What Do You Do When There Are No Comparable Sales?

By
Real Estate Agent with Keller Williams Realty

 

So what do you do when you have a unique property or a home that is located in an area where there has been no sales, or very limited ones that have taken place?

 

Playing ostrich with your head buried in the sand and pretending you don't see the problem or better yet it will simply disappear will not get the task before you accomplished.

 

2301 State Blvd., McKinney, Texas - Tucker Hill

It begins with the end in mind as the saying goes ... when you first visit the home and then work on an analysis red flags will wave.  At that moment, as the one who will representing the sellers as the listing agent, you know there will be a challenge if not a "deal killer" that you will face.  Better peel off the band-aid now and tackle the problem.

Immediate things to watch when an offer is presented - the type of loan, the lender, the quality of the buyer, how much down payment.  If you have a difficult property and you know comparable sales are limited or non-existent then the strength of the buyer will certainly help overcome some underwriting obstacles.  The more down payment the more forgiveness that might be extended on the appraisal report.  The quality of the lender and the type of appraiser pool they draw upon is also important.  Appraisers can make or break the report just on the merits of how well they provided explanation and tried to present reasonable data.

Lack of Sales due to Unique Aspects of the Home

 

  • Identify what is unique about the property and then do a wide search for a similar variable.  If it is size, finish quality, updates, etc. you may need to locate sales in competitive areas to utilize.  An appraiser cannot overlook sales in an immediate neighborhood if they are present but if there are none then they have no choice, distance becomes necessary.  Again, if the buyer's lender has a distance of sales rule then this may present an issue especially with a weaker buyer.
  • Utilize sales in the neighborhood and make adjustments for the unique factor if ones are available but just are not as similar as the property.
  • If size is an issue and the home has had additions, then you might break out the addition and give it a contributory value which will bring the main living area in range with other home sales that have taken place.  This is generally done when the addition is not the same finish or has a functionality issue when compared to the main dwelling.

   Lack of Sale due to No Sales

 

  • Go back in time frame for sold sale search even past a year if necessary.  Depending on your local market you may need to time adjust for depreciation of value due to economy.  If there are some sales that are comparable they can be used as support information.
  • List out the competitive neighborhoods/areas where you would take a buyer to look for similar homes.  These are the next areas to research to pull comparable sales.  The closer the better.  Be sure to watch location, schools, etc. that help define similarity of housing desirability to the buyers.

Be prepared on the front end with your market analysis to provide information to how you derived at your list price, where you went for research, etc.  I like to prepare a packet for the appraiser, if they wish to look at it great and if not then at least you know you did the very best to provide dependable information.  Be sure to include a list of updates, etc. that may help elevate the opinion of the value of the home.  Also if there are sales in the area that sold low for a good reason, then be sure to pull up the data and have an explanation as to the "Why" on the MLS sheet - was a total redo, smelled like a cigarette, etc.

Most of all prepare you sellers that there may be and most likely will be a problem due to lack of similar sales.  Expectations on the front end may assist in paving the road to bumpy journey of getting it under contract ... and then realizing that is only one step in the process of hurdles yet to leap.

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Show All Comments
Rainer
39,571
Hosai Nasir
Century 21 M & M and Associates - Cupertino, CA

You set the standards yourself... Best of luck and it's a gorgeous property....

 thank you for sharing.. have a great afternoon. 

Please keep me in mind for Northern California Real Estate..

Hosai Nasir

Hosai@c21mm.com

Jul 19, 2011 01:37 PM #1
Rainmaker
535,405
Gay E. Rosen
Julia B. Fee Sotheby's International Realty - Larchmont, NY
As Real as Real Estate Gets!

Connie; As a buyer;s agent I usedd that to my buyer's advantage for the appraiser.. As a seller's agent.. I would make sure I have ducks all  in a  row for that appraiser. LOL Gya

Jul 19, 2011 01:37 PM #2
Rainmaker
936,283
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

Good information - I enjoyed reading it and will read it again.  Thank you!

Jul 19, 2011 01:39 PM #3
Rainmaker
3,577,711
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hi Connie,  I would have a appraiser do his numbers and pay for it, I have posted the information in the home to help the fellow agents with their clients.

Jul 19, 2011 01:59 PM #4
Rainer
37,846
Jose Rivas
Nottingham, MD

Hi Connie, great post, I agree with everything, that is the right way to price  a unique house, also you can go by square footage, break down the price per square foot foor the neighborhood and you can use that. 

Jul 19, 2011 02:14 PM #5
Rainmaker
808,931
Cindy Edwards
RE/MAX Checkmate - Johnson City, TN
CRS, GRI, PMN - Northeast Tennessee - 423-677-6677

Hi Connie,

What great information you bring to the table.  You need to hook up with some of our appraisers!!!  VA appraisers to be specific!!  (did I say that out loud?)  ha ha

Jul 19, 2011 02:19 PM #6
Rainmaker
4,021,306
Dorie Dillard CRS GRI ABR
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Connie,

I am right on board with your comments! Thanks for the great information.

Jul 19, 2011 02:37 PM #7
Ambassador
1,726,734
Richard Weisser
Richard Weisser Realty - Newnan, GA
Richard Weisser Retired Real Estate Professional

Connie...

This is an excellent post about a problem that we ALL run in to at one time or another! Suggested for AR feature.

Jul 19, 2011 02:38 PM #8
Rainer
203,079
Mary Macy
Top Agents Atlanta Metro - Roswell, GA
Top Agents Atlanta Metro

It is so hard to find comparable homes in any price range with the slower market and the more unique or older the home, the harder it is to find.  It takes market knowledge and that is where we earn our reputations as professionals.  Thanks for the post.

