118. Valuation Using the Comparative Market Analysis Approach

All right, we're looking at valuation today. And there are three approaches to value when it comes to real property. We've got the sales comp approach, which is the comparative market analysis. We've got the cost approach and we have the income approach. And the two that we're going to focus on as part of this review will be the sales comp or the CMA, the comparative market analysis approach and then the cost approach. And then the income approach is covered separately. So there are three values for real property. There's market value or fair market value. And this is a price, a willing buyer is willing to pay, and a willing seller is willing to sell for under normal conditions. And so that what a willing buyer is willing to pay and a willing seller is willing to sell for under normal conditions. And the key, one of the key elements there is under normal conditions. So it's not a, it's an arm linked, arm's linked transaction. It's not a distressed property. So generally to give you an example, we would think of a property that's listed in the MLS by a seller. They want to sell the property, but they're not being forced to sell the property. It's not like there's some sort of distressed, you know, if they issue, if they don't sell the property tomorrow, then they're going to lose the house or lose the property. So what a willing buyer is willing to pay and a willing seller is willing to sell for under normal conditions. So that is the fair market value or the market value. The second value for real property is investment value. And this is the value and investor places on a piece of property. So there's a distinction there in that the method of determining value between a residential property and investment property is not the same. So if a buyer or a seller is looking to sell and list a residential property and a buyer is willing or buyer is looking to buy real property and wants to make an offer, then the those parties are going to look at the fair market value of that property to get an idea of what they might want to sell or they might want to or list or what they might want to pay on the buyer side for that property. And so do that, they'll run a analysis that's called the comparative market analysis or they'll run a CMA. And so the listing agent will prepare a CMA and then the seller will based on that and with guidance from the from the listing agent will then arrive at a price to list that property for. And the buyer or a prospective buyer who wants to make an offer on that property, the agent for that buyer will also run a CMA to determine what offer to make and then what to kind of get an estimate of or an idea of what that property should sell for. But on the on the investment side, an investor is going to look at the income, producing aspects of that property and operating expenses and and then analyze potential risks either now or in the future and determine how that property is being managed, how is it being managed effectively could it be a managed better. So elements like that come into place. So there's a there's a distinct difference between value and a property from a residential perspective and a commercial property perspective by an investor. So we've got market value, market value or fair market value, we've got investment price and then we have our investment value and then we have transaction price and what we're looking at here is what a property has sold for in the past. So we're looking at the historical value of that property going backwards and and it's important to take that into consideration when trying to determine what a buyer may want to pay for property. So behind that is to get an idea of what what that property is sold for how many times does it changes as it changed hands and you know is the property overvalued is it is a price too high. So we're looking at the property in the market and the market is a CMA will help also help identify that but determining the sales price of that property in the past and so you can get that data in MLS as well the multiple listing service to run a comp or a comp analysis or CMA which is the first of the three value approaches that we're looking at. So we're going to first start off with the subject property and this is the property that is being valued or praised. Now I'll talk about this in a minute and that is that real estate agents have to be careful not to use those terms. So the term that real estate agent should use is the price so the subject property that is being priced would be the better way of saying that by it from a real estate agents perspective a licensed real estate agent explain why in a minute. And so you have the subject property and then you have the comps and a comp is a property that the subject property is being compared to to then arrive at a price either on the listing side or on the on the buying side and generally there are three comps and these this is what residential estate agents will use. And sometimes not limited to just three comps but but in the appraisal that is prepared by an appraisal will generally have three comps and so an agent will generally have at least three comps in a in a CMA primarily on the listing side. And so the comp is the property the subject property is being compared to and then there are adjustments that are made based on that on that comparison so you always start with your subject property and for example as factors some factors you look at are the age of the property the square footage the number of bedrooms and bathrooms and the number of garage doors. Number of what else are we looking at the other one story versus two story the size of the lot the type of construction the design of the home whether it has upgrades the landscaping all those factors come into play. And so then there are adjustments made based on those variations in in the in the comps to arrive at a price for the subject property and so if they it's a generally the goal is to find one is to find properties in the same neighborhood. Now sometimes that may not be difficult you know in a in a in a production home neighborhood where builder goes in and builds out the whole neighborhood and