Tips for Dealing with Complex Single Family Residential Appraisals-Page 3

Some Methods for Dealing with Complexity

Expand Your Scope of Work

Complex residential appraisals require more work by nature. Expect to spend more time on the assignment and to take the necessary steps to address any complexity.

Define your Subject’s Market

When you first realize that you might have a complex assignment on your hands, spend some time considering the subject’s market. Where would potential buyers of the subject look for homes? This is the starting point for your data collection.

Unpeel the Onion-Expand Outward

For complex assignments, you often need to expand outside of the typical box for your search for comparables. Should you limit your comparable data search to only the subject’s neighborhood? Or does it make sense to look throughout the subject’s city? Or is it one of the best homes in the county? Does it have regional appeal?

Research, Research, Research!

Be exhaustive in your search for data. Dig through your data sources for comparables. Call agents active in the subject’s sub-market and pick their brains for sales data and ask for opinions regarding the subject’s complex issue. Build a network of local appraisers you can rely on for both data and advice. When you have a really complex assignment, knowing who to call for advice is crucial. It’s just as important to maintain your relationships with other real estate professionals by sharing your knowledge with others.


Time is your friend when dealing with a complex residential assignment.  In general, time adjustments are the easiest and most reliable adjustments to make. Don’t limit your comparable search to the lender box of 3 months/6 months/12 months back. Go back as far as necessary to deal with your subject’s complexity.

Prior Sale of the Subject

A special case of going back in time for comparables is to consider the prior sale of the subject. Using the prior sale of the subject is a great way to deal with issues unique to the subject such as location or a physical characteristic. If you’re lucky, the subject has sold within a reasonable time frame and can be time adjusted forward to be used as a comparable. The prior sale of the subject can be your best comparable.

Even if you can’t use the prior sale of the subject as a direct comparable, you can use the prior sale of the subject to examine what your subject’s market is and what a possible adjustment for the factor might be. The last time the subject sold, what did other homes nearby sell for? Which ones appear to have been reasonably similar in characteristics and price? What was the subject’s competitive market? What did the listing agent for the subject say about the prior sale of the subject?

Bracket the Factor of Complexity

This is somewhat obvious but if at all possible, bracket the factor of complexity. This creates a box around the impact of the complex feature and lends credibility to how you dealt with the issue. One significant benefit of bracketing is that lending clients understand bracketing well. For example, if your subject is facing a busy street, you can use a sale on a much busier street to establish a bottom on the subject’s external obsolescence from its negative location.

Qualitative Analysis

From the Dictionary of Real Estate, 5th Edition, Qualitative Analysis is the process of accounting for differences that are not quantified. Qualitative analysis is very useful for answering subjective questions and as a starting point for understanding the subject’s place in the market. You can use qualitative analysis to place the subject overall in a group of competitive sales or you can you can use it to analyze specific property characteristics.

  • Where does the subject fit in the neighborhood? Is the subject the best home, the worst home, or relatively typical? What does this mean for comparable selection?
  • How does the quality of the subject’s kitchen remodel compare to other homes in the neighborhood?
  • The subject is halfway up a mountain with panoramic views looking west. How does the subject’s view compare to homes near the bottom of the mountain? How does the subject’s view compare to homes at the top with views in all directions?
  • The subject is a spec home built from relatively common plans. It is a step up from nearby tract homes but is a step down from truly custom homes.

The subject’s position in the market can help you zero in on value. Along with bracketing, qualitative analysis can help you understand a needed adjustment for a characteristic.

Consider Proxies if No Better Data Exists

Sometimes data research finds a sale not directly competitive with the subject but  is affected by the same issue of complexity. This supplemental sale can help you understand the impact on the subject. For example, the subject is a small home on a busy street with no recent competitive sales on a similar busy street. However, there are sales of much larger homes on the same street plus similar large models on quiet streets. The larger home sales can be a guide for a reasonable location adjustment.

Caution: Sometimes proxies can be misleading. What is true for one market segment may not be true for another so be sure to be exhaustive in your data search before moving to proxies.

Survey Market Participants

Conduct a formal survey of market participants to measure the group’s opinion of the impact of the complex factor. When you have no data, a formal survey can provide guidance for how to deal with a complex issue. However, it’s very easy to introduce bias in a survey so spend time constructing it. This article offers advice.

Partner with an Expert

Find someone with expertise in dealing with your subject’s complex issue. During the assignment, you have the opportunity to develop competency as required by USPAP. Having help can speed up the learning curve and produce results faster.

Use Common Sense!

Whatever you do, before sending the report on, put on your appraiser cap (thanks George!), and ask yourself, does it make sense?

Explain Yourself

Complex appraisal assignments require a higher level of analysis and a higher level of communication. The subject is unusual, you had to take unusual steps to determine the impact of the complexity, and the reader of the report deserves an explanation. Be as clear as possible in explaining the complex issue(s), your methods for dealing with the complexity, and your logic and reasoning.

Next Page