Typically, the properties that generate complaints are unique properties. There is usually acreage and oftentimes outbuildings of various types, plus these parcels are far apart from one another. Comps are rarely found within a mile of the subject. Sometimes comps are located miles away, often in another town.
Rural properties typically contain a variety of outbuildings, such as sheds, barns and even guesthouses or accessory dwellings. Some properties are zoned for horses and have corrals. Findings comps with similar features can be difficult.
When a state board investigator is asked to look at one of these reports, they rarely take issue with the comparable sale selection. Their focus is almost always on the amount of explanation provided by the appraiser. Why were the comps selected? What was the research done by the appraiser? What search parameters were utilized and why?
It is the explanation of the process that the investigators often question.
The same applies when it comes to the inevitable process of making adjustments. There will often be adjustments due to site size, age of the improvements, the number of outbuildings, location, etc. The investigator does not question the adjustment, itself, but they want to see support. There needs to be reasons for the adjustment(s) as well as documented support.
When appraising rural properties, it is important for the appraiser to keep these issues in mind. Ask yourself if the reader of the report has enough information to understand why those comps and why those adjustments.
It is always advisable to consider continuing education options that focus on these questions. Look for classes that deal with Comparable Sale Selection and Support, Adjustment Support and Report Writing. Another worthwhile class option might be one that highlights selecting comps for unique properties. In other words, how to choose comps when there are none.
It is true that some investigators will never find enough support in any report they review; but if rural appraisers understand that this is oftentimes the heart of state board complaints, they can keep it in mind when preparing future reports.By Claudia Gaglione, Esq. – National Claims Counsel for LIA Administrators & Insurance Services