Subject Is Best Comp

[CindyR]

This one has been bothering me. I think there is one scenario where I would not use the prior sale of the subject as a comp and that would likely be if this is a refinance transaction. Some properties are so unique that there is only one possible buyer and the 'typical' buyer might not be represented by that prior sale transaction.

 

[J Grant]

This one has been bothering me. I think there is one scenario where I would not use the prior sale of the subject as a comp and that would likely be if this is a refinance transaction. Some properties are so unique that there is only one possible buyer and the 'typical' buyer might not be represented by that prior sale transaction.

Imo the reverse is true. For a unique property, the subject is a good comp for itself because if the property is unique by definition, there are few sales of similar properties. If there is only ONE possible buyer for a property, it has a marketability problem that has to be addressed. But if it has a small niche group of buyers, the prior sale is particularly important. The typically motivated buyer is a theoretical for any assignment and may not represent the last/prior sale of any property , the judgement and analysis of the buyers in the market for similar properties determines actions of the theoretical typical buyer in appraisal, not the actions of any one buyer (including the buyer in a sales contract for a subject )

I tend to not use subject as a comp for itself in more ordinary properties where there are other , typically more recent sales to choose from for comps.

 

[Peter LeQuire]

If Buyer A paid too much 8 months ago and Skippy appraised it out, if you use it as the best comparable, how do you know Buyer A didn't pay too much? I see this with VA purchasers frequently, way ahead of the market, no equity in the game.

But then, how do you know that the buyers of the other comparables didn't pay too much? Seems to me if you analyze the prior sale of the subject property the same way you analyze every sale you intend to use as a comparable, you answer the question about whether the buyer "paid too much".

 

[J Grant]

But then, how do you know that the buyers of the other comparables didn't pay too much? Seems to me if you analyze the prior sale of the subject property the same way you analyze every sale you intend to use as a comparable, you answer the question about whether the buyer "paid too much".

That can be a problem with prior sales of subject, and why I (typically) don't like to use them on ordinary properties where there are plenty of other sales to use as comps.

The present owner of a subject is probably not going to be happy to hear "they paid too much", which is what they will discover if our opinion of market value is less than what they paid X months ago...and that will come about when we comment on why our opinion of value differs from a prior recent sale price. Therefore leaving it out as a comp means you don't have to adjust for "paying too much " (if that is the case). Using subject as its own comp can also act, or be construed to act, as a pre determined value for itself, which is why perhaps Fannie requires it as a fourth comp, not one of first 3 comps on grid.

 

[Mark K]

Quote Selling Guide B4-1.3-08 "The subject property can be used as a fourth comparable sale or as supporting data if it was previously closed."

Put as comp #4 or put as 1-3. If put as 1-3 say, comps arranged by gross adjustments required. State subject is used as a 4th comparable sale.

I agree. I've always put it in the #1 position next to the current subject. The guide says "4th comp", not "on the second page of comps in the 4th position."

Never had any problems.

 

[miktay]

But then, how do you know that the buyers of the other comparables didn't pay too much? Seems to me if you analyze the prior sale of the subject property the same way you analyze every sale you intend to use as a comparable.

I agree with this.
The subjects recent sale is just another comp in the pool that needs to be analyzed and considered for inclusion. Actually, not doing so may be misleading.

 

[Peter LeQuire]

That can be a problem with prior sales of subject, and why I (typically) don't like to use them on ordinary properties where there are plenty of other sales to use as comps.

The present owner of a subject is probably not going to be happy to hear "they paid too much", which is what they will discover if our opinion of market value is less than what they paid X months ago...and that will come about when we comment on why our opinion of value differs from a prior recent sale price. Therefore leaving it out as a comp means you don't have to adjust for "paying too much " (if that is the case). Using subject as its own comp can also act, or be construed to act, as a pre determined value for itself, which is why perhaps Fannie requires it as a fourth comp, not one of first 3 comps on grid.

If it's a "problem" with the prior sale of a subject property you intend to use as a comparable in a current appraisal, is it not also a "problem" with the sales of all of the comparables you use? And if you determine that the price of the prior sale was "too high" (or "too low" or "just right"), have you not done an appraisal of that property as of its prior sale date? And if you do a retrospective appraisal appraisal of that property, are you required to meet all the requirements of USPAP et al? Do you test the sales of the comparables the same way?

Or do you simply satisfy yourself that it was arm's-length, typically motivated, affected by concessions, etc.? And, if you do and the prior sale and current sale of the comparables meet the tests of your analysis, do you simply accept the price of the comparables are facts and not develop your own value on the dates of the sales?

All that to say, if the prior sale of the property being appraised is meaningful and meets the tests of the value definition in play, why would it be considered any less reliable than of the other comparables? (Of course, client conditions about how a prior sale are treated/considered are very much pertinent.)

 

[Gobears81]

This isn't overly uncommon in commercial appraising-you have a set of comps where each has warts on it, whereas you can adjust the prior sale of the subject for conditions of sale, market conditions, changes to the property since the transfer, etc. I often include it as a fifth or sixth comp in these cases, but in stable markets where there is no change in the property and the price that they paid was a fair one, it is what it is, so in those cases, I typically just discuss it in the ownership history section and leave it at that.

 

[jay trotta]

Quote; Selling Guide B4-1.3-08 "The subject property can be used as a fourth comparable sale or as supporting data if it was previously closed."

If it is recognized as "supporting data", via appropriate comments for the other 3 sales, why does the position matter ?

 

[RSW]

Quote; Selling Guide B4-1.3-08 "The subject property can be used as a fourth comparable sale or as supporting data if it was previously closed."

If it is recognized as "supporting data", via appropriate comments for the other 3 sales, why does the position matter ?

Because the Fannie Mae gods said so...