Retrospective appraisal - use of subsequent sale of subject as a comp

[mkrozack]

Looking for thoughts re using a sale of the subject property, and its credibility as a comp, in a retrospective appraisal, when the sale occurred two years after the date of death which was in 2004. The subject is a unique property and it is the best sale. Since I know what the market did, can I adjust back to the DOD? USPAP says "Data subsequent to the effective date may be considered in developing a retrospective value as a confirmation of trends that would reasonably be considered by a buyer or seller as of that date. The appraiser should determine a logical cut-off because at some point distant from the effective date, the subsequent data will not reflect the relevant market".

Thanks.

 

[CANative]

SMT 3 also says:

A retrospective appraisal is complicated by the fact that the appraiser already knows what occurred in the market after the effective date of the appraisal.

You're trying to push the "Easy Button." IMO, 2 years is not a logical cut-off date.

 

[Webbed Feet]

That is a stretch. I'd have to read the two or three pages convincing me that the subject assignment is so very complex that other credible methods were exhausted, or that doing that was a supplement to other primary data.

Recommended Section Title: I Had to Do This!

P.S. Opps! Brother Boyd and I agree.... That should shoot the idea down unless there is no other idea.

 

[Metamorphic]

I'm working up one of these right now. I decided that 6 months either side of the DOD was a reasonable span; if you can go backwards 6 months without raising a ruckus, why not forward that same amount? I figure that the people that bought 6 months after were probably looking at the DOD; likewise for the sellers. That basically take me from about "now" to a year ago (7/10 DOD). Market has been pretty flat in that segment over that time, and that give me access to about 14 sales, 4 of which are reasonably comparable.

 

[CANative]

It all depends on the intended use and intended user. For property tax appeals the standard is 3 months after the lien date (the value is as of January 1st but you can use sales up to March 31 of the tax year). They don't refer to this valuation as a retrospective appraisal but it's essentially the same thing.

The various Counties of the State of California apparently believe that 3 months is the "logical cut off date." For any intended use I'd be kind of nervous about going 6 months past the event date (DoD).

 

[Terrel L. Shields]

2 years is not a logical cut-off date.

that depends on what is being appraised... in commercial or ag 2 years isn't very long and the absence of data may be a problem.

The use of the sale, imho, is best left to the reconciliation as part of your judgment regarding the prior sale. As part of the sales grid (obviously) it does put the bullseye on the prior sale and so long as I can determine that was an arm's length transaction, then yes, I will bias my results towards the prior indication with appropriate time adjustment..

 

[Peter LeQuire]

Two years is a very long time in residential land. However, OP, you're a GC and the property is "unique." If the property is a "unique" residence, its subsequent sale may be useful for developing support for how it related to its market on the effective date of the appraisal, and allow you to extract supported adjustments that reflect its unique characteristics.

If it is a non-residential property, Terrell's comments are on point, though I don't do commercial work and don't know what the useful life of a comparable is in your market.

 

[CANative]

There's no reason a credible retrospective value opinion cannot be developed and stay within a reasonable cut off date. It's just that in some assignments it might make the job more difficult. Don't drink the kool aid.

 

[Metamorphic]

There's no reason a credible retrospective value opinion cannot be developed and stay within a reasonable cut off date. It's just that in some assignments it might make the job more difficult. Don't drink the kool aid.

I always look at the subject's last sale as a special circumstance comp. I can see going a LONG way back to glean info from that sale; heck, prior sale analysis is one of the few things that is directly mentioned in USPAP. Putting it on the grid is a form of analysis. Whether its on the grid or not it should be part of the reconciliation if its in any kind of a vaguely interesting position to bear on the current MV. I say 2 years is well within the "vaguely interesting" time frame for the subject regardless of the property type. Whether you're talking about 2 years back or 2 years forward is mostly immaterial.

 

[CANative]

You would need to have a REALLY good reason to justify not using the effective date as the logical cut off date. That's because (IMO) if your work came under scrutiny you would have to support the rationale in your variance from SMT3.

Lines 2694 - 2701, Statement 3:

"Data subsequent to the effective date may be considered in developing a retrospective value as a confirmation of trends that would reasonably be considered by a buyer or seller as of that date. The appraiser should determine a logical cut-off because at some point distant from the effective date, the subsequent data will not reflect the relevant market. This is a difficult determination to make. In the absence of evidence in the market that data subsequent to the effective date were consistent with and confirmed market expectations as of the effective date, the effective date should be used as the cut-off date for data considered by the appraiser."