Jul 19, 2011 03:10 PM #9
Rainer
134,479
Jean Singleton
Capital Realty Experts - Rexford, NY
Specializing in Your Special Needs

Hi Connie,

As a Realtor who works with a Broker who's an Appraiser, we've had to do all those things when we couldn't find comps.  The hardest thing is trying to get the home owner to understand the concept, sometimes :-)

Jul 19, 2011 03:26 PM #10
Ambassador
727,741
Sheldon Neal
Bergen County, NJ - RE/MAX Real Estate Limited - Maywood, NJ
That British Agent Bergen County NJ
Terrific options to consider Connie ! I love this, and have suggested it ! Sometimes you have to get creative and do a little more digging !

Cheers Connie !
Jul 19, 2011 03:40 PM #11
Rainmaker
173,500
Richard Glesser
North Country Appraisal Services - Gaylord, MI

Having over 25 years in appraising, I still go back to words of my mentor who stated: "There's always comps.  They may not be within the typical perameters, but there's always comps."  The lesson in this is to expand various areas of your search.  Working a fairly large and very diverse market in Northern Michigan, I have found that my first step in identifying comps is to identify the Primary Value Factor.  That is the single-most factor which brings the most value to the marketplace.  For example, a lakefront property must be compared with other properties with frontage of similar value.  By matching the Primary Value Factor with comparable sales and listings, all other features require less adjustment and can be accounted and bracketted in the Market Approach. 

The other factor, generally out of the agent's control, is appraiser selection.  Try to urge the buyer to seek financing at an institution which does not use AMCs.  I have worked very hard completed understandable and acceptable appraisal reports on difficult properties because I do not work for discount fees.  Too many underpaid appraisers do not spend the time necessary in narrative explanation of the process and unique features of a property.  This is not right, but it is a fact.  Appraisers working for most AMCs are underpaid and over-pressured for quick turn-times.  Unique properties require extensive time to consider vrious approaches and develop a detailed, comprehensive report which makes sense to the underwriter.

Very good post pointing out items often overlooked in the listing process.

Jul 20, 2011 02:21 AM #12
Rainer
17,614
Gary Scardino
Gary Scardino - InvestPro Realty Group - Katy TX - Broker - Katy, TX
Katy TX Real Estate - Traditional and Investment Real Estate

Connie great information and I have to agree with post #12 as well.

Jul 20, 2011 03:02 AM #13
Rainmaker
558,118
Cherise Selley
Selley Group Real Estate, LLC - Colorado Springs, CO
Colorado Springs Realtor

Connie,

It's obvious you've thought and empirically worked through this scenario before writing this wonderful post... g

Jul 20, 2011 04:48 AM #14
Rainmaker
861,575
Gabrielle Kamahele Rhind
KGC Properties LLC, Tucson Property Management & Real Estate - Tucson, AZ
Broker/Owner

HI CONNIE!  Unique topic that I haven't read about here (unless I've had my head in the sand like the ostrich!).  It is clear to me that you know exactly what you are talking about and how to go about getting the information needed for these type of homes!

Jul 20, 2011 06:48 AM #15
Rainmaker
616,800
Tracy Lee Parker
RE/MAX Dallas Suburbs/PLATINUM PROPERTIES & MANAGEMENT - Royse City, TX
Buy*Sell*Lease

Connie,

I like your idea of preparing a packet for the appraiser. I have done this as well on a unique property and left it on the breakfast bar, but I don't think he saw it!! Next time I will meet him at the home! Preparing sellers with what could happen upfront is a great idea too.

Number 12's comments were very helpful!

Jul 20, 2011 08:01 AM #16
Rainmaker
1,116,763
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

I’m lucky because there is always something going on in the 39 condo communities in my farm area.

Jul 24, 2011 06:32 AM #18
Rainmaker
650,447
Barbara Hensley
RE/MAX Properties - Rockwall, TX
Homes for Sale in Rockwall County, Texas

Connie - this is excellent advise on a topic which I have had to deal with many times over the years.  I am waiting now for an appraisal to come in on an upper end home with acreage.  The home is over 10,500 SF and there have been no sales in the last six months, last year....what about the last several years!  I have done my best to supply the right information...now waiting!  

Jul 25, 2011 01:29 AM #19
Rainmaker
90,411
Craig Chapman
Call Realty / Access Appraisals - Mesa, AZ
The Value Guy

I'll second Richard Glessers comments about there always being comps. They may be less similar than what will be easy to analyze & they may be somewhat dated. But if the appraiser knows what he is doing, there will be something that can be used for comps. Even if using a lender that orders an appraisal from an AMC, put in your contract that you require the appraisal be done by a "certified appraiser", not just a lic, one. Too often lenders & AMCs use the million dollar mark to decide who to use for a complex appraisal, as if everything under a million was easy.  A "certified appraiser" should know how to deal with a complex property better than a lic one will, at least they have some extra experience & training in complex appraisals in order to be certified.

Jul 26, 2011 11:59 AM #20
Rainmaker
120,400
Sara Goodwin
Ashcroft & Associates - Portland, OR
Portland, Oregon Appraiser

I'm working on a four-plex that is in a rural town that only has one other income apartment (8-plex) property in it (not sold in eons, of course) - The nearest town is 7+ miles away and a completely different market. 

I feel your pain.

 

Aug 03, 2011 05:52 PM #21
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Rainer
261,098

Connie Goodrich

CRS ABR (McKinney Realtor)Texas
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