In real estate appraisals it is important to consider comparable sales when determining a property’s value. Comps, or comparable sales, are recently sold properties with similar characteristics to the subject property. These include location, size and condition. But one question that arises often is:
“How far in the past do appraisers take into account comparable sales?” In this blog, we will explore this topic and provide insight into the timeframes appraisers consider. We’ll also discuss factors that could influence the selection or comparable sales.
- The appraiser’s consideration of timeframe in selecting comparable sales can vary depending on a number of factors, such as:
a. Market Conditions Appraisers look at the current real estate market, including its fluctuations. In a stable real estate market, recent sales from the last six to twelve months may suffice. Appraisers may include sales in the past two years or more if the market is rapidly changing.
b. Property Type: The property type being appraised influences the timeframe for comparable sales. Residential properties usually require more recent sales information due to their shorter sales cycle. Due to the limited number of comparable sales, it may be necessary to take into account a longer time frame for commercial properties or unique property.
Location: The property’s location is an important factor when determining the timeline of comparable sales. Appraisers look at the local conditions of the market and whether recent sales are available within a reasonable radius from the subject property.
- Factors that influence the selection of comparable sales: Appraisers select comparable sales with great care to ensure accuracy in the valuation. In addition to considering the timeframe they also consider:
Similarity: Appraisers search for properties with similar features to the subject property, such as location, size and condition. The more similar the comparables to the subject are, the more accurate will be the valuation.
b. Appraisers will give priority to sales comparable to the property in question. This ensures the sales data accurately reflects local market conditions, as well as factors specific to an area.
c. Revisions: Appraisers are allowed to make adjustments based on the differences between comparable sales. These adjustments take into account variations that can affect the value of the property and bring comparables up to par with the subject.
- The importance of current information: While it is important to consider the timeframe for comparable sales, it is also crucial that appraisers are able to access up-to date data. Markets can be volatile and outdated sales data can lead to inaccurate valuations. Appraisers try to collect the most current and relevant data to create a reliable and accurate appraisal.
- Technology and data sources: Technological advancements have made accessing and analyzing real estate information easier for appraisers. The Multiple Listing Services (MLS), public record databases, and other online platforms offer a wealth information that appraisers may use in their valuation process. These resources allow appraisers gather accurate, current sales data in order to support their analysis.
Summary
Appraisers will consider comparable sales based on a number of factors including the market, type of property and location. Appraisers select the most recent and relevant sales information to ensure accuracy of property valuation