Speaking of those high-tech internet tools we use to determine value….
This is from the FHA Underwriting Manual of 1936:
307 (2.) It must be noted, too, that sales prices are of varying usefulness and importance according to the rapidity with which price levels of real property may be changing. In an unusually active sales market, such as exists in “boom” times, accompanied by rapidly rising prices, the stimulus given to prices by strongly competing buyers becomes such that fairness, as regards the prices paid, disappears.
Stability and permanence are nonexistent at such times, as well as in times of rapidly declining prices, and the prices then obtained in sales are almost worthless as useful information in estimating value, though their frequency, coupled with pyramiding prices, constitutes a warning of the imminence of a reversal of the price trend. Only in times of comparative stability of the price structure are sales prices of substantial worth in valuation work.
Read the full article discussing home valuations during booms here:
The FHA 307 (1.) is just as good:
307 (1.) Use of Sales Prices. Included in data the Valuator must obtain is information regarding sales transactions in evolving residences similar to those which he must appraise.
In the past, and to a large extent still, great importance has been attached to sales prices. They are frequently not as important as has been believed. This is because the price in a given real estate sale results to the transaction, either or both of whom may have been poorly informed, or motivated by unusual or compelling circumstances.
Before the sales price in any case can be of any substantial use, the Valuator must obtain certain information regarding the conditions and circumstances which existed when the sale was made. Such information includes:
(a) The actuating motives of buyer and seller;
(b) The relative intelligence of buyer and seller in negotiating the sale;
(c) The relative skill in bargaining of the buyer and seller;
(d) The fairness of the price paid in view of prices asked for available properties affording equal advantages and subject to equal possibilities of enhancement or loss of value ;
(e) The date of the sale and the general and specific environing and economic conditions which then existed and whether or not such conditions have changed since that date.
If you ask me they are even more worthless in bust times as it is hard to compete with the beat up foreclosure down the street that close last month.