Wide Value Ranges

[Couch Potato]

Tomorrow I am going to see a property that was built in 1960 and is 1,107 SF according to tax records. This year it sold in Feb. for $78,000 and in May for $179,000. In doing initial research I found the following as prospective comps. None of these sales show unusual characteristics in MLS. Nothing indicates any of them were foreclosure sales.

Price / YB / Sale Date / SF / Miles to Sub.
$172,000 / 1960 / 06/27/2005 / 1,284 / 0.08
$115,000 / 1959 / 07/21/2005 / 1,025 / 0.11
$218,500 / 1959 / 07/29/2005 / 1,227 / 0.39
$190,000 / 1959 / 06/13/2005 / 1,200 / 0.47
$197,000 / 1957 / 08/12/2005 / 1,199 / 0.62
$103,000 / 1968 / 06/30/2005 / 1,158 / 0.65
$190,000 / 1957 / 07/14/2005 / 1,089 / 0.74
$155,000 / 1962 / 08/18/2005 / 1,137 / 0.8
$150,500 / 1958 / 06/23/2005 / 993 / 0.87
$ 79,900 / 1957 / 06/24/2005 / 888 / 0.9
$170,000 / 1950 / 08/15/2005 / 1,049 / 0.94
$ 83,000 / 1959 / 08/16/2005 / 864 / 1.01

The range of values is huge even by the wild standards seen in this area over the past year. Anyone care to share how they handle such ranges when no reasonable explanation presents itself?

 

[Terrel L. Shields]

Your parameters are not significant statistically

There is something else driving the values. Condition? That is the best hope I think...

See below

 

[VolcanoLvr]

Greg...

Flipping comes to mind initially!

The ??? is why did the property sell for 100K more just a few months later. Have you asked the parties to the prior transaction, and have you asked the current participants about how the sales price was derived? Is this an MLS listed property?

What is the prior sales history of this property? Was it bank-owned recently?

Has there been extensive renovations done to the property?

As far as the sales in the area go, it appears that you can toss out the two lowest sales as they have smaller GLA. There should be a resonable explanation why they sold so low....stigma, maintenance, family sale, condition, etc.

How close to the subject are the rest of the sales?

If it were me, I'd find the most comparable properties in terms of GLA, site size, proximity, condition, renovations and actual age, and use them as the most appropriate comparables, regardless of their sales price.

Remember...you don't have to agree with the contract sales price if you feel it is not supported. Use enough comps to demonstrate why you have come to that conclusion.

 

[Tom Barclay]

Greg,
I see nothing unusual in the data except as was pointed out about the two sales under 1,000 SF. I see this all the time here, can have a range of $100,000 on a 40-50 year old home within the same neighborhood. What I have found is condition and views are the most significant driving factor for value. You never know until you view the subject, find out the real condition and what has been done, if anything since the prior sale; only then can you select the most appropriate comps to use. Even then, factors arise that can't readily be explained, and will give you a range of value. That is where your judgement of the market comes in.

 

[Chris Colston]

Did the subject have significant hurricane damage that was repaired between sales? Perhaps a "blue tarp" roof that was finally fixed, new windows and central A/C, new flooring, etc? Or the higher priced sales were repaired and the lower priced sales were not. Could also be a view (lake, canal, etc) or a pool that has been added and hasn't hit public records yet. Ya gotta go see it to really know.

Greg, you know we are still feeling the effects of last years hurricanes and many of the "repaired" houses are just now starting to surface and enter the market. I think you will have to look closely at CONDITION here and that you won't know until you see everything. It's another really strong reason to give clients when they ask for pre-comps....."have to see if there may have been hurricane damage that is still present or has been repaired before I can give even a value range."

 

[xm72mhd]

I know nothing about FL except what I learn on here or CNN, but how fortunate you are to have too many comps. Sounds like you are in for doing some research to figure this out. In don't know about you, but the foreclosures here are beginning to impact the market and there are often two factors that affect the sales. Condition and motivation of the seller. Unfortunately the number of foreclsure sales are sufficient to affect whether owners are able to sell their homes. Maybe that isn't happening in your market and you've got two markets (or more). An investor market and an nowner market.

 

[Carnivore]

Greg,

I have a neighborhood that is worse than yours. The cause is interesting in that there are sub-markets within the total neighborhood. This is a PUD. I has at least 2,500 homes(guessing). eight major factors are coming into play and condition is not one of them. In the PUD all of the below exist in the sub-markets of the PUD. I recently completed an appraisal in this S/D. I had over 60 sales that I could have used. For Skippy its real easy, just pick the three highest. For me it was a nightmare. You guessed it, everyones mad at me.

Resales(wide range of REAgents skill levels

new sales(hidden concessions)

foreclosures

foreclosure post sales

Post foreclousre normal

Post foreclosure Flipping by misreprenstation

FSBO's

Active listings

 

[Jeff Horton]

Originally posted by Greg Myers@Sep 11 2005, 09:38 PM
Anyone care to share how they handle such ranges when no reasonable explanation presents itself?

You wait till you see the property to make a judgement call. Without actually seeing the property you don't know what your appraising nor can you pick comparables till then.

This is pretty typical results in my market if I try to pull the sales before seeing the house or a MLS listing on the house.

 

[Robert Dunkle]

I always pull sales before going to view a property. In my area, I can put a couple hundred miles on my vehicle even when I have my sales pulled before hand. However, once I view the proprty I start to weed through the sales to find my "comps". At the point you were with this post, these were not "comps" only sales in the area. As others have said, be careful and research for possible flipping, but find true comps. Don't do as one person I worked with for a while and run the sales, then ALWAYS find the comps in the three highest priced sales.

 

[Couch Potato]

As I said in my original post, those were PROSPECTIVE comps. Simply of list of sales with an age of +/- 10 yrs. of the subject and +/- 25% in GLA that occurred in the past 3 months within a mile of the subject. When I broaden the age parameter I did find a significant number of similar houses built in 1971 that were very similar in size.

The price difference in the Feb. and May sales was due to the Feb. purchase being a pre-forclosure sale, significant work being done on the property after purchase in Feb. (some hurricane related) and the May purchaser buying the first home she looked at.

Condition of the other sales in the neighborhood is apparently part of the of the reason for some of the lower sales, the second one on the list, $115,000 for 1025 SF still has its blue tarp from the hurricanes last fall. There is a wide range of condition of the properties as one would expect in a 45 year old neighborhood.

The is significant investor activity as three of the sales I listed are currently FSBO. I viewed about 25 properties, using my expanded search results, and will sort it all out after lunch. I appreciate the responses. It help affirm my direction, clarify what to look for and set my mind in the right mode for the job.

Andrew, you sound like you are describing my old neighborhood of Highland Creek in your resopnse. Best place I every lived, worst real estate investment I ever made. B)