Reviewers ask why a certain sale was not used as a comparable. Why don’t they know I already used the best comps, just like I was taught?
Don’t they know I used what was competitive, similar, and “able to be compared” – Just like The Appraisal of Real Estate 15th ed. says:
- A good comparable sale is a competitive P.107
- The data used for comparison … should come from properties that are similar. P.107
Is that all there is? There is no further definition or help in identifying what is a comp! Be similar, be competitive, and be able to be compared.
Unfortunately, this guidance (or lack of guidance) consigns appraisal to being subjective from the start. And precludes any objective, evidence-based conclusion.
So why didn’t you use a particular comparable? Simple. It is not traditional practice. Not how you were trained. Historical practices required harvesting what was available, not finding stuff you wouldn’t use! Reviewers would seldom know about another ‘comp’ the appraiser ‘should’ have used! But today, review appraisers, and administrative reviewers generally have access to the data, and can pick one that seems seemly.
So why would a reviewer go to this effort?
- A genuine desire to feel better about the point value opinion.
- A genuine desire to protect employer (or the AMC’s client).
- A desire to appear diligent with an unnecessary request.
- A bias or desire to get a number to help make a deal.
- A genuine desire to protect their own reputation.
- A desire to have something to do on a slow day.
- A need to show the appearance of doing work.
But is there any justification?
USPAP does seem to open this possibility in the Scope of Work rule where it states: “Sufficient information includes disclosure of research and analyses performed and might also include disclosure of research and analyses not performed.”
This appears to open the door for the reviewer, who in their opinion — that the appraiser should have either used the reviewer’s data, or at least have disclosed why that data was not identified.
In modernized appraisal practice (EBA – Evidence Based Appraisal©), we solve the above issues.
- We apply a basic science/research practice called ‘reduction.’ Herein we reduce the problem into smaller components, analyze those components, then put them back together (synthesize).
- We objectively classify sale data into competitive, or not competitive. Then we use “all information necessary” and “analyze such comparable sales data as are available.”
Modern data sources (in most areas) easily allow the download of all relevant data, including sales which are not illustrative of the market (like three comps). By simply listing and/or providing the exact parameters and source of the data, with simple classification reasoning – we are able to fully prevent requests for additional work. The method is simpler, faster, and bulletproof!
In the Valuemetrics.info Stats, Graphs, and Data Science1 class we provide the training needed.