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.
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.