Comparable mineral properties – do they exist for market value appraisals?

"In August 2013, the Appraisal Practices Board of the U.S. Appraisal Foundation issued its “APB Valuation Advisory #4 - Identifying Comparable Properties,” which contains analysis and examples that may suggest a broader meaning of the term “comparable properties” than is current convention in real property value appraisal in the United States and internationally. The advisory is directed at the appraisal of real property of all kinds, including interests in mineral properties, as indicated by the inclusion of two mineral property appraisal papers in the appendix that lists suggestions for further reading.This paper firstly reviews as background the historical meaning of a comparable property, with its perceived constraints, against real-world examples of transacted mineral properties that are adjusted to subject properties to provide market value indications. The advisory’s findings are then examined and evaluated as to whether they may influence and benefit the work of mineral property appraisers, particularly in situations where their sales comparison analyses may be challenged. The conclusion is that the combination of constraints that the advisory’s findings specify for use of the term “comparable” will for mineral properties be met infrequently or rarely. As a result, mineral property appraisers are advised to avoid using the terms comparable or “comp” when referring to transactions of mineral properties that they analyze to derive data for appraising the value of their subject mineral properties. IntroductionA mineral property appraiser rarely finds a sale of a mineral property that meets the literal meaning of the term “comparable sale,” by being directly comparable to the subject property of the appraisal in all factors of significance in the determination of the value of the property interest being appraised. Real estate appraisers have long used a more liberal interpretation of the meaning of comparable sale and its commonly used abbreviation, “comp.” Real estate appraisers compare sales to their subject property on the basis of price per hectare or acre of land and price per square meter or square foot of building floor area. Adjustments totaling to within the range of +30 to -30 percent from the sale property to the subject, before factoring in the property area, have generally been viewed as appropriate for the sale to be considered a comparable sale."