A: I find myself getting into more and more talks about comps analysis lately and just wanted to put some thoughts into an article. My main point will continue to be: perform a comparable market analysis using the least amount of adjustable variables as possible! The more variables that you introduce that require adjustments, the more you will degrade the ultimate analysis. The simple solution to this is to stay in building, but the ideal solution is to stay within the same line of the target apartment. However, in the real world, data is not always available and exceptions must be made. Lets discuss.
One fallacy that just rubs me the wrong way is when brokers start to justify higher property expectations using sold comps from a different building when there are perfectly good comps to use in the same building. The reasoning for this is usually always the same, "the in-building comps are too old, I never use a comp that is older than 3-5 months old". Hogwash!
#1 - First off, don't go by the sale date instead you should focus on when the sold comparable was SIGNED INTO CONTRACT! Sure the deal may have closed 90 days ago, but for all you know the deal was signed into contract 7 months ago and had a delayed closing! Market conditions at the time of contract execution is what matters most; not the market conditions when the deal closes.#2 - By leaving the building and using an outside building's sold comparable, you are introducing the following variables:
a) building service level
b) building financials
c) banks willingness to lend to building based on bldg's unique characteristics
d) building amenities
e) building policies & restrictions
f) building type (yes, I had brokers compare an ACTV co-op to a SOLD condo to argue for a higher bid from my client)
g) school zone
#3 - By leaving the building and using a different unit altogether, you are introducing the following variables:
a) different layout
b) different size
c) different carrying costs
d) different exposure / views
e) different levels of natural sunlight
So whats the argument now? Rather than keep all those variables constant by staying in-building and adjusting for a) floor, b) time, and c) renovations, you would rather adjust for 11-12 additional variables that quite frankly nobody has any means to quantify anyway?? In Manhattan, every building is its own little unique marketplace.
Do not degrade a comps analysis and make more work for yourself simply because a highly relevant sale is 'deemed' too old to look at. In today's world, we have different companies spending vast amounts of money to sanitize data and build all sorts of applications so that brokers & consumers have incredibly useful tools to help service their clients.
Are you beating the market? We are!!!