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Use the same propery for 2 comps?

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Greg davenport

Thread Starter
Member
Joined
Mar 30, 2004
Professional Status
Certified Residential Appraiser
State
Arkansas
This is strange, but valid. Here's the story.
this is a comp, not the subject.

Sold 3/20/2007 for $97,000
this sale was the home, 10 acres and all mineral rights.

Sold again on 4/27/2007 for $88,000
This sale was the home, 5 acres and NO mineral rights.

Now the rest of the story.
Property was bought only for the mineral rights the first time. They had no intention of keeping the home. (I called and verified with the buyer) They paid market value, for the hope of making money off the mineral rights.

The second sales was a person looking for a home.

Two questions
1. Can you use both sales as comps? I can find nothing saying you can not.
2. Would you use both sales as comps?

This is in a rural area with limited sales, so I am considering using this as comps 2 and 3. Keep in mind the only change between sales is the lot size.

:confused::confused:
 

Joker

Elite Member
Joined
May 28, 2002
Professional Status
Certified General Appraiser
State
Ohio
1. Yes, you can.
2. If there were other more comparable sales available, I would not use both sales. The motivation of the buyers was different. The only change between the sales is NOT the size of the lot. It is also the loss of mineral rights on the resale. Is that typical in your market?

I may use one or both, if there were limited other sales in the area. No matter what you do, explain it.
 

Greg davenport

Thread Starter
Member
Joined
Mar 30, 2004
Professional Status
Certified Residential Appraiser
State
Arkansas
1. Yes, you can.
2. If there were other more comparable sales available, I would not use both sales. The motivation of the buyers was different. Is that typical in your market?

Not typical, but not unheard of either.

This is in an area where gas was "discovered" and mineral rights are the biggest thing going in some circles. Mineral rights in some area are worth big bucks, other nothing.
 

stefan olafson

Senior Member
Joined
Apr 2, 2003
Professional Status
Certified General Appraiser
State
North Dakota
Sounds like the minerals were worth $8,000 to the first buyer? I guess if you make darn sure you disclose the why's and what's of the transactions you could use the same property twice?

I know how hard it is to find good information in rural areas. I just wish underwriters did!
 

David Wimpelberg

Moderator
Staff member
Moderator
Joined
Mar 30, 2005
Professional Status
Certified General Appraiser
State
New York
When possible, I would recommend sticking with sales that have the same property rights compared to the subject. If the property rights are different, you will often find that you are dealing with completely different sets of buyers with different motivations (as seems to be the case here).
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
How are you going to adjust for the lost of part of the bundle of rights, ie the mineral rights? What base are you going to use? Where are you going to find the data?

I would think this would end up making it a complex work of art.

Is the mineral rights really worth the $8K or is the seller that held the right going to get a lot more? If so what does that make the other mineral rights worth on the subject? Does the subject have mineral rights that are worth money, if so what, how much?

How would you approach this problem? What would a reviewer do with the original report that show missing mineral rights?
 

Lawrence R.

Senior Member
Joined
Mar 27, 2007
Professional Status
Certified General Appraiser
State
South Carolina
Don't have my USPAP in front of my but isn't there something about buyers and sellers being typically motivated?

The first sale doesn't sound like a typical motivation to me.

Even if it were, are you trying to make some poor underwriter's head explode? Or possibly your own after the request for more information comes in?

I am not advocating appraising to please UWs, but you could probably avoid some aggravation if you just used the 2nd sale, a typical buyer and seller in the SFR market...though, if the seller based his price on the return he would get from the mineral rights, that motivation for him as a seller may not be typical, either.

Just my 2 bits.

Good luck, as hard as it can be to find comps, I would want to use them too...but I would probably pass.

Good detective work on the details of the 2 transactions, though!!:flowers:
 

Diego Lopez

Member
Joined
Sep 11, 2006
Professional Status
Certified Residential Appraiser
State
Florida
I like to keep my appraisals as simple and transparent as possibles, the least needed adjustments, the least I'll need to justify if anything goes wrong. I would probably pass on using that sale alltogether.
 
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