Most weight to pending sales!

[Joyce Potts]

How does it afford a good market indicator when the appraisal to close the deal comes in significantly higher or lower?

I've lost count of the number of "pending" deals I've killed when I allowed things like closed sales influence my opinion of value.

With that in mind I only use pending/actives as indicators of market trend.

How can you render a value for today based on still variable pricing to be set tomorrow?

How do you render an final value opinion based on historic closed sales when you have OFFERINGS that are lower?

 

[timd354]

I agree with David. Use the principal of substitution. If there are no homes listed above or at where the subject property appraises, and your closed sales are 90 - 180 days or more old, then It is only logical that the subject would not or should not appraise higher than the listing price of the active listings.

I agree with this and would add that if you have done the the proper market condition adjustments (which some people call Time adjustments) to accurately reflect the decling market, then adjusted sales prices of the settled comparable sales will in most cases be as low or lower than the adjusted sales prices of the current pending and active listings.

 

[c w d]

[/B]

How do you render an final value opinion based on historic closed sales when you have OFFERINGS that are lower?

The sales comparison approach for a contemporaneous appraisal 'is' historical by its nature. Every text will state as much. It is a recognized and accepted limitation of that approach to value. If actives and pendings were reliable indicators of value then you'd have to wonder why the texts which describe the sales comparison approach do not say it is prospective by its nature. I'm not saying don't consider active and pendings in your appraisal for trending. But, how does one derive adjustments based on arbitrary data?

 

[The Warrior Monk]

The sales comparison approach for a contemporaneous appraisal 'is' historical by its nature. Every text will state as much. It is a recognized and accepted limitation of that approach to value. If actives and pendings were reliable indicators of value then you'd have to wonder why the texts which describe the sales comparison approach do not say it is prospective by its nature.

There is nothing that says that fact nobody will pay $200,000 today when they would have paid $225,000 yesterday is a prospective value opinion...it is a fact that exists today.

I'm not saying don't consider active and pendings in your appraisal for trending. But, how does one derive adjustments based on arbitrary data?

The appraisal texts that I am familiar with, such as The Appraisal of Real Estate, note that consideration of listings and pending sales are part of one's analysis.

 

[Mike Boyd]

If 10 sales closed last month at $120,000 and now there are 10 listings at $100,000, what is the subject worth?

Assuming they were all model matches and in identical condition? If not, then you have to grid them and make adjustments for the differences.

 

[Mike Boyd]

The sales comparison approach for a contemporaneous appraisal 'is' historical by its nature. Every text will state as much. It is a recognized and accepted limitation of that approach to value. If actives and pendings were reliable indicators of value then you'd have to wonder why the texts which describe the sales comparison approach do not say it is prospective by its nature. I'm not saying don't consider active and pendings in your appraisal for trending. But, how does one derive adjustments based on arbitrary data?

First you look for a trend. If that trend is not clear then your adjustment is only hypothetical. A little snooping and interviewing either or both of the agents, or the seller, if known, should produce some clarity. Nobody said it's perfect but just PART of the analysis and the easiest to substantiate to an underwriter.

 

[Mike Boyd]

[/B]

How do you render an final value opinion based on historic closed sales when you have OFFERINGS that are lower?

I can't believe you asked that, Joyce. Obviously you make downward date of sale adjustments to the sale comps.

Sorry, Joyce. My first reading of your response was misinterpretted. Forget I wrote that.

 

[Mike Boyd]

No, I don't think my market's unique. I just think that sellers are still oblivious to the fact of the matter. Listings are still higher than closed sales here. If I used active listings in my reports and didn't adjust for them being active listings, my values would come out inflated.

That has not been the case in my market area for nearly a year. There are SOME listings where the agent and the owner are in a dream world but they are easily spotted by the trained eye.

 

[Mike Boyd]

How does it afford a good market indicator when the appraisal to close the deal comes in significantly higher or lower?

I've lost count of the number of "pending" deals I've killed when I allowed things like closed sales influence my opinion of value.

With that in mind I only use pending/actives as indicators of market trend.

How can you render a value for today based on still variable pricing to be set tomorrow?

A TREND can be developed into a reasonable adjustment. Just as you do with sale comps, you must survey what is out there and select Pendings and actives that are representative of the actual market.

 

[Mr Rex]

I have noticed a trend. The posters that most vehemently fight to not consider listings or pendings seem to come from California and Florida, 2 of the areas of the country that are widely recognized as declining. Speaks volumes about how those markets got to their current condition.