Subject as Comparable Limitations

[TerryRohrer]

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.

A possibility, but no where near a certainty.

 

[PL1957]

FWIW, I think the answer, as usual, is “it depends” … In a relatively active market, I‘d not hesitate to use it as a comp if it’s a sale within a year. If it was older, I’d mention it, but not include it in the analysis. That being said, in a thin market (few transactions, unique property), even a few year old sale could be useful as a comp for itself, with appropriate adjustment.

 

[Joe Flacco]

It always depends.

 

[Phil McDonald]

Thank you for taking the time to share your thoughts and insights, this is very helpful.

In my continued research of this topic, I was able to find a slightly more definitive statement in the Yellow Book which indicated that using the prior sale of the subject as a comparable should receive the same consideration as the other comparables.

I guess that can still be open to interpretation. I am choosing to interpret that to indicate that the prior sale of the subject can be used, or should be considered, as a potential comparable if the prior sale date falls within the same time period of the other comparables being considered. Scope of work generally defines a market area and time period to be researched for comparable sales.

It seems to me to be consistent with the Yellow Book guideline to place using the prior sale of the subject as a comparable within this same time period. If comparables are being considered during a two or three-year period prior to the effective date and the prior sale of the subject was five years prior then using the prior sale of the subject as a comparable would not be the same consideration, it would be special consideration.

The scope of work could be changed to five years so that it included the prior sale date of the subject. However, the decision to expand the scope of work to cover this period would need to be made based on the totality of all comparables, and making the decision solely for the purpose of using the prior sale of the subject as a comparable would also be giving the prior sale of the subject special consideration.

Granted, this single statement in the Yellow Book to reach a time period conclusion is a bit thin. However, it does encompass many of the “it depends”. If there is an abundance of great comparables within the past six months, then using the prior sale of the subject from a year ago could be inappropriate. However, suppose there are so few available comparables that the assignment requires the use of comparables with a sale date ten years prior to the effective date. In that case, a prior sale of the subject occurring ten years ago should also be considered a potential comparable.

Where are the flaws in my logic? Does anybody have a different interpretation?

Thanks again for sharing your thoughts.

 

[Red Flint]

from yellow book course, fyi:

Since, any recent, unforced, arm’s length sale of the subject property can be the best evidence
of value; the subject sale can be used as a comparable sale. The appraiser must verify the sale
with a party to the transaction to ensure it is an arms-length transaction and provides an
indication of market value.

The prior sale of the subject, while not categorically entitled to more consideration than other
transactions, must be analyzed like any other comparable sale and given appropriate weight
in developing a final opinion of market value. In analyzing prior sales of the subject,
adjustments may be necessary for changes in market conditions, transaction conditions, or
other factors since the date of sale.