, many of these water front homes get full blown gut renovations, it is rather common. So you could have plenty of homes 30-40-50 years in age on paper that have just totally been renovated. In Annapolis, the housing stock does not conform at all, you can have 75 year old bungalows next door to McMansions :) With the mix of housing stock and water amenties, AVM's will never take over in this market :)
 

cridgely01

Thread Starter
Sophomore Member
Joined
Sep 6, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
I m a certified appraiser I just havent found a way to update my professional status in profile--there no block for it--I am newly certified in 9/07 but have been appraising for many years.....I have done other complex assignments each of them different, of course, each having their own unique quirks---It seems more lately, I just thought about trying something new if all else fails...and wanted some feedbackwoohoo
 

cridgely01

Thread Starter
Sophomore Member
Joined
Sep 6, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
the property is not located in Annapolis--I wish it was...I know the area well---Mine is Harford county---Aberdeen Proving grounds consumes most of the water front north until we get to Abingdon-10-12 miles away and south with Middle River--Baltimore County...Which is one reason I have the situation I have...
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Sorry for all the detail Cridgely01, I was giving all that so others who are not familiar with the Annapolis area may understand :) Don't forget to look across the water, even if it takes five miles of driving to get there, that could be the most similar water "location". :)
 

cridgely01

Thread Starter
Sophomore Member
Joined
Sep 6, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
I appreciate your comments-I was hoping maybe you also knew this area...
 
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