Subject as Comparable Limitations

[Phil McDonald]

Hello,

I realize that the topic of using the subject as a comparable has been discussed extensively. I reviewed the recent discussion ( https://appraisersforum.com/forums/threads/subject-as-a-comp.232549/ ) and found some interesting observations and opinions. I am familiar with existing guidelines, books, and articles on the subject and realize that, as is the case with many appraisal topics, these sources present a general discussion of the topic. Consequently, I would like to solicit your opinion regarding specific applications.

I would like to hear the opinions of the forum members regarding the time limitation they would place on using the prior sale of the subject as a comparable, if any. Of course, every decision is made based on a specific property and available market data. As such, it would be great to hear the different situations when you may use the subject as a comparable if the prior sale occurred 6 months ago, 3 years ago, 5 years ago or even longer. Do you have an absolute cut-off time where you would never use the prior sale of the subject as a comparable under any circumstances?

Thanks for taking the time to consider my request and sharing your thoughts.

Phil

 

[RCA]

Good grief. Less than 6 months ago is within the past year, which is within the past 3 years, which is within the past 5 years, .... Yes, these are all overlapping time periods. They should be distinct.

The real answer might be something more like: At least 2 comps from the past year, and another two comps going back 2-3 years. That is to say a good answer is likely not so simple.

The commercial appraisal is likely more tied to the income approach. You should just go as far out as necessary to get several comps within a reasonable time period, such as 1-3 years, for the sales comparison approach. You might also just ditch the SC as not applicable - if in your estimation you can't find any satisfactory sales comps.

 

[BRCJR]

It depends on what may or may not have been done to the subject comparable.
Time wise, it may depend on the property type and location.
It may depend on market activity, too.

 

[Joe Flacco]

It depends on what data is available. If the prior sale has a story to tell then it is at least worthy of discussion on how it fits into the analysis of current market value. Whether included in the sales comparison approach or discussed outside of it doesn't really matter in my opinion.

 

[Joe Flacco]

Are you still in Thailand Phil?

 

[Phil McDonald]

I was in the Philippines, not Thailand, but have been back here for a few years. Thanks for asking. We would like to go back but haven't had the opportunity with two recent high school graduates now in college and a three year old. My wife has been interviewing with the major airlines this year for a position as a flight attendant so now we will see how that works out and then will probably relocate to wherever she gets based.

 

[Joe Flacco]

Congrats on the 3 year old. You get to do it all over again. Lol

I hope I get a chance to live overseas like that for a while after my kids are grown.

 

[alebrewer]

The thread header says 'commercial', so not sure who your target audience is? Seems to me, though, that using the subject as a comparable would kill two birds with one stone - we're required to analyze the prior sale of the subject - how better to do so?... AND it's an additional comparable.

 

[TerryRohrer]

There is never a set formula, but my preference is to develop an opinion of value of the subject (regardless of property type) without considering it as a comparable, and then reconciling that opinion with the prior sale of the subject. So, if there is a difference in the property or in market conditions, the impact on value due to those differences can enlighten the reader.

In my view, there is a tendency, when using the subject as a comp, to support that as the market value by adjusting to it, which conceals the variability likely in most markets.

 

[Zephyr999]

FWIW, the courts have found the sale of the subject to be a key indicator of its value when a full take occurs...specifically when no physical changes have occurred.
When it's an arms length transaction there is no equivalent comparable for the appraised property as any other would require a physical adjustment at minimum for lot location differences.