most of the houses are look the same. It's a little bit easier to go in and find similar properties to the subject property to find comps for the subject property and the other thing that that comes into play is that we look at homes that have sold not homes that are currently listed or under contract but homes that have sold within the last six months and the the appraisers going to do the same thing so homes that have sold within the last six months on the comp side so comps that have sold within the last six months and the adjustments are made and one of the goals is in this applies both to the CMA and the appraisal one of one of the objectives of a listing agent. Listing agent who is listing a property should be to arrive at a price and not the list of price but to arrive at a price is a starting point with the seller that is that's close or close to what they expect the appraisal to come back at and a good real estate agent will be able to do that they'll be able to make that analysis based on their research they'll be able to package up that data. And that will be important because then a real estate agent can give that packet to an appraiser to validate here's how I arrived at the price so if you let's say you have a house that's listed the real estate agent does their research and they come back and they they analyze the comps and compare those to the subject property and and arrive at a price of then I'm just going to round this off $300,000. And then based on that the adjustments that are made the the the agent says tells the seller I expect this I expect this house to appraise for 300,000. Now we won't know until we get the appraisal back because the appraisers going to do their own thing and if it's off then we may have the opportunity to may have the opportunity to make an argument as to why the appraisers incorrect. Or maybe the appraiser missed something what we can't do is go in and this is what we did back in the the lenders would do back in the 2000s is the house wouldn't appraising they called the appraiser and say you know you you came in 30,000 under and you need to fix this and the pressure would go back and go my bad I. I totally made a mistake here. I found my problem. And now the house, I found $30,000 to add and so now the house appraises. You can't do that anymore. That shouldn't have been done to begin with. But in this case, if there's an argument to be made, then the real estate agent has done his or her research and can validate, you know, can qualify. Why they believe the appraiser is incorrect. So one of the goals is to, and then from there, then the seller can determine what they want to list, actually list the property for. But just so they have a good idea of what the house will praise for because that will come in to play whenever you have a borrower who's taken out alone and if the house does not appraise, then you've got other issues to take into consideration at that time. And so one of the objectives is one to make the least amount of corrections as possible. And that applies both on the CMA side and the appraiser side. And so what that means is, if you have a three bedroom, two bath house with a two car garage, then it's 2000 square feet, then you want to find, or let's call it 3000 square feet, $100 square foot. Then you want to find, this is a subject property. You want to find comps that are very similar or as close as possible to the subject property so that you're not having to make wide adjustments. And so you want to look for other three bedroom to bath three car garage homes that are approximately 3000 square feet. And so now, if we find a similar home, three bedroom, two bath, two car garage, but the comp has a fireplace. Well, that fireplace may add value. So now the real estate agent will make a determination as to whether or not an adjustment needs to be made. And so the appraiser may have a guide to go by and say that in this market, that fireplace, that addition, it's not gonna be dollar for dollar necessarily, but that fireplace is worth $500 or $1,000. And so we will make an adjustment to the comp down to subtract that fireplace from that property and so now we know the sales price of that property within the last six months. And so that's how we make that adjustment. If there's a difference in square footage, if let's say there's a house next door, three bedroom, two bath, two car garage, that's sold within the last six months, but it has 3200 square feet. Well, we look through all of our comps to see if there's anything that's closer that's three bedroom, two bath, two car garage, with 3,000 square feet. And we've got one, another one down the road at 2,900 square feet and the one next door is 3,200. So that's not too far off and they're very similar except for that difference in square footage. So then we would make an adjustment to that comp to account for that additional square footage to bring it down in line with the subject property. And then the same thing for the house with 2,900 square feet, it's missing or it has 100 square foot less than the subject property. So we're gonna make an adjustment up to account for that difference in the square footage. We might have an adjustment on lot size, but generally that's not gonna be a big adjustment in a production home neighborhood, where most of the lots are the same. You could make an argument that one lot over another has a premium tied to it 'cause some builders will charge a premium or developers will charge a premium for a lot based on its location. For example, if it's got a lot of mature oak trees or if it's on a green space, the maybe the direction that the lot faces that all of those can be factors where the builder or developer charges a premium for that lot. And so there could be an argument made on that. There could be. And so that has to be taken consideration. But if you've got one lot that's two tens of an acre and another one that's three tens of an acre, there's probably not gonna be that big of adjustment. Now when we get into a lot in one part of a neighborhood that is two tens of an acre and then you've got lots in a different section that are one and a half acres, that's a pretty big difference. And I'm also gonna assume