Distressed Comps

42 Pages Posted: 4 Mar 2022 Last revised: 23 Nov 2022

See all articles by James Conklin

James Conklin

University of Georgia; Federal Reserve Banks - Federal Reserve Bank of Philadelphia

N. Edward Coulson

Independent

Moussa Diop

University of Southern California

Date Written: October 26, 2022

Abstract

We consider the use and impact of distressed properties as comparables in residential appraisals. First, we describe the incidence of their use and their relative comparability; second, we estimate their impact on the appraisal value itself; and third, we consider their impact on the probability that the appraisal is below the proposed transaction price. We find, generally, that distressed comps are largely good matches to their subject properties, which suggests that they are not necessarily used as a last resort. We find that they are not a drag on appraised value because appraisers learn to make the right adjustments over time. The use of distressed comps is associated with a higher probability of a below-price appraisal due to the increased spread of appraisals around the contract price, particularly for higher priced homes. Overall, the use of distressed comps increased the uncertainty in the valuation process, but appraisers learned the appropriate adjustments over time.

Suggested Citation

Conklin, James and Coulson, N. Edward and Diop, Moussa, Distressed Comps (October 26, 2022). Available at SSRN: https://ssrn.com/abstract=4008585 or http://dx.doi.org/10.2139/ssrn.4008585

James Conklin (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

N. Edward Coulson

Independent

Moussa Diop

University of Southern California ( email )

Sol Price School of Public Policy
RGL 315
Los Angeles, CA 90089
United States
(213)821-0467 (Phone)

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