Can You Use the Subject as a Comp?

To keep my finger on the pulse of the real estate appraisal community, I like to check in on Facebook groups dedicated to our profession. A little while ago, I noticed that the same question was coming up over and over again; ‘can you use the subject as a comparable sale?’

subject as comparable appraisalWhen you work in a big, metropolitan area, this isn’t really an issue. Real estate appraisers in those places would probably dismiss this idea out of hand; they’re going to have plenty of comparables to use in their valuation process. In rural areas like the one in which I work however, the process can be a little trickier.

There are simply fewer homes in more remote areas, and many of the properties are unique. Many times over the years I’ve entered the relevant data and searched for comparables, to find that the only result was… the property itself!

Now, I’m going to come out straight away and say that my answer to the initial question is ‘yes’. You can use the subject as a comparable sale, and I have done many times over the years. The more important question is ‘should you?’

Again, my answer is ‘yes’. However, I believe that an important distinction needs to be made about what we actually do in real estate appraisal. We’re not appraising the house itself. What we’re really doing is appraising the sale, and the value. We are appraising how people react. In that case – if we are appraising the value – what could be a more helpful indicator than the subject itself?

I should add in a few disclaimers at this point. I’m only talking about using the subject if it was sold in the past six-twelve months, if the market has remained stable, and if there have been no significant changes made to the property (although, even if changes have been made, I believe you can still adjust your valuation accordingly).

There was a lot of discussion on the Facebook groups as to whether or not real estate appraisers were actually allowed to use the subject as a comparable. I took out my dusty old copy of The Big Book of Real Estate Appraisal (OK, so really I jumped on to Google), and did some research. Here’s what I found, in Fannie Mae’s Selling Guide: “The subject property can be used as a fourth comparable sale or as supporting data if [the sale] was previously closed.”

So there you have it. The subject can be used as a valid comparable; it’s a perfectly legal thing to do. Not only that, but I believe it should be. Just know that it cannot be used as Sales 1, 2, or 3 if it is a Fannie Mae transaction. Remember, as real estate appraisers we’re looking at the buying habits of the individual. We’re trying to evaluate what the buyer will do in a certain market, not the property itself. In certain circumstances, using the subject as a comparable can be the only option we have. Not only that, but it can also be a highly effective one.

For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode 012 – Can You Use the Subject as a Comparable Sale? 

8 Comments on “Can You Use the Subject as a Comp?”

  1. Pingback: Can You Use the Subject as a Comp? - Appraisal Buzz

  2. Thank you for this bit of info. I just appraised a property that had a sale of the Subject 4 months ago. I used it as a fourth sale to bracket square footage. I didn’t get any blow back from the Lender so I assumed they knew it was ok to use it. But I have printed out your text so I can refer to it in the future if this comes up again. Thanks.

  3. Why wouldn’t the subject be considered the perfect comp, in a majority of cases? Not sure why the perfect comp would cause caution and uncertainty of action? We need to go find comps that are less similar, in order to, credibly promote the public trust?

  4. Thank you for putting this in writing! I, too, work very rural areas, residential and residential acreages, and have used the sale as a comp a few times. And, over the years, have had some real negative reactions from fellow appraisers, instructors and even members of my appraisal board (most, I might add, have only been to rural areas to do a little fishing).

    ‘an important distinction needs to be made about what we actually do in real estate appraisal. We’re not appraising the house itself. What we’re really doing is appraising the sale, and the value. We are appraising how people react. In that case – if we are appraising the value – what could be a more helpful indicator than the subject itself? ‘

    Thank you for your weekly posts. I have certainly learned new things.

  5. USPAP SR 1-5 (a)(b) requires appraisers to analyze 1) all agreements of sale, options, or listings of the subject property current as of the effective date of the appraisal and 2) analyze all sales of the subject that occurred within three years prior to the effective date of appraisal if that information is available in the normal course of business. I agree we not only can use the subject sale as a comp, but in the sense the analysis of any recent sale(s) is/are required by USPAP, those transactions should be included. How the subject transactional information is presented in the appraisal report and the depth of analysis applied is subject to specific client or jurisdictional requirements and policy. Not sure about the reader’s comment “We’re not appraising the house itself.” It has always been my observation, over 40 years of being in this profession, a real property’s market value (the house itself) is the result of the “collective” actions of the market. We appraisers gauge those “collective” market actions using market evidence of buyer and seller reactions i.e. comparable sales, listings, offers to sell and buy, and, in cases where possible, the actual sale of the subject property.

  6. I agree the subject can and should be used as a comp, when it is relevant. The problem is that many lenders will come back and ask you to remove it. For whatever reason, (some)lenders don’t like it. I have been required to remove the subject (comp) in the last three reports, where I have done this. It has always been as a fourth comp. I have responded with Fannie Mae quotes but in the end they still want it removed. Glad to hear others have had a more favorable experience.

  7. If the prior sale of the subject was a non “arms length” transaction I think you would have a difficult time making adjustments and reconciling the two sales of the subject property.

  8. I did a tax appeal on a home that sold in May of 2016 for $215,000, and was appraised by the county as of January 1, 2017 for $365,000. My appraisal date was May of 2017 with an effective date of January 1, 2017. You better believe I used the subject as a comp! The county still prevailed until we went to arbitration and won.

    This was not the first time I used the subject as a comp. By the way I am in Texas where there is no disclosure and no income tax.

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