Imagine this: you receive an appraisal and the value is shockingly lower than you expected. Once you look passed the number and dive deeper into the appraisal, you realize that all comparables are over 1 year old, with at least two of them being more than 2 years old.
How incredibly frustrated would you feel?
Would you believe me if I said that older sales make better comparables?
My guess is a resounding NO!
If you find it hard to believe, I recommend taking some time to watch the video below featuring insights from Lyle Radke, Senior Director of Single-Family Collateral Risk at Fannie Mae, and from Appraiser eLearning, a nationwide appraisal education provider. Although it’s a bit lengthy, the information provided is valuable and can clarify these concepts and support appraisal methodologies, particularly up to the 30-minute mark. Here are the key areas covered:
- The legitimacy of using sales that are 18 months old or older.
- Whether changing markets consistently trend upwards.
- Time adjustments.
- Do all property types in a particular neighborhood move in the same direction?
The video also explores why older sales can serve as the best comparable, highlighting several crucial points:
- Older sales, when adjusted for time, can offer a highly reliable basis for appraisal.
- Recent sales that are farther away and differ in condition may not reflect true market value.
- Matching properties based on physical attributes and location is essential for accuracy.
- Time adjustments are typically low-risk and provide a more reliable indication of value.
- Conversely, adjusting for physical and locational differences can carry a higher level of risk and a less reliable
indication of value.