Join        Login             Stock Quote

Jonathan Miller On "What Is A Comp"

 March 05, 2012 08:25 PM

A: By now regular readers know that this is such a passionate topic for me, and its not because me and my programmers have been hard at work for almost a year on a unique Manhattan Comparable Sales tool - expected to go live in 6-8 weeks. The real reason why I care so much is that many brokers openly argue about "what is a comp"? The main debate lies between "relevancy" and "recency" of the comparable sale to the subject property. I admit, I did "pester" Jonathan to write on the topic because I value his opinion and his standing in the appraisal world is irrefutable. Lets get his take on what a comparable sale is, and take a quick peek at the real world and why "relevancy" should be the clear choice when markets are stable. First lets define both "relevancy" and "recency" when it comes to picking out a comparable sale for an analysis of a subject property: Relevancy - the comparable sales used are highly relevant to the features of the target unit. This tends to mean, the same building, the same line, the same layout or the same bedroom/bath size, the same exposures/views. Recency - the comparable sales used are the most recent sales either in the building or nearby. This tends to be at the sacrifice of 'relevancy' as vertical housing markets like Manhattan rarely have highly relevant sales that are also very recent. Now, in the appraisal world there are 3 types of markets: rising, declining, and stable. If the market is deemed stable for say a period of 2 years, then its OK to use a highly relevant comparable sale where an applied time adjustment is not too difficult to figure out. It's only in rising or declining markets that brokers and consumers tend to sacrifice "relevancy" in order to focus on "recency" - probably due to the difficulty in adjusting for market changes over time. This is where I disagree completely, especially since we have the Streeteasy Repeat Condo Index to help us see market changes over time. Before I continue lets take a look at Jonathan Miller's recent article, "What is a Comparable Sale":
The use of comparable sales are the basic ingredient for real estate appraisers and agents to vet out market value - so the similarity of it to the subject property (the property being valued) is paramount. As an appraiser, I see the term "comparable sale" often abused. Some of it can be chalked up to inexperience and some of it to fraud. An illustrated deterioration of the slippery slope goes something like this: Comparable Sale -> Sale -> Data -> Information -> Misinformation -> FraudA practical definition: A "comparable sale" is a sale that would be considered an alternative choice to a buyer that might purchase the subject property. The sale should have a similar set of amenities (ie, size, condition, location, views, configuration, etc.) to be considered as an alternative choice for the buyer. However it gets tricky when the subject property is unique and there are few "comps" to use.

Next Page >>123
iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageSavings Glut and Financial Imbalances

Martin Wolf in today's Financial Times discusses the reasons for low interest rates and suggests some read on...

article imageA Dividend Aristocrat Is Now On Sale

The bear market investors have been dreading is already here for many individual stocks. While the S&P 500 read on...

article imageTwo Picks to Play Defense in a Slowing Economy

Is the economy slowing? Last Thursday the Institute for Supply Management (ISM) reported that its read on...

article imageUS Jobless Claims Fall, Moving Closer To Multi-Decade Low… Again

US jobless claims continue to cast a positive glow on the outlook for the labor market. Today’s weekly read on...

Popular Articles

Daily Sector Scan
Partner Center

Related Articles:

Two Picks to Play Defense in a Slowing Economy
More Articles on: Real Estate

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.