4.4.2.4.6. Offers, Listings, Contracts, and Options. Unconsummated transactions are generally not reliable indicators of value and therefore cannot be used as comparable sales. Appraisers should still carefully analyze such data, which may be appropriate to consider for certain limited purposes.519 “An opinion, however, largely based on owners’ asking prices ought to be rejected, for the courts have decided that even offers by buyers are too unreliable to be considered.”520 

A binding and unconditional contract of sale can generally be considered as evidence of value, even if title has yet to be conveyed.521 By contrast, mere nonbinding offers or unexercised options are not permissible evidence of value, and therefore the appraiser should give little or no weight to such options except to the extent that they may set limits of value.522 

Listings and other nonbinding offers to buy or sell real estate generally cannot be relied on as comparable sales.523 As the Supreme Court explained: 

It is frequently very difficult to show precisely the situation under which these offers were made. In our judgment they do not tend to show value, and they are unsatisfactory, easy of fabrication and even dangerous in their character as evidence upon this subject.524 

These risks are still greater “when the offers are proved only by the party to whom they are alleged to have been made, and not by the party making them.”525 

An option to purchase is a form of an offer; it is an offer that is irrevocable for the period stipulated. Unexercised options “represent only what a willing seller would take for his land but not, unless and until exercised by the holder of the option, what a willing buyer would give for it.”526 As a result, even if consideration has been paid for it, an unexercised option—like an unaccepted offer—is inadmissible to establish market value. As the Fifth Circuit reasoned: 

We cannot agree that paying a consideration for the granting of an option to purchase property at a stipulated price changes its basic character or increases its reliability as an indicia of value. The payment of consideration makes the landowner’s offer irrevocable for the period of time stipulated in the option, . . . and thus assures the holder that amount of time in which to consider all the facts which he deems relevant and to decide at his leisure whether or not to buy. The payment thus merely binds the landowner and indicates the bona fides of his asking price. It does not in any way bind the holder to buy at that price or indicate that he regards that price as a fair one from a purchaser’s standpoint. An option, even though paid for, may well have been acquired for purely speculative reasons.527 

Exercised options, on the other hand, “when they result in a binding agreement between buyer and seller, do not differ, from a probative standpoint, from completed transactions.”528