I'm gonna make an assumption that the design of those homes and maybe the square footage and the price, the initial price for both of those homes based on the upgrades for the neighborhood with a one and a half acre lots could be more. And so that may not be a good comparison to use because of the differences in design of those two homes. And then if they were exactly the same just happens to be bigger lots, then you might make an adjustment for you would make an adjustment for the lot size on that other home. But then the goal would be to try to find other homes that are closer to the subject property. And so if that's all you had then you could use it. There are some instances where you try to stay within the neighborhood, but there are instances where sometimes a home is not sold in a neighborhood. So you have to go outside of that neighborhood and if you do you've got to qualify it. Both the agent and the appraisers should qualify that as to why they had to go outside of the neighborhood. There are some instances in rural areas where they may have to go 10, 15 miles down the road to a completely different neighborhood. And if so then again they've got to qualify that by saying there are no subject properties that have sold within the last six months in this neighborhood or in the immediate area. And then the other thing they might do is go back 12 months and say I've not found anything in 12 months. So this is why I've had to select these other properties that are further away. One of the keys in terms of using that timeframe in the last six months is that a lot of things can change within that time period, pricing in a neighborhood can change within that time period, believe it or not. You could have a time where homes are still selling but because of the time of the year, people aren't, the market's just not as hot as it would be say in May, once schools over June or July or August when people are looking to buy and they're making decisions before the school year begins. And so it's a little bit hotter market and so demand goes up, supplies is still limited but because of that demand now properties are selling for higher price. And so you can have that based on when you sell that home there could be a difference in the price arrived under the CMA or under the appraisal just based on that time when you're selling the properties. You always have to take that in consideration. So if it's just you come to a point in the year where there's a little bit of a lull and there's decent supply or even low supply but there's not a lot of demand then homes just aren't selling like they would in a hotter time. So that has to be taken in consideration but usually that six month window is what's generally utilized. If you've got homes that have sold within the last month and those homes come in at a higher price than the sales price than homes that were sold five or six months ago then you're gonna want to use the homes that were sold within the last month to say here's what's going on right here right now and this is why this is the better number to use and that's gonna be both important on the listing side but more importantly on the appraisal side. We've got the CMA or the BPO so the CMA is the comparative market analysis and that is generally prepared by an agent for a seller or buyer. We also have what's referred to as a BPO or a broker price opinion and this is effectively the same thing it may include some additional information but this is something that's generally prepared for a lender or maybe for an estate sale or a foreclosure to get an idea of the value for that property but again the agent cannot use that term value you could use the term price or sales price what that property might sell for. So that's generally prepared for a lender where they don't need a full blown appraisal. The appraisal takes time, a cost extra money or cost money where the BPO can be done more quickly and less expensive oftentimes and this can be both you on the commercial or the residential side where BPO is utilized. Let's see here, oh Texas Administrative Code, Section 535.17 so this is a state law that Texas Administrative Code and it says broker price opinion, notice to consumers is required and so we do provide this notice in both CMAs and BPO's it applies to all estimated worth or sales price statements so that would be a CMA or BPO and the statement itself says this represents an estimated sales price for this property. It is not the same as an opinion of value and an appraisal developed by a licensed appraiser. And so that's where we've got two, we've got trick that is. has said real estate agents do not need to use the word appraisal in any of their documentation it has to be an estimated sales price and then the appraisers are the ones that prepare an appraisal and they are the ones that can determine the apprais value or the opinion of value for a property. Okay, so I've talked about where a CMAR BPM may be used for determining a listing price or when making an offer by a buyer or when a lender wants an estimate of the price of a property but does not require an appraisal. Some resources used to determine the sales price for a CMAR BPO by a real estate agent. The most obvious would be MLS or the multiple listing service. There are some other elements, other resources that can be taken into account like the county appraisal district but that assess value in the county appraisal district is not the same thing as a fair market value. That is a value that the appraisal district has arrived at based on using their own methodology of mass appraisal and so it's not the same process. But you can take in to consider it, you can factor in some of that information in the county appraisal district in the analysis, same thing like tax records, things like that. There is a resource that's called RPR or real property reports that is owned by the NAR National Association of Realtors and this effectively you utilize this platform or this app, platform on a computer on web based or an app on your phone or tablet to then tie in your MLS subscription and then it generates additional information for a property or properties that you are looking at such as demographics and