Home Appraisal and the Coefficient of Variation
 
An appraiser that determines the price of a home you are buying uses a lower coefficient of variation. Which means, using a more exact comparable sale (with the least differences and the most identical features, such as interior living area, exterior living area, and structure) as a better model to determine home value. The value of a home using a comparable sale or lower coefficient is more precise to determine its value, rather than using a neighboring home, with some similar, but more different coefficient of variations.
 
Meaning, if I were buying a home and an appraiser states that the home I am buying is worth $500K, the appraiser will provide an appraisal report showing three comparable sales. Each comparable sale of property must possess the lower coefficient of variation (the more similar characteristics in functionality and less different in size). However, on the seller’s side, let's assume that the seller is unhappy with the appraisal and wanted something higher, let's say $600K. The seller will ask why the appraiser didn't use the neighboring property, since the location was closer than the comparable sales. The appraiser will state that the neighboring property has a much larger coefficient of variation (some similar characteristics in functionality but greatly different in size), therefore could not be used as a comparable sale.
 
Additionally, coefficient of variation can be useful to a buyer purchasing a home, where it determines the precise parallel appraisal of a similar property/lower coefficient of variation. However, the coefficient of variation may be an advantage to a seller to determine how much the seller wants to sell his/her property for. This way, the seller can understand and determine which comparable sales were used and not used.

If the appraiser used the lower coefficient of variation (3 properties down the block which are identical), not the "larger" coefficient of variation (the neighbors property, which is obviously not identical), and the evaluation price of the sellers home is appraised to be drastically lower than the sellers expected selling price, the seller can cease the selling of his/her home to make adjustments (granted that there is no extreme, out of pocket, monetary loss) on the property to be more similar and less different with the "larger" coefficient of variations (the neighbors property). This in turn makes his/her property identical to the neighboring property which was the "larger" coefficient of variations, and now, more different than the 3 properties down the block (which is the previously stated, lower coefficient of variations). Thus, after the adjustments, the seller can put the property back on the market and the appraiser may now use the neighboring property to become the lowest coefficient of variation.