When you are comparing like properties, pulling comps isn’t all that difficult. However, when it comes to atypical properties, the process becomes much more challenging. Experts almost always recommend that appraisers use an “apples to apples” approach when researching comps, but what do you when there isn’t another “apple” to compare? Here’s our advice regarding how to pull comps on a complex property.
Check the previous sale price
If it sold before, what was the price and how did it compare to other local properties? That will give you an idea of how the property fit into the market, and whether it was priced higher or lower than other properties that sold at the time.
Start with the low-to-high range
No doubt, this could be a wide range, but it at least provides you with some insight about where the value of the property is likely to fall. If either the low or high property doesn’t align at all with the subject property, you’ll know that you must do some additional digging and broaden your search.
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Conduct deep research
The status quo is to look for houses of similar size and condition, within the same neighborhood, that sold within the last six months. However, that likely won’t apply with atypical properties. You may need to go back years, expand outside your neighborhood, or consider properties that only have some similar characteristics (e.g., the style is similar, but the square footage is different) to find a comparable property. Then make sure you adjust up or down to reflect market trends.
Broaden your search to other competitive areas
If you find few—or even no—sales in your subject neighborhood, think about nearby or comparable neighborhoods where a target buyer might look. For example, neighborhoods that feed into the same school system or waterfront properties on another local body of water. It is critical that you confirm the neighborhood is indeed comparable, so make sure that sales in both neighborhoods are similar and that values have increased or decreased similarly over time.
Don’t be afraid to tap your appraiser network
Reach out to colleagues, professional groups, or mentors in the industry to ask for advice on valuing properties or to see if they have valued a similar property. Ask them how they found comps, what resources they used, and how they overcame obstacles. Those tips can point you in the right direction and save you loads of time.
Complex property appraisals can be both challenging and profitable. It’s important to consider that a complex property will require more time and expertise, so you should set the fee accordingly. Want more insights into how to pull comps for atypical properties, apply non-traditional appraisal techniques, and more? Enroll in our CE course, Complex Properties: The Odd Side of Appraisal.