school district information and historical trends in the area in the market. So it's a great resource to use and the benefit of that is that in the old days when we had MLS it was actually delivered in paper format once a week to an office and then the agents would have to update their three ring binders and then they went to the floppy disks and then agents may or may not have used that whether they had access to a computer or knew how to use a computer. Well now with MLS, then we had MLS online and generally a real estate agent would have to go back to the office or to their house or wherever their home office or wherever their office is and sit down and do the research and prepare the CMA and then send that out to the client. Well now all of that can be done in the app and the adjustments can be made within the app, the adjustments I was talking about comparing the comps to the subject property. So it's so much more convenient and efficient to use utilize an app and then that that report that CMA can be generated right there in the app and then send out to emailed out to the client directly out of the app. So much more efficient. Getting on, talk about appraisals now and so an appraisal is an unbiased written statement of the fair market value of real property. So an appraisal is an unbiased written estimate of the fair market of real property and only an appraisal can determine the value of a property. Only an appraisal can determine the value of a property because they are licensed and that's their job. Examples of where an appraisal may be needed, one would be the purchase of a property and so if that property is being purchased and the buyer is going to take out a loan to buy the property then the lender is going to want an appraisal on that property to ensure that they are not loaning more money than the asset is worth. Another example would be if the loan is refinanced, the lender may order an appraisal to determine the value of that property again to determine that their loan is in line with, in their underwriting, in line with their underwriting guidelines and that they are not loaning too much money or not too much money but more money than the property is worth the value of the property. If the seller is looking to determine the value of the property they may order an appraisal on the front end and the benefits of that is that appraisals have much more methodical process that the appraisal goes through to arrive at an opinion of value then what a real estate agent does to determine the sales price in a CMA. A buyer looking to determine the value of a property before making an offer but that's in and of itself. I've got a situation right now where that may come into play but that's more of a working out an agreement with the seller because if you don't have a contract in place and a potential prospective buyer just showed up to the seller and said hey I want to order a appraisal on your house. The seller is 99.9 times out of 100 is probably going to say no but in some circumstances the parties may agree to conduct an appraisal that way especially if they are not represented. Maybe in a divorce when you are looking at the distribution of assets an appraisal may be ordered or in a probate proceeding to determine the value of real property that's in the inventory of that estate. Another would be in relation to insurance you want to make sure that whatever you have insurance on your real property that you're not under insured or maybe not even over insured because insurance company is not just going to give you the full value of that insurance policy. There's going to be some limitations that can come into play so determine what your property is worth and making sure you've got the right insurance in place. Add the Lorm tax protest and that's where an individual protesting their taxes because they think the appraisal district has the property assessed too high so an appraisal could be a benefit there. Also in a condemnation litigation that's where the government or government agency has exercised its imminent domain powers to acquire the property of another for public use and the property owner has not agreed and so as part of that process appraisers will be hired by both sides to determine the value of that property. Now I'll make a note here that in a divorce where the parties are looking at distribution of assets and a probate proceeding and in a we'll throw in an insurance to determine the valuation for insurance purposes. A CMA may suffice and may often suffice and I'll tell you what really does a lot of times is using the assess value in those cases. And then the ad valorm protests tax protest then generally there needs to be a CMA in that situation so that the property owner has enough information to go in and make an argument at the hearing of the protest hearing but the in the divorce and probate a lot of times the assess value in the county appraisal district is used and the reason behind that is because it's free. It's fast, it's quick, you can get on the computer and pull that off in less than a minute in many cases and so that's an example where the assess value may be used as part of the distribution of assets or the determine the value of the property and inventory for a probate. But it would be in the best interest of those parties to get a CMA at the very least or BPO and then the next step. And if you were to call up a real estate agent and say I need you to run a CMA for me, if you've got a work in relationship they're probably not going to charge you. If there's no work in relationship or it's a BPO situation and they may charge you know $100 or more but a lot of times they may see that as a loss leader. So the benefit is most of the time the assess value is used because it's free and it's easily available. There are two types of appraisals. The formal appraisal and the informal appraisal. And a formal appraisal is the estimate of value reached by the methodical collection and analysis of relevant market data. So a formal appraisal is the estimate of value reached by the methodical collection and analysis of relevant market data. An informal appraisal is an analysis using comps, talking to family, friends, neighbors, looking