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When The Comps Say More, But Reality Says Less?

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PS111222333444

Sophomore Member
Joined
Sep 2, 2010
Professional Status
Certified General Appraiser
State
Washington
Appraising a 1 acre vacant light industrial site in a secondary market which has been stagnant for many recent years. Marketing time is reflected in years not days or months. The subject has many superior characteristics to recent sales comps in the immediate market. However, it has been listed several times in recent years with no offers and limited interest. The comps are found to be a price per SF above that of the subject’s historical list prices. The subject has no stigma other than having been previously exposed to the market. Not sure what direction I should take with this, but my gut says the subject is not worth what the comps are suggesting.

Appreciate any input.
 

EddieB

Elite Member
Joined
Feb 17, 2005
Professional Status
Certified Residential Appraiser
State
North Carolina
How old are the subject listings? I've been down this path before and if the listings are recent, something is happening. Call the prior listing agents and ask.
 

Tom Woolford

Elite Member
Joined
Nov 20, 2005
Professional Status
Certified Residential Appraiser
State
Florida
1. whats wrong with the subject you missed? 2. What was wrong with the comps that you didn't consider. Location, location, location. Rail access, location to transport hubs, availability of utilities........
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Appraising a 1 acre vacant light industrial site in a secondary market which has been stagnant for many recent years. Marketing time is reflected in years not days or months. The subject has many superior characteristics to recent sales comps in the immediate market. However, it has been listed several times in recent years with no offers and limited interest. The comps are found to be a price per SF above that of the subject’s historical list prices. The subject has no stigma other than having been previously exposed to the market. Not sure what direction I should take with this, but my gut says the subject is not worth what the comps are suggesting.
Appreciate any input.

What in your view makes subject superior ...perhaps the market is not recognizing the characteristics as superior or it is over improved .Could the subject lack a key element the sold comps have?

Talk more to the listing RE agent or others...was it a difficult owner or difficult property to show? A stigma to other agents can be accrued by long dom, but a serious effort to sell by or re list should get an offer if a property is decent...something is off but what? Are there other listings right around the subject ...revisit comp choices..?
 

DREA Dean

Sophomore Member
Joined
Apr 16, 2015
Professional Status
Certified General Appraiser
State
Pennsylvania
...was it a difficult owner or difficult property to show?

I've seen this happen before. I recently appraised an office building that is pretty nice and attractive. But the owner is a royal pain, and makes every inquiry, inspection and negotiation an absolute nightmare. He won't let the listing agents do their job and sell the property. The property has been under contract a couple of times, but the deals fall through because the owner just keeps delaying things and making everyone's life miserable. I've seen the same thing with leasing, too. You wonder why a decent shopping center or office building has more vacancy than it should. When you talk to the listing agent, they say that the owner just keeps screwing up deals and can't get leases completed.

I agree that it is often very fruitful to speak with current and past listing agents to find out what the problem might be. If not a difficult owner or incompetent listing agent, it could be something else that you are overlooking. Vehicle access or traffic patterns, perhaps? Utilities? Floodplain or stormwater management?
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
My guess is, if you have gotten to the point of posting here, you have drilled down on the market and site characteristics, so I won't question you on that. But, an industrial site in a secondary market requiring a marketing or exposure time of multiple years? Even if the macro analysis suggests no decline in price, the micro analysis could suggest extremely slim demand, and perhaps at the time that it was listed (or now), those who were looking for vacant industrial sites had already found what they needed. One thing that I've found is that when transfers are direct between parties, the seller is often approached by the buyer and gets a price that they are OK with. People won't pay several percentage points of the sale price for a brokerage commission if they don't have do, and if they list it, that is a sign that they don't have a buyer, so you may occasionally find lower average prices with brokers in this type of market. The prior statement is, of course, one that could be picked on in an active, healthy market, but in an illiquid market with slim to no demand? The type of issue that you speak of in itself is one that may alter the prospective purchaser from, say an owner occupant to an investor willing to hold for speculation purposes.

I did an appraisal not too long ago of a church which had a recent addition comprising about a third of the GBA. They put it on the market soon after, and now it is listed for about 80% of the cost of the addition alone. A year or two ago, there were a couple people looking to buy churches in this area, and now, no one is looking to buy. There isn't really anything of significance that suggests real weakness in the greater commercial RE market, and even the more fundamental issues such as the changing number of churchgoers in the area do not suggest softness in the market. Yet, the lack of buyers in the market for this type of property is allowing prices to fall through the floor.
 
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techbiker

Sophomore Member
Joined
Dec 4, 2015
Professional Status
General Public
State
Texas
Check for burdensome restrictive covenants and easements. An easement through the middle of the property, held by the gas company will cause nightmares for example.
 

PS111222333444

Sophomore Member
Joined
Sep 2, 2010
Professional Status
Certified General Appraiser
State
Washington
How old are the subject listings? I've been down this path before and if the listings are recent, something is happening. Call the prior listing agents and ask.
Prior broker's input is that the seller was flaky - disappeared for months. Insisted asking price high when broker recommend reductions. Property unkempt - needed mowing.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Is subject in contract now?
 
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