Sometimes we are asked to appraise properties in markets where true comparables are scarce. In such situations it is important to have selected an appraisal firm who will go beyond the normal call of duty to get to value.
There are any number of reasons why comparables may not exist in the subject neighborhood or region. The property may be unique for the area, or development may be sparse. Perhaps the market has softened and few transactions are occurring.
Tools for Valuation in Thin Markets:
a). The appraiser should research available listings, noting time on market, asking prices, and importantly, offers received. Several asking/offer comparable sets should be adjusted and analyzed, resulting in ranges of value for the subject.
b). If truly comparable transfers did not occur in the subject neighborhood recently, perhaps they did in the past, or perhaps they are currently occurring in other locations. Sales of similar use may have occurred in the subject neighborhood, but could have been too different than the subject to be considered readily comparable. In such cases appraisers use paired sales to isolate the adjustments needed equalize the comparable to the subject.
c). Appraisers should be sure to communicate with brokers in the market to help add another level of assurance that values derived are realistic.
It is important to choose an appraisal firm who will take the time to do the research and analysis needed to accurately value your property, especially in thin markets.