at the newspaper, reviewing websites and you know like real estate related websites and things like that. Trade publications, real estate, talking to real estate other real estate brokers and salespersons. So that's where an informal appraisal comes into play. Question, what issues can you think of that may arise when attempting to estimate the value real property using a formal appraisal? So I'll give you, I'll let you think about that. And then another issue is same thing. What can you think about the issues when you're using an informal appraisal? So we've talked about some of those on the formal appraisal side. One and the informal with the CMA, one is that there may not be comps in the neighborhood or there may not be comps that are close enough in relation to the property type or size or condition compared to the subject property. So there's some issues that can come into play there. On the informal side, you know, one of the issues I see is that people talk to their friends or family or neighbors and they all say, "Well, this is what I think." And so that's what gets stuck in in the seller's head or even the buyer's head as opposed to looking at the real data and making an determination based on that real data. Sources of property used for an appraisal, the elements that do come into play here are the county appraisal district records, the county clerks records. So the appraisal will do some title research to determine the type of interest in that property and when that property transferred hands and if it was an arms link transaction. Private data service, title companies have, well there are private data service companies out there most of the title companies, some title companies own those services but you can, you know, third parties can subscribe to those services to collect data. HOA subdivision information and another is asking questions. It is not uncommon for an appraisal to contact the agents on the seller side primarily and say, "Hey, I need some more information on this property. You know, can you tell me about this issue or can you tell me about it looks like the property may have transferred hands between part family members or, you know, what can you tell me about that?" So they dig into some of those details just by asking questions, you know, through a phone call. As far as the appraisal process itself, there are seven steps and we first start off by defining, or the appraisal first starts off by defining the problem. So the first starts off by defining the problem. So they identify the property, determine the property rights to be valued and the assumption is that the interest in that property is fee simple absolute. So they'll look to determine if there's any other conditions placed on the ownership of that property, determine what type of appraisal, so what type of value would be primary. So if it's a residential property then it's going to be the CMA analysis where the appraisal will use the subject property in three comps. They will also include the investment analysis and cost approach analysis, but those generally are not as relevant as the comparative market analysis approach. And so the second step in the process is to select and collect data. So the appraisal will look at economic conditions or factors that may affect the property and the market and where the property is located. Demographics of the area, any regulatory issues such as condemnation or eminent domain or any roadway expansions or any future development. All of those are going to come into play. Geographic factors. So the geography based on where the property is located is part of the property in the flood plain. It's part of the property not usable. You know you could have, let's say you could have in a neighborhood you could have most of the lots are one acre and most of that one acre is usable, but you get to the subject property in this scenario. And only it's a one acre lot, but only half of the acre is usable. The other half is on a slope that is on a steep embankment that's rocky and treed and it's just not usable. You know you can't even you can't even play on it. And so you could say I've got one acre, but in reality you've got really you've got a half acre to play with. So are there any geographic factors that come into play? What is the existing land use? How is the property currently being used? Because on an appraisal, the appraisal will look at the highest and best use of the property. And in some instances you may have a residential property, but the highest and best use would be for that property to be commercial office or commercial retail space. Because of the changes in the area. You've got water zoning factors that come into play. And then physical characteristics of the subject property and the comps and the neighborhood. And so that's where the appraisal will look at the condition of the property itself and condition of the comps to make sure that there's similarities there. Number three, the appraisal will determine the highest and best use. And that's what I just said. So in some instances the the or the appraisal will look at the value for the raw land. And then also value as though vacant and available for development. And that's where I said it may you may have a property with the with an old house on it. The zone is residential. And really the house is worthless. You know, it almost needs to be it's fallen down or it would take too much money to rehab it. But because of the change in the area and some of the zoning changes that have taken place, the rezoning changes that have taken place in the area, the higher and better use or the highest and best use that property may be for a small office, you know, commercial office. And so in that case, the the valuation of the property should be much higher than if it appraised for residential use based on that property. Because the house is not not going to be worth as much. And then the lot for residential use is not going to be is going to be at a lower rate compared to the valuation of that that lot for commercial use. Okay, so that'll be taken into consideration. Then looking at the improved value, also the highest and best use as developed or as anticipated use. That means if