To Be Or Not To Be – The Sale Selection Process

I received a call last week from a property owner.  He kindly inquired about our report and why a sale in the same business park was not included as a comparable.  This is not an unusual question and there are a lot of factors in determining which comparables to utilize.  However, in this particular instance we could not confirm the sales price. 

Texas is one of 14 non-disclosure states in the United States.  While transaction data is available for public access in most states, in Texas and other non-disclosure states this information is considered to be private and confidential and there is no requirement or obligation to disclose the sale price of real estate.  Therefore, confirming accurate sale prices in non-disclosure states is a challenge and can limit the amount of sales data available for analysis.

Appraisers in non-disclosure states have to rely on a wide variety of methods for confirming sale transactions.  Data subscription services, interviews with market participants, and confirmed sales from past appraisals and work files are some of the more common approaches.

Data sources such as CoStar, Loopnet, and subscriptions to Multiple Listing Services are generally a good starting place.  These services provide details regarding the transactions and often times a broker or contact name for additional information.  While some of the data is very accurate and robust, a lot of pertinent data is often unavailable or even incorrect.

Therefore, the next step is to try and gather additional details from a party privy to the transaction.  This can be one of several people including a buyer, seller, broker, lawyer, or even other appraisers.  Interviews with these market participants can uncover a lot of the motivations behind the sale and other relevant information.

A final source for comparable sales data is the appraiser’s own files.  During an appraisal assignment it is not uncommon to research and confirm a dozen or more sales.  Only a few of these sales will be included in the appraisal report.  Due to various transactional and physical differences, some of the sales will not provide good indications of value for the property being appraised.  However, these confirmed sales may work better for a different appraisal assignment.

This brings me back to the original question from the property owner.  After explaining the confirmation process and why we did not utilize the property as a comparable sale, I believe he had a better understanding of the process and why the sale was not included.

At Meridia Appraisal Group, research and analysis is one of core competencies.  Through our relationships established with market participants and our subscriptions to various commercial database services, we can offer our clients excellent research and analysis in our appraisal reports.  We look forward to being of service to you and your clients.

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