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Relocation forecasting and over-supply.

Discussion in 'General Appraisal Discussion' started by Doug in NC, Jul 2, 2011.

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  1. Doug in NC

    Doug in NC Senior Member

    3
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Just wondering how other relocation appraisers handle forecasting for an over-supply of inventory. Pending, active, closed and contingent competitive listings are all under 100 days on the market. Inventory supply is at 10-11 months. Relocation clients are expecting to see an adjustment for excess inventory. Property values have been relatively stable over the past 4 quarters as well.
     
    Last edited: Jul 2, 2011
  2. AlwaysLearning

    AlwaysLearning Member

    0
    Apr 5, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    What is normal in the subject’s market segment? If the above inventory represents an oversupply in the subject’s market segment then a negative forecasting adjustment would be appropriate. An oversupply of inventory typically results in downward pressure on prices.
    I find this statement to be untrue. The only thing my relocation clients are expecting is a high degree of accuracy.
     
  3. Calvin the Airedale

    Calvin the Airedale Elite Member
    Gold Supporting Member

    0
    Aug 17, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Ohio
    Take your most closely similar listings, contingents and pendings. Adjust them out as you would your closed comps to indicate your suggested asking price range. (Don't for get to adjust for potential seller concessions if it looks like the market will likely employ them.) Apply a list to close adjustment based on what is typical in your market. Compare that adjusted range to the range indicated by your closed comparisons.

    Is the range higher, lower, the same? Now, because your market is in oversupply (and even if it weren't) your subject should be priced to place it at the head of the line. It should be priced to make it abundantly more salable than its likely competition.

    What lump sum, when applied to your listings would place it at the front of the line (make it lower than the lowest range indicated by the listing comps)? Take that amount, add it to the difference between the list comp range and sold comp range, and apply that sum as your forecast adjustment to all the comps.

    Remember, the forecast adjustment must be the same amount for all the comps.

    The forecast adjustment should reconcile any price changes predicted in the market for the the anticipated marketing period (usually 90-120 days) and reconcile that margin in price needed to make the home sell in that time period if the normal marketing time is longer. Be sure you consider both these factors in estimating your forecast adjustment.
     
    Last edited: Jul 4, 2011
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