Selecting Comparable Sales

Appraisal clients are often concerned about whether or not a specific comparable sale will be selected for use in an appraisal report.  I often hear "the sales you used are high" or "the sales you used are low" and I have even had Clients request that a sale they have information on be added or deleted from a report.  If you are an appraiser I'm sure that you have had this happen to you, it's a Clients way of trying to steer the outcome of your appraisal. 

What few clients realize is that there is nothing wrong with an appraiser considering a diverse group of sales.  Thus many appraisers are open to reviewing sales that a client thinks are best if they are provided to the appraiser at the beginning of the appraisal assignment.  When the assignment is completed it is much more difficult to get sales considered by an appraiser.  After completion suggesting different sales appears to simply be an effort to make s change to the appraisers market value opinion after they have taken their time and effort to form the opinion, and having to go back and look again is generally not well received. 

As part of the appraisal process appraisers look at property sales that are clearly superior and others that are clearly inferior to the subject, how else could they decide on where the subject property fits into the group?  Decisions about the quality, finish, features and amenities of similar sales is where Clients should focus because those factors are important to the appraiser.  Some of the sales reviewed may be so dissimilar that many appraisers wouldn't want to call them "comparable" but they may nevertheless be used by others for comparison. 

Appraisers usually compare one house to another with the house being the unit of comparison, but there are times when price per square foot comparisons make sense.  So a pool or a garage add value and and a smaller site or no porches subtracts from value.  Differences deemed significant are adjusted for based on quantitative or qualitative adjustments. 

Appraisers recognize that the sales they select are historical in nature in that they were bargained for weeks or months before their use in an appraisal report, and we are all acutely aware of the fact that the market is constantly changing.  I'm always surprised by clients who think that I will not or have not considered changing market conditions.  Do clients really think that appraisers don't read brokerage reports, talk to agents, talk to market participants, watch YouTube videos and and gather statistics on the local market?  I can't believe that an appraiser could survive for long in the appraisal business without knowing their market.  

Comparable sales research always seems to provide either a feast or a famine of comparables, and the famine is always the worst case scenario for an appraiser.  When there are few good comparable sales available appraisers have to widen the area that they are searching in and / or go back in time to search for more sales.  While some appraisers insist the appraisal process is purely scientific, and the research step looks like science, the judgment involved it comparable sales selection and the adjustment process is clearly not scientific. 

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

Article source: http://www.appraisalarticles.com/Real-Property-Appraisal/4402-Selecting-Comparable-Sales.html