Subject as it's own comp.

[TJSum]

The bottom line is the market value has to be determined from independent data. That would be your gridded comparables.

A well written report would give the subject's last sale no matter how long ago it was, if that data is available (for transactions many decades ago). The more recent, the more details that will be available to us. The appraiser should explain to the reader how the last transaction compares with the value opinion of today. What has the market done since that transaction? How has the subject's condition changed? Was the previous transaction arms length? The appraiser should explain how that transaction value has morphed into todays opinion of value.

My typical report just explains this journey in a paragraph below the market grid, but if one wishes to explain it by placing it on the grid as extra data, that is fine too. As long as the reader can see how the subject went from value A to value B is the key. The gridded subject as comp, would not be the cake, just the icing on the cake

 

[The Warrior Monk]

I'll take a stab. There are problems with using subject as a comp. First, there are some people who don't like the idea of - assuming to be true in the premises of an argument, the very thing the argument is supposed to prove. That is, 'it's worth five dollars because that's what you paid for it' is not exactly an independent appraisal. It's simply repeating the owner's opinion of value, not developing your own.

That's not only true of the subject, but all of the sales. The prior transfer of the subject, as well as all of the sales, all have to be verified, as well as compared against the backdrop of the rest of the market.

Second, is there any literature on the "correctly employed..recognized methods" of using something as a comp for itself?

Actually, I don't know. But I don't recall seeing any literature on ignoring it either.

Third, I am naive enough to believe that sales comparison is supposed to be an application of the so-called "principle of substitution." You know, value being set by the price of substitutes. All that stuff? Using something as a "comp" for itself isn't just a verbal oxymoron. An asset cannot substitute for itself.

The problem I see is that a buyer wouldn't ignore the prior transfer of the subject property, and would consider it making an offer for the subject. This being the case, the appraiser would have to consider it in order to reflect the attitude of the market participants.

 

[Jack Straw]

Ok, I read all of the posts leading up to this one before coming up with my take. I think using the subject as an additional comparable is a great idea in a declining market with very few sales. I have used the “subject property” on a grid as an additional comp more than once in the last 17 years.

I think it could very well be the best comp as long as it was an arms length transaction. Think about it, what other sale could you use that is more like the subject than the subject? And assuming it compliments other found sales, it shows a consistency of value in the report.

I don’t assume the reader of the report to be able to calculate time adjustments or sale concessions, that is MY job. I occasionally end up in a conversation with a UW or a lender who are pretty green. Who knows, if you don’t grid it out they may assume the home is still worth what it sold for 3 months ago.

Use it, explain it, and if they don’t like it, too bad. Send them Fannie’s quote and maybe you will help them with their job.

Fannie says it’s ok. Why? Because it is absolutely a representative of the market.
It is a snapshot of the market just like all the other sales you are using.

 

[Queen City Gurl]

Absolutely ! Technically, it's the perfect comp ! Your analyzing the previous sale to a higher degree. It's allowed, and why wouldn't it be?

Experience says you'll probably get a call....since it's not the norm, heads will be turning ! But it should go through in the end.

 

[Fred]

Actually, I don't know. But I don't recall seeing any literature on ignoring it either.

It seems like P.P. has hacked David's password. The absence of explcit rejection of every possible form of error, does not constitute "recognition" as an acceptable method.

 

[CANative]

If it's such a bad idea then why do lenders and USPAP insist on a report of the 36 months sales history? Someone must have liked it. Maybe it was Mikey.

 

[Mr Rex]

If it's such a bad idea then why do lenders and USPAP insist on a report of the 36 months sales history? Someone must have liked it. Maybe it was Mikey.

Maybe they want the 36 month sales history so appraisers wouldn't think it appropriate to use the subject as a comparable in the Sales Comparison Approach.

 

[Fred]

If it's such a bad idea then why do lenders and USPAP insist on a report of the 36 months sales history?

Because of appraisers participating in flips.

 

[Fred]

From Fannie herself:

Don,
Without getting into the debate that Fannie wants the same use of three sales whether or no subject is "used" as a comp - and that is not really condoning it...

Do you see Fannie "herself" as having any authority to create binding appraisal standards?

 

[CANative]

It's still a comp for itself. It's just in a tiny grid instead of the "big grid."