As most of you know, Real Estate Appraisers rely on comparable sales to determine the current market value of a property. The challenge lies in selecting truly comparable properties—otherwise, the final value can be skewed too high or too low, which benefits no one.
Simply put, Appraisers follow the Principle of Substitution. If the subject property were no longer available, what would a typical buyer choose instead—based on location, features, and price point?
That last point is crucial.
Too often, we see comparable sales selected by Realtors, Homeowners, Buyers, and even some Appraisers who are unfamiliar with the area that are simply not comparable. Choosing homes from higher-priced neighborhoods to “push” value does a disservice to everyone involved—especially the lender and the unsuspecting buyer who may end up overpaying.
Ideally, comparable sales should:
Equally important is timing.
The date of the comparable sale matters significantly. The more recent the sale, the more reliable it is as an indicator of current market conditions. Markets shift—sometimes quickly—and using outdated data can lead to inaccurate conclusions.
What many Homeowners and Realtors may not realize is that Appraisers can and do use pending sales as part of their analysis.
Pending sales are often the most current indicator of market direction. While closed sales are required and reflect past activity, pending transactions provide insight into where the market is heading right now.
A thorough Appraiser will:
These insights are invaluable and should be considered in every well-supported appraisal report.
At Pendley & Pendley Appraisers, we utilize all available and relevant data to produce credible, well-supported reports for all intended users.
Contact us today for an up-to-date, accurate, and reliable appraisal report.