Paired Sales Analysis & Adjustments

[Ariba]

“Through paired sales data analysis an appraiser can derive the amount of value attributable to a difference in an element of comparison directly from the market area. When the two sales considered comparable are very similar in all but one characteristic, the appraiser may be able to conclude that the difference in this single characteristic accounts for the difference in their price. In practice, it is often difficult for an appraiser to identify several matched pairs from among the sales of comparable or similar properties. Usually the number of available comparables is limited and an appraiser rarely finds pairs that directly indicate the effect of each element of comparison.”

With the slow real estate market (mid-western US), finding comparables at any level is a challenge, let alone paired analysis. The use of paired analysis is limited because perfect sets of comparables that differ in only one respect are rarely found.

What are you using for paired analysis in these slow market conditions? If you go back further than 12 months you might have to make a time adjustment. If you go outside the area you might have to adjust for location, etc. Also, the political climate, economic condition, zoning, schools, views, and traffic conditions changing over time, which renders the perfect pair analysis impossible or useless, especially if the sales are over 12 months old. Are most of still using the same adjustments (bedrooms, bathrooms, traffic, open space, golf, view, ect) you made 6, 9, and 12 months ago? Can that be justified?

Give me your thoughts!

Thanks
Ron <_<

 

[Bill Rose]

Rarely ever use Paired Sales. That's for a very homogeneous property....like tents in an army camp.

 

[Bobby Bucks]

see below

 

[Kate]

Originally posted by Bill Rose@Jul 14 2004, 07:56 PM
Rarely ever use Paired Sales. That's for a very homogeneous property....like tents in an army camp.

I don't get it. How do you make adjustments then? Please don't come down on me just a newbie dumb dumb asking?

I often wondered how often you experts review your adjustments. Every asignment, every week, month, year....what? This is obviously assuming you are staying in your area.

 

[Restrain]

You can go back to a more active time period to do your paired sales, i.e. for a pool. Then you can apply it to the current market and see how it fits. As long as your pair is within the same time frame, you don't have to worry about time adjustments, etc.

 

[Ariba]

RS,

That is not entirely correct. Take your pool as an example. Here in Colorado we are having a drought, and for a period of time and you were not allowed to fill the pool. So a swimming pool was a negative in as far as determining value. However, paired comparables from 12 months ago would seem to indicate a positive adjustment. So time has a defined impact on paired sales.

Ron

 

[kim grant]

Ron,

We look at the historical price difference for the item. If historically buyers were paying an average of 10% for two baths vs. one bath then we will apply the 10% difference to today's market citing the historical trends. (this is an example only)

You need ALOT of data that is specific to your market area, fortunately we are located in a metropolitan area so we have lots of data plus the fact that most of the MLS boards we belong to have data back 6-8 years and on one board we can actually download the data directly from their website to Excel.

I know your market area is not as large as mine but I think this practice can still work in theory. Here is another thing to consider: if you have exercised due dilligence and have formulated a conclusion based in fact and an applied theory there would not be many underwriters or review appraisers that would challenge you. The key is to divulge all your process and resulting findings in the report.

Good luck!!!! :blueflower:

Kim

 

[Cheryl Whirley]

Ron,

I'm in a very rural area & very limited matched pairs. Some of my pairs are over a year old, but I do my best to try to determine support for adjustments every 2 months. My major adjustments change per market about every 6 months. You just have to keep up with the market in your area. If you can't extract a recent pair, you have to use what you can support. Time adjustment? maybe if you can support that. Our profession is more an art than a science, we have to do the best we can.

Cheryl

 

[Richard Carlsen]

In the Northern Michigan market I serve, a low density essentially rural market, regardless of the amount of snow on the ground or leaves on the trees, I find that the major items rarely seem to change. A 2 car garage value stays just about the same within a given sales pool as does a basement, additional bath, decks, etc. These seem to be fairly constant. Waterfront has its own quirks. With a limited number of sales annually, it is more often being reasonable in the assigned value than having beautiful matched pairs to demonstrate value.

Once you've worked through these and used them for a while, you find that results are surprisingly consistent. Consistency and reasonableness are two watchwords when you have limited data to work with (i.e. no rows of tents to check) and must use properties that are not cookie cutters for comps.

Sometimes I think this is where appraising resembles an art rather than a science.

 

[Ghost Rider]

Originally posted by Ron Seylhouwer@Jul 14 2004, 10:27 PM
That is not entirely correct. Take your pool as an example. Here in Colorado we are having a drought, and for a period of time and you were not allowed to fill the pool. So a swimming pool was a negative in as far as determining value. However, paired comparables from 12 months ago would seem to indicate a positive adjustment. So time has a defined impact on paired sales.

ron - If you're in an area with a lack of sales data, how can you make a statement like that?? Do you have the facts to back that up??

While I agree that certain amenties *can* change in terms of overall value, most stay relatively the same - It's always necessary to go through data to make sure things make sense. I think Kim gave really good advice - While historical data isn't as good as recent data, I'd much rather hang my hat on an adjustment based in fact, than one based on opinion.