you've got a lot and you're going to build something on it. Step number five, the appraiser will apply the three approaches. So the sales comparison approach, the cost approach and the income approach. Step six, the appraiser will reconcile the indicated values. And that's where because there are no identical properties, the appraiser will have the subject property and then select the three comps and then make adjustments to the values of those comps by making additions or subtractions to arrive at adjusted sales price for each property. And then step seven, the appraiser will prepare the report. And the appraiser on a residential property will use the residential uniform residential appraisal report. So that's going to be a standard report that's used throughout Texas and throughout throughout the US on properties where there is a loan on the property. Question I have is who is the customer? Who is the appraiser's customer? Well, generally the party ordering the appraisal is the lender. So there's often a misnomer that the borrower is the customer. The borrower is paying for it. But the customer is the lender because they want to make sure that they are not loaning money, loaning funds on a property that is not in line or on a sales price that is not in line with the value of their loan. What is the average cost of a residential appraisal? You're probably looking at $350 to the $500 range for residential appraisal. And then when might three comps might not be enough for an appraisal or a BPO and I've already talked about that. That's if you haven't had any sales within that neighborhood or you haven't had any sales in the vicinity with with like kind properties. And so you've got to go beyond that to find you might use those properties. But then you might go beyond that to find additional properties to further further validate your the final indicator value. So some of the goals of the appraisal is to find comps in the media neighborhood, find comps in similar size, design and characteristics, find comps that were sold in arms linked transaction. From investopedia arms linked transaction is defined as a transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arms linked transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party. Examples of non arms linked transactions include distress property sales such as foreclosures, related properties selling and buying a property to a discount. That's like if a if a parent said I'm going to you know told a child I'll sell you my property and they sell it for half of what it's worth, you know half of the value. Well is that information is recorded and the appraisal used that it would totally throw off the value for subject property if it's being compared if that property is being used as a comp. So generally appraisal would not use that property as a comp in the CMA analysis. So foreclosure related parties selling and buying property to discount property sold as part of the divorce because that's a distressed situation. Property sold to the tax sale or short sale. So, appraisers are generally not going to want to use properties that were not sold in an arms link transaction because the sales price does not reflect the true fair market value for that property, for that comp. In determining location, you know, one lot may be better because of location, the size, the view, the availability, so that could be a factor in the appraisal. I said under the CMA that may be less of an issue. And again, I talked about if you have a lot with one acre that you can actually use, then that would be valued differently than a lot with a half acre, where that's usable, where the other half acre is on a hillside that's unusable. Other adjustments that come into play, and some of these are minor, I'd say minor, you still make the adjustments, but whether a house has a fireplace or no fireplace. You know, some builders, production builders will offer that as an add-on. And so, some sellers will say, yes, I want a fire. I mean, some home buyers, or new home buyers will say, I want a fireplace. You look at, so that's an adjustment that would be made. You look at the difference in the foundation between slab or pure and beam, and those are valued differently. So, if you have a house that has a pure and beam foundation, then your objective would be to try to find other properties that have a pure and beam foundation. And in an instance, let's say in the immediate vicinity, there are none that have sold within the last six months, or even the last 12 months. But there are homes in the neighborhood that have sold within the last six months, but they're on a slab. And so, the appraisal uses those three comps, but then maybe goes beyond that, those three comps to go outside of that area and find other properties. And you may have a property that's 10 or 15 miles away that's on pure and beam to determine if that property can be used as part of the appraisal. The condition of the subject property and comps is taken into account. If you've got a subject property that has been rehabbed, it's been updated, and you've got a comp or potential comp that has not been updated, then your objective would be to try to find another property that has been updated so that they're equal. Otherwise, you could have a property in a given area where $200,000 has been put into it. So that's a pretty significant amount for upgrades. And so, using a property that has not been upgraded could throw off the final indicator value for this subject property. Justments are made for age of the properties, the style of the homes, the floor plan, the quality of building materials that are used, all of those are factors. And then we look at the type of estate. We've talked about that where you've got the fee simple, absolute fee simple, determined, fee simple, conditional life estate. And so, you want to find properties, the comps that have were transferred under the same kind of estate that the buyer is purchasing the property under. You look at the current use, if you have a house residential property, but it's being used as an office, then that would not be a good comp to compare to another house that will be used for residential purposes. And a crazier will also