Using subject as comparable

[Alsie35]

It appears your question is missing details, or you are confused on when using the subject as a comparable is done.

Using the PRIOR SALE of the subject as a comparable can help convey many points about current market conditions. Using the CURRENT SALE, which you are talking about in the OP is never done.

You beat me to it. What apt20 said I agree with 100%.

I will only add that using a prior sale of the Subject as a comparable should be done as an additional comparable (usually #4), and not as one of the primary comps (usually #1-#3) that value is based on. That's what I was taught, and it makes sense. It helps to bracket ALL of subject's features including some of the peskier ones you might have trouble with otherwise.

 

[Don Jones]

It appears your question is missing details, or you are confused on when using the subject as a comparable is done.

Using the PRIOR SALE of the subject as a comparable can help convey many points about current market conditions. Using the CURRENT SALE, which you are talking about in the OP is never done.

No details missing. You are the one that is confused.

 

[Sadie]

I have only used a previous sale the subject as a comparable. And not very often.

 

[Deleted member 152047]

It is already in the report when you analyze the current contract, but I always reference it before concluding - in fact it's in my table of conclusions. I think including it as a comparable sale is admitting that you don't have anything all that good and are just trying to fill your grid.

I could see using a prior sale in the grid, however, especially if the conditions of sale were relevant. If it was a market sale, and you have nothing better, it's a good idea to illustrate the current value by making a market conditions adjustment and, if relevant, conditions of sale as well.

Glad to see you back on the forum Michael! I appreciate your insight as you are typically spot on.

 

[Deleted member 152047]

I don’t know of many users of appraisals that know enough about proper appraisal methods to criticize anything in an appraisal except their belief that the opinion of value is too low.

or too high, or just stupid, or not worth the paper it is written on, or there is a massive critique after someone only looks at the executive summary or LOT.

Had a borrower call me the other day after looking at the executive summary only and he proceeded to tell me why I was wrong, but he had no idea what the property actually was.

 

[Deleted member 152047]

I don't typically use the subject sale in the grid. I try to present the most comparable sales within the market in the grid and then in my reconciliation for the SCA I will present the subject contract price and analyze it against the comparable sales.

 

[Don Jones]

or too high, or just stupid, or not worth the paper it is written on, or there is a massive critique after someone only looks at the executive summary or LOT.

Had a borrower call me the other day after looking at the executive summary only and he proceeded to tell me why I was wrong, but he had no idea what the property actually was.

After 40 years as a full time appraiser, not a hobby, or part-time job, I’ve probably seen about everything at least once and much of it more than once. The kind of problem you describe is commonplace with lenders as well as other users of appraisals. It has come to be expected from them. What is more troubling is that many licensed and certified appraisers seem to have a dim understanding of what it is all about. Also, I have seen review appraisers provide misleading and improper appraisal methodology to the one they were reviewing. If an appraiser is supposedly knowledgeable enough to do reviews of other appraisers that review appraiser should be trained well, and understand proper appraisal techniques. Been this way for years and I see no hope for improvement.

 

[Terrel L. Shields]

Some of the oldest textbooks may mention a 4th method of valuation, "historical" where the subject property's prior sales are updated with a market conditions adjustment. It was never a popular method. Then again, one old text (Ratcliff, if I am not mistaken) was all about income methods and offered 5 variations or more of that method alone. As pappy used to say, "There's more than one way to skin a cat without getting hair in your teeth."

 

[Terrel L. Shields]

that is going to be strong evidence of value unless it is shown to be not an indication by an expert.

I just appraised a property under contract, family related sale, where 3 acreages totaled some 140 acres. The rear 40 had sold for half what the total property value ended up appraised for only 18 months later. However, when that 40 sold, it was landlocked to the highway, a condition "cured" by being added to the larger parcels. It rendered a ½ mile easement (but no road nor lane nor fencing) into the site which cured both the access issue and the easement on the adjacent parcels. In fact, it had been retained by the seller only as a hunting ground until he decided to sell. Once it sold, the owner fenced the entire property with new fencing (1 mile of it), removed some old barns of no value, and 'cleaned up' the place.

In rural farm/ranch/recreational land, motivations and utility are key. Just looked at another where the buyer does not want the old manf. home on 5 acres. He just wants the acreage which sits in the middle of his property making his property somewhat horseshoe shaped. His motivation isn't the MH but obviously he had to pay for that too, or the buyer finds someone else. So even if paying a premium for the 5 acres, it likely makes his own property more valuable or at least, more fungible since, once again, buying the land extinguishes a driveway easement across his property.

 

[Terrel L. Shields]

No details missing.

Don and I have both seen a lot of farmland 'flipped' - no different than houses. Someone buys the property knowing it is a bargain, or that they have a potential bargain and it can be quickly resold for more, otherwise can be used. I recall a few years ago when a fellow bought a property and six months later sold it for about 20% more than he gave for it. I knew him and asked why he sold. Seems he was diagnosed with potentially fatal cancer which once he went to Mayo's found out wasn't cancer but a rare but curable disease for which he got treatment. He had sold in a panic but told me he had bought the property cheap because the seller had really had cancer and was going to lose the place if he didn't sell. He admitted he thought the place was jinxed when he got his first diagnosis Afterwards he then purchased a similar large tract across the road, remodeled some old hog houses for free range chickens, built a new house on it, and that he recently sold for over $1.5 million, then turned around and bought another farm, similar size for somewhat less. He's made more money off flipping these farms than he ever did with cattle, and he owns an auction barn.