Proterty in a remote area

[rchsiao]

Hi, Everyone,

I recently received a case with the subject property (a single family home) located in a very remote area. There is no comparable sales (there is even no house) in the 5 miles radius area. In addition to turning down the case, what do you ususlly do in this kind of situation? More comparable sales? Cost approach? Any comments or suggestions are greatly appreciated. Thanks.

Raymond 1-24-02.

 

[Doug Ellwood]

If there are comps 5 miles away is it not appropriate to adjust for location? When I get a situation like this one, before I turn it down I consider how the next appraiser will evaluate the subject. It must have value, I would forget about location for now and appraise the home as if it was in the developed area, then deal with the remote location, comment and adjust.

 

[Richard Carlsen]

You are now talking about a significant portion of my market. Here's what I do.

Expand the search area for comps to find a minimum of 4 comps. I generally give 4 or 5 comps when they are like this. Use them even if they are 20 miles away. Explain that this is a rural, low-density market with few annual sales resulting in very few comps. Do a very accurate Cost Approach not forgetting External due to the lower demand in the market.

If pressed, I explain that use of comps from the greater market is justified as it emulates the situation the buyer finds himself in with a limited number of houses available to choose from and these scattered all over the place. Also explain that this remoteness is one of the attractions of the property. It is in my market.

If you want some of my comments, contact me and I'll be glad to send some along.

 

[Tim Hicks (Texas)]

Unfortunately, you have to compare it to something. Is it "rural" or "suburban"? Sounds like rural to me (sorry, that is a big debate around here). I would just use the most similar sales avaiable from 10-15 mile area and consider its most important charactersitics for comparison. I would not worry about distance if you really want to find similar properties. Remember the underwriter is going to compare your comparable sales to the subject for likeness since there is nothing close. I would consider lot size (don't use a bunch of city house if you are on acreage), age (don't use homes built in 1995 if your is 50 years old) and contruction quality ( don't use brick homes if you have a frame home or log home, etc) I treat barren, rural homes like log home sales. The underwriter wants to see log home comps no matter what the distance (alike properties). I once had to drive over 40 miles to furnish an underwriter with two log home sales. So, try to find similar proepties and ont worry about distance. I hope I was helpful.

 

[Judy Whitehead (Florida)]

I agree with Richard. I was told by my supervisor/teacher that Anything can be appraised (by someone with the right qualifications Anyway, we occasionally have to go further than 5 miles to find sales, as well. Make your adjustments accordingly on location (do this by land sales with your comps versus your subject). If you have to go back several years and track land sales then do that. Also, charge more!!!!

 

[Steven Bonner]

Like someone said, this is the majority of my market. You guys that consistently have comps within 5 miles are appraisal wimps :lol: . Just kidding. But surely to appraise this type of property you must find comparables and that means going as far as necessary to find similar properties from as reasonably similar marketing areas as possible. A full explaination is of course necessary as to why you did this. Unlike others, I don't subscribe to the notion the an external/economic adjustment is warranted due the subject being in a low desinty limited market. It may but the market reflects that necessity in the relative sale prices to similar sales from markets that are not low density. For example, I service a market area that is low density, few listings and few sales. However, the sale prices are very similar to surrounding markets that are considered average in marketability and activity. Are supply and demand factors in balance? If so, sale prices may be very typical of the overall marketing region so there would not be any economic obsolescence observed in the market. In fact, if the supply were lower than the demand, there may even be a premium that is being paid in that limited market. Bottom line, if you can't prove an adjustment, best not to make it. Also, sales that are even 2-3 years old in the immediate market, if they exist, could be provided as additional comps just to demonstrate a viable market.

 

[Oregon Doug]

Raymond - some appraisers work in urban areas, some in the suburbs and some of us are way out here in the sticks. If the remote nature of this property is unique to you or your market, then the best thing for you to do is too turn it down or affiliate with another appraiser having this sort of experience and is willing to help you through it. Rural appraisals are not difficilt in & of themselves but the territory covered can be wide.

Most of my work out here is rural. I'm finishing a report right now on a manufactured home & acre where my closest comp is over 25 miles away and one comp is about 75 miles away in another county.

Wanna talk about fees?, Oregon Doug

 

[Don Clark]

8)

I agree with Richard, and the others who agree with him. My primary market is metroploitan, lot's of cookie cutter house, dozens of comps, etc. However, I also do appraisals in another state(NC) right over the berder from my primary market in Virginia. I have specialized in the area for about 12 years> One isolated area is 5 miles from the mainland, accessible only by going through another state, or 5 miles by free ferry. There are about 300 homes there so comps are usually available with most being off market sales. However, there is another isolated area, 20-40 miles from the first isolated area, accessible only by going through another state to get either to the other isolated area, or 15 miles through another state to get to the mainland in NC. Also, another isolated area with less than 20 homes, in Virginia, only accessible by going through the first isolated area in NC. In some cases, when there is little or no sales activity, I will go 20-30 mile away to find "comparables", or 5 miles by the free ferry, and then another 5-15 miles once I get on the mainland. Somehow it always works out. I love it. It gives me an opportunity to test all my skills as an appraiser. My detailed addendum describing what I have just told you, is usually sufficient. Once in a while I get a real dumb **s and have to walk them through it. :roll: BTW, I have a friend who did an even more isolated appraisal. It was on Tangier Island, Virginia, a small fishing community of about 200 people in the middle of the Chesapeake Bay half way between Virginia and Maryland, and accessible only by a 1+ hour boat ride or small airplane. The folks there date their community to early english settlers over 300 years ago, and still speak what is called, a form of "Elizabethian English". This appraiser was asked to do an appraisal on the island, was to be paid a fee of $1,000(residential), all expenses paid. He stayed in the one hotel on the island(also serves as the island jail), and round trip air transportation by charter. He found one sale on the island in past 5 years. He then found 2 comps from the eastern shore of Virginia, and 2 comps from the eastern shore of Maryland, and then went around town and asked everyone interviewed what they thought it was worth, then based on the interviews(the market), he formed an opinion of value. Loan closed, underwriter asked no questions.

Happy hunting(for comps that is)

Don

 

[Damon Pedersen]

I am in the same situation. Rural properties. Of course you go outside of the area, even if a location adjustment is needed. There are comps, they will just be further away. In situations where the comps are 30 miles away (or more), I always look back for older sales in the subject property's neighborhood even if they are 3 years old, at least one older sale is always included. Same applies to small towns. I just did two appraisals in small communities with no recent sales, so comparables were used from a community with a similar market over 30 miles away. Also included in each were two older sales. Lots of explanation and no questions from either of the underwriters. (Both were for large national mortgage companies.)

I don't necessarily agree with the fact that ANY property can be appraised by an appraiser with a designation. I look at it as ANY property can be appraised by ANY appraiser if they try hard enough.

There is no concrete rule that ALL comps must be less than 6 months old and within 5 miles. Improvize!!

Damon (No designations here)

 

[Don Clark]

8)

Damon:

No designation here either. Don't have one, don't need one, don't want one. Nothing wrong with a designation but at my age and with the business I have, and the reputation I have, and my companies reputation, a designation is a moot issue. I do belong to the Virginia Association of Realtors Appraisal Section, and am on it's board of directors. That is the only organization I have seen so far that has a strong collective voice for appraisers, and uses it.

Don