Paired Sales comments

[Kelly Cardoso]

I completed a 1004 w/accessory unit and had few comps. I had to use comps in inferior areas and SFRs without access units and make large adjustments. (There are 9 comps in the report). The lender asked for reasoning for the large adjustments, even though I had already explained So I put the definition for 'paired sales' in the addendum and sent it back. That didn't fly, they want "statistical support". Any suggestions on how to address this? I honestly don't know how to tackle this...

 

[CANative]

This amenity can be rare with only a few sales in any give year. There is not a sufficient sampling to support a meaningful statistical analysis. Your adjustments are opinions based on analysis of costs and income potential as well as market analysis and the few available sales. The adjustment is based largely on your experience with this market.

Take it or leave it.

 

[pat outlaw]

this is something i got from forum a while back, cant remember who posted, maybe resguy; i now put it in all my reports

Not all adjustments in the Sales Comparison Approach can be directly extracted or supported by the available market data with a high degree of accuracy. Some adjustments have an element of subjectivity and professional judgment which the appraiser has applied based on prior observations of the reactions of typical/knowledgeable buyers' and sellers' in the marketplace. This method is a standard and well accepted practice within the appraisal industry. All interested parties are encouraged to have an understanding of basic valuation practices when appraising atypical or complex properties;or where there is an extreme absence of like elements of comparison; or in instances where the market data is inconsistent with which to draw better supported adjustments and overall value conclusions. Appraising Residential Properties, 4th Edition, Appraisal Institute, Page 342, "Limitations of Paired Data Analysis" states: "...This brief discussion of paired data analysis may seem to suggest that identifying the effects of property differences from market data is a straightforward procedure that can produce accurate, complete mathematical results in all appraisals. Such an impression would be misleading. Appraisers develop an opinion of market value by applying their judgment to the analysis and interpretation of data. Paired data analysis is a tool that an appraiser can apply to market data in some circumstances. When used in conjunction with other analytical tools, this type of analysis supports and guides the appraiser's judgment, but it does not take its place. Perfect sets of comparables that vary in a single, identifiable respect are rarely found. Because properties that are sufficiently similar to the subject are usually limited in number, the decision to apply paired data analysis in a given situation is a matter of judgment. Often the sampling size may not be larger enough to provide a solid statistical foundation for the appraiser's conclusions."

 

[J Grant]

great verbiage Pat !

And yes, include that not enough data exists to form a reliable statistical analysis .

There comes a certain point where the lender has to make a decision to accept or reject a report based on the limitations present in data and the market. (or even the appraiser's limitations...(if they want a report with pages of statistical analysis let them order a second appraisal . requiring a statistical analysis was not in original SOW , besides the point that the appraiser determines if it is relevant to value development)

 

[George Hatch]

I never refer to paired sales, even when I have access to a couple. I refer to comparing groups of sales to each other, including but not limited to the direct comparables. I also refer to my personal judgement, itself the result of my exposure to vast quantities of data and repeated comparisons for these various attributes.

I also favor qualitative overall ranking more than individual quantitative adjustments. We generally do both in a Sales Comparison but I think of overall ranking as the forest and the individual line item adjustments as trees. Those adjustments are refinements in the analysis, not the heart of them.

 

[The Nightfly]

I refer to comparing groups of sales to each other, including but not limited to the direct comparables.

George - is that not paired sales analysis? I have always operated on the theory that comparing groups of sales to another group of sales is paired sales analysis, even though it's not a one-on-one comparison with a single isolated difference. Maybe paired data analysis is a better term?

 

[Kelly Cardoso]

Thanks for the replies, very helpful.

 

[sputnam]

It's funny,,,and not in a good way. Most appraisers, who understand that every property is different, will tell you that paired sales analysis is the gold standard...when you can find a pair. Most U/W's and their bosses, who would love for every property to be the same, will tell you that some sort of statistical analysis is the superior method to support adjustments. I'm an appraiser. I do either or both depending on the availability and quality of data.

 

[23Degrees]

Post 3 has some great language. I hope you don't mind if I steal some of it. Definitely beats telling the UW that I'll dig up those "paired sales" right after I hunt down the werewolf that killed Bigfoot's pet unicorn.

 

[PhillyApp]

J Grant,

"There comes a certain point where the lender has to make a decision to accept or reject a report based on the limitations present in data and the market."

I could not agree more, I cannot tell you the amount of times, that I have told a lender that the report is complete and meets all requirements, now you have to decide if you believe it and make a lending decision.

If there are concerns, the risk is greater than they like, maybe you have to decline the loan...Stop asking for the appraisal to match your expectations, when your expectations are based on the perfect appraisal and the subject is anything but.