Does the value make sense? That’s the last question I ask when finishing an appraisal, and I want to walk you through what that looks like. I hope this will be useful for both agents and colleagues. Let me know what you think.
UPCOMING SPEAKING GIGS:
4/2/25 SAFE Credit Union Coffee Talk (RSVP here)
4/10/25 Yuba-Sutter Association (register here)
4/15/25 Culbertson and Gray (private I think)
4/24/25 KW EDH (private I think)
5/8/25 Private event (details TBA)
5/13/25 PCAR
5/21/25 Grounded Real Estate
6/5/25 Auburn Marketing Meeting
9/26/25 PCAR
11/4/25 SAR Main Meeting
DOES THE VALUE MAKE SENSE?
When wrapping up the value, I find myself stepping back to ask one big question. Does the value make sense when looking at what you can get right now for that amount? I like this because it’s one final question to critique the final value. Does it seem reasonable for the market area? Or is it too high or too low? I think this is a good system of checks and balances to be more confident about value. And yes, this is an AI image I made with Grok of Dave Grohl (I’m a huge Foo Fighters fan). It’s a bit scary how good AI is getting, right?
CHECKING THE IMMEDIATE NEIGHBORHOOD
My appraised value was right around $550K, so the last thing I did in my process was step back and ask what buyers can get for that amount right now. I looked at the immediate neighborhood first as these were natural boundaries. I would be concerned if all recent sales and pendings were above $550K today because that might be a clue I’m coming in too low (unless there is a reason for a lower value). In contrast, if everything was way lower, then maybe I’m too high. As I said, this is a last question I ask to get a good sense of whether the value seems to fit with the market.
LOOKING AT A WIDER AREA TO BE SURE
Like I’ve mentioned in recent weeks, pulling comps today isn’t for the faint of heart because there aren’t that many sales. So, one thing I find myself doing is looking at a much wider area to compare various neighborhoods and understand what buyers are willing to pay in other areas. Here’s an example where I kept drawing different boundaries around various surrounding areas to ask what you can get for $550K or so. I didn’t choose comps in my report from the other areas, but researching these locations helped boost confidence that my value was solid.
Sign riders offering free pizza are the key to my heart. Haha.
ONE MORE THING
The yellow dot represents the subject value, and it was closer to the very top of the competitive sales (dark blue dots). When looking at sales this way, does it make sense for the subject to compete toward the top based on condition, upgrades, and location? In my opinion, yes. Look, it’s possible for some properties to break out of a range in light of upgrades or something special, but this property seemed to fit right in there based on comps (and what you can get right now for properties with similar features). One of the things I like about seeing a range of value is it helps me explain why the subject property’s price position makes sense. In this case, the competitive range was mostly from $450,000 to $550,000, and it was reasonable for the subject to be at the top.
In case you missed this visual last week, what do we do when there aren’t many comps? Here are some options:
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Questions: What is the last thing you do when coming up with the value of a property, whether you’re an agent, appraiser, investor, etc…?
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The “OCTOPUS” graph is tremendous… it should be required reading in APPRAISAL 101 ! (I also do the beyond 12 month graph (13-24 months, to see if long term trends are holding…)
Right on, Bruce. Yeah, I’m a big fan of longer graphs. It’s just not enough context to look at a few months. I typically export 25 years of data at one time for a neighborhood. Probably an overkill. But this helps me create some cool charts to show what volume is doing, so it’s a two birds with one stone situation. I can create something that I may or may not use in my report, but I have a piece of content for a presentation maybe.
The nice part about the multi-year charting is you get an intuitive feel for how much noise and variability there is in your data set. Really helps you understand if that increase/decrease you’re considering for an adjustment is big enough to be signal not noise.
Thanks Jared.
Hey Ryan,
Great explanation and advice. With complex properties, it can be an iterative process for me. Yesterday I had a top tier property and had to ask myself multiple times if my conclusion made sense. I spent most of the day bouncing back and forth with different modeling decisions until I was happy with where I landed.
Love to hear it, Joe. I think we live in this tension. Does it make sense? The hope is that the appraised value will always be reasonable, but value is tough too. Glad your modeling made you happy.
Here on Maui, comps often difficult to find much less sales. Back in time, competing neighborhoods and price point checks all solid analysis tools. Listings and pending sales playing a bigger role currently as longer days on market and price negotiations common. Listings often the best data when reconciling valence opinion. Thanks for sharing your expertise Ryan
Thanks Dan. I can’t imagine what it’s like in your market. Please share any insight on any future post as you have a unique view of things with limited data. Even here we have to give strong weight to pendings and listings. I find sometimes appraisers say a property has to be closed to be considered or given strong weight, but that seems backwards since sales are historic artifacts that tell us what the market used to be like (and we see the current trend in the actives and pendings). Besides, if we have to wait to see the trend before a property closes, we will always be 30-60+ days behind the market probably (Case Shiller Index vibes).
Ryan as always great stuff. My mentors’ favorite comment was “go sit on the curb across the street and ask myself, would I buy this property at the concluded value”. Sometimes on my more complicated project I have gone back and sat in my truck, as usually no curbs on dirt roads, and asked myself would I pay $x,xxx,xxx for this home, if I COULD come up with the cash. The other item for me now, is I like and am using the histogram for comparing property sale prices and my potential market value. If I am at the far-right hand side of the histogram chart with my estimated market value, there better be a really good explanation as to why, or I have done something wrong. What me wrong how dare I say that……. Course ask my wife, dogs and horses if I was wrong today. They will tell you I was wrong three times today and heck I have been out of town for three days, UGH, go figure…… Sure do like your last question of the day before finishing off the report.
This is great stuff. Be careful about sitting in your truck though. You might go viral online as a stalker in the neighborhood. Haha. Kidding. I like your thinking here, and I appreciate you sharing.
I do the same thing, kind of. I always arrange my comparable sales from lowest to highest price. I look at each sales price without adjustments and ask myself, “Is this property better or worse than the subject?” As I go up the line, at some point I switch from being inferior to superior, if I’ve done my job and bracketed. When the comparable sales switch from being inferior to superior, that is the range the subject should also be after adjustments and reconciliation. Did my adjustments lead me to the same value as ranking? That’s my final question, is this reasonable or does it make sense?
Oh, I like this. Thank you Gary. I love hearing your logic. And hope you enjoyed Sacramento last night despite the outcome of the game. Sacramento always welcomes you.