When Is It Appropriate To Use The Subject Property Sale As A Comp?

[J Grant]

I dislike using the subject as a comp for itself unless the subject is unique and/or a shortage of recent similar sale comps available. For the reason Bobby Bucks states above, plus I think the prior sale price of a subject can influence an appraiser to a greater degree than what the sale price are for other comp sales used. ( such as the OP is struggling with now)

 

[Mr Rex]

I have an appointment tomorrow for a 1940s house on a couple of acres, inground pool, over-sized 3 car detached, and attached 2 car garage. I don't think including the 2009 sale @ $230k cash is going to help today when its in the $150-175k range and values haven't fallen that much by a long stretch. Did I mention the sales agent at the time was the owner? Oh yeah, the kicker: FHA reverse for a little widow lady.

 

[Deleted member 77547]

I'd do a deep dive on the backstory/motivation of the one that sold for much less. I'd also use the subject as a comp as 4, or 5. Just because there is a lack of data doesn't mean he over/under paid. Just that there are a lack of data.

 

[Doug in NC]

I'm confident the lot price was over-paid for last year. There was zero evidence to support that purchase price. After talking to the local agent expert, it appears even the pending adjacent lot of the same size is under contract about 20% lower than was paid for my subject lot. Not getting a competent appraisal has probably cost the borrower at least $35K by my estimation.

 

[Mr Rex]

I'm confident the lot price was over-paid for last year. There was zero evidence to support that purchase price. After talking to the local agent expert, it appears even the pending adjacent lot of the same size is under contract about 20% lower than was paid for my subject lot. Not getting a competent appraisal has probably cost the borrower at least $35K by my estimation.

But he saved a couple of hundred by not getting an appraisal.

 

[Deleted member 130081]

But he saved a couple of hundred by not getting an appraisal.

BAM!

 

[Deleted member 130081]

I dunno how everyone else does it, but I always use/consider the analysis of the prior sale in my development of value. I would only actually grid that sale if I had no other choice. In that event, you gotta wonder if you have enough data to do a credible appraisal in the first place no? I would be including some reconciliation statements addressing the quantity and quality of data as it relates to the credibility of the appraisal (God forbid).

 

[Mr Rex]

So the truth comes out. The folks moved from Seattle to NC with no knowledge of local values and the potential differences in values based on location. Navy veteran that has moved numerous times over the years and the last one he was involved in was a substantial loss...The widow doing a reverse that is likely in the 75% range of their cash purchase in 2009, but they saved a couple of hundred bucks on an appraisal...

 

[Webbed Feet]

I kinda think the borrower probably did pay too much last year too. It's the 2017 sale about a block away that is really worrying me at $70k below subject's last year price. Waiting for the agent to return my call, just hope she is not on vacation this week (or is reluctant to call me back to explain why she sold two similar lots in the past year with a $30K+ difference in the $200K price range).

Be beyond very careful. Bare land sales or site sales can be license killers. Once I was asked to appraise a lot sale that had a price seriously not in line with other sales. The sales contract referred to an addendum nobody wanted to provide to me. Lender and I had a coming to ....... chat about that and they finally "obtained" and forwarded the addendum to me. It turned out there was a clause that if the buyer wanted to back out prior to the seller (a contractor) building a house for the buyer that the seller had to purchase the lot back AND that the full sale price of the lot would be credited towards the "total purchase price" of the house WITH the lot. That told me what was going on was an intentional overcharge for the lot with the extra money to act as construction material funds for the seller/builder. The lender, by loaning on the lot, was going to be providing a construction loan with it.

If your "prior" subject lot sale doesn't compute, I'd not be using it for a comp without 100% of the involved sales contract.

 

[Amy Perkins]

I dislike using the subject as a comp for itself unless the subject is unique and/or a shortage of recent similar sale comps available. For the reason Bobby Bucks states above, plus I think the prior sale price of a subject can influence an appraiser to a greater degree than what the sale price are for other comp sales used. ( such as the OP is struggling with now)

This is why I think that it should be stated in the report that it is a supplemental sale and does not hold the same weight as the other sales. I have seen sales purposefully inflated so they could sell for more later. Though it is not typical, it does happen.