want to take into account whether there's any personal property that was included with any of those sales. And so the crazier may call and say, you know, based on this price, it looks like you had the original list price, but was there any personal property included. A lot of times the parties may say, you know what, just give me an extra 500 bucks for the washer dryer and the fridge. And then the contract is adjusted upwards. And so their crazier calls and says, why was that adjustment made? Well, they sold the, you know, they included the washer dryer and fridge in the sale. So the crazier says, well, I'm going to deduct that from the comp sales price because that included personal property. And so the items could be furniture or storage building or, you know, any personal property, but that's not representative of the true value of the real estate, the value of the real estate or the comp. But a lot of times it may be that it's just factored in. And so if you can't break it out as a line item, then, then that sales price for that comp is what it is. So the financing terms, those, those can vary. So if you've got a cash deal, that's that can, that price can look much different than a house where there's a, where it's finance with a loan or a sale that's seller finance owner finance. So those, those valuations can throw off the value of that comp. You know, if you've got, if you've got a seller that comes in and says, I'll give you cash right now, but I want you to not 10,000 off. Well, seller says, finally, I'll take it. But in another situation, you have a seller that says, I'm selling my home and I'm going to carry the note so it's going to be under finance. But I'm going to charge a premium because of the risk effect tied into this. And so I'm actually going to sell that house for $10,000 more than what it would have price for generally a price for. So all of that has to be taken in consideration. And conditions that the sale can impact the sales price or foreclosure or probator bankruptcy. And so you generally don't want to throw, don't want to include those properties because those were really throw off in neighborhood quickly. And then we look at the market conditions. So we look at the supply and demand when the property was sold. And then that's generally why we stay within that 180 day window. The cost approach is the second factor that is used in determining value. So in the second of the three approaches. And the cost approach is used when there's no sales data available. So when there's no sales data available, the cost approach is used. And generally the reason why is because there's a lack of market activity for that property or that property type. There's also no income data available. You know, it's not a income producing property in and of itself. And so we might look at using the use in the cost analysis on new construction. You know, we want to arrive at a value of that property using the construction cost figures. Another would be specialty properties and take a church or a property like UTSA. UTSA while it is, quote, while it's, it's kind of income producing in the sense that students pay tuition to go to school. And then there's operating expenses and budgets and all that other stuff. In and of itself, it is not an income producing property. And you look at, you look at UTSA as a whole and there are a lot of different buildings. And all those buildings are interconnected. Most of the buildings are connected to two physical plants. That then generate the or control the environment for those buildings. You know, so you really couldn't sell some of the buildings on campus independent of those, those physical plants. And then you also look at having to go in and replat the property and then the potential use if you were to break up a property like that. So that would get interesting. And then the other thing is, you know, what examples can you think of where another campus like UTSA has sold recently, you know, out there on the open market. So it just doesn't exist. And so in that case, you would, you would use, there's no income data. And there's no market activity for that type of property. So then you would use the cost approach. If you were to take another example, like a church, and I use the thing is San Fernando Cathedral downtown across from the courthouse. And that is a very old building. And it, the physical appearance is of an old church. You know, it's not, it's not old and run down, but just it's based on when it was constructed. And while there are other churches that are bought and sold and sometimes converted into other uses, you take a property like that and show me another one has sold within San Antonio within the last six months or last year or 10 years. A property like that. It's not income producing in that it's not, it may, it may have some non related business income, but it's a, it's a nonprofit or should be, well, it's a, it's a nonprofit corporation. It's a tax exempt organization. Let's put it that way under the internal revenue code, whether it's filed for exemption or not. A church, a church is a tax exempt organization. And so it's not income producing in the sense of a weekly or monthly contributions that are made or one off contributions that are made, but it may have unrelated business income. And that's where a nonprofit or charitable organization charges, for items that are not related directly to its, its primary core service in that case, which is being a church, you know, they were to sell breakfast tacos for example, that's an unrelated business activity, but selling breakfast tacos on a building like that in and of itself. It's not going to be enough to justify or to use to arrive at a value, an indicator value using an income stream. So we'll use the cost approach in that instance to arrive at a value for that property. So what we've talked about is valuation utilizing the comparative market analysis approach and that's where a real estate agent is either looking to represent a seller to list a property or a buyer to make an offer on a property and for an appraiser to arrive at an indicated value for a property using the appraisal method. And then we also looked at the cost approach method.