Asking price adjustments for listings?

[Verne Hebert]

Why the hell would you adjust a listing? Adjust it to what?...........market value? Saleable price?

There doesn't have to be rhyme nor reason for an listing price. Is that a fishing price, or an ..."I might want to sell it price", or a realtor didn't do their job price?

You can't be serious? After work go buy a pitcher of beer and throw and darts and play some pool.......have some fun.

 

[Mr Rex]

Why the hell would you adjust a listing? Adjust it to what?...........market value? Saleable price?

There doesn't have to be rhyme nor reason for an listing price. Is that a fishing price, or an ..."I might want to sell it price", or a realtor didn't do their job price?

You can't be serious? After work go buy a pitcher of beer and throw and darts and play some pool.......have some fun.

Because its a client requirement in some cases:

In order to ensure that FHA receives an accurate and thorough appraisal analysis, the inclusion of comparable listings and/or pending sales is required in appraisals of properties that are located in declining markets. Specifically, the appraiser must:

• Include a minimum of two active listings or pending sales on the appraisal grid of the applicable appraisal reporting form in comparable 4-6 position or higher (in addition to the three settled sales).

• Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables. Reasonable market exposure is reflected by typical marketing times for the neighborhood. The comparable listings should be truly comparable and the appraiser should bracket the listings using both dwelling size and sales price whenever possible.

• Adjust active listings to reflect list to sale price ratios for the market.

• Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sale price ratios.
• Include the original list price, any revised list prices, and total days on the market (DOM). Provide an explanation for DOM that do not approximate time frames

 

[AnonApprsr]

Don't adjust, just explain why it's high in the comments. "Appears that it is overpriced based on DOM compared to typical homes..." Make sure you're not missing something about the home (finished basement, pond frontage, gold driveway) that could explain the higher LP.

 

[Eric C]

Why the hell would you adjust a listing? Adjust it to what?...........market value? Saleable price?

There doesn't have to be rhyme nor reason for an listing price. Is that a fishing price, or an ..."I might want to sell it price", or a realtor didn't do their job price?

You can't be serious? After work go buy a pitcher of beer and throw and darts and play some pool.......have some fun.

Yes, adjust to market value, whats wrong with that?

I dont understand how you would take HIGHLY into consideration a LOW listing, lower than all three closed sales, but not a HIGH listing.

everything you adjust in the report is djusted to "market value" so why not adjust a higher than market value listing?

I would rather NOT use listing comps but since the clients require them then I have to, and on top of that they "might" want all comps to support eachother and the appraised value.

 

[woodsytf]

we often include listing & pendings and adjust them etc, etc...

and then we include a statement that only the closed sales are included in the development of the opinion of market value as they are the best indicators of bla-bla-bla and the listings are only included at the direct request of the client.

 

[Michigan CG]

There is no restriction prohibiting adjusting a Listing for the extracted typical List to Sell Ratio PLUS a second adjustment (also extracted) for "over-listing" should it be necessary. Full explanation in comments......

I agree with Mr. Kennedy. To elaborate further an appraisal is an OPINION. If a client insists on listings then you provide the listings and explain. If the listing is overpriced then simply state it is your opinion based on market evidence and experience that the listing is overpriced.

Call the Realtor and ask them why it is listing at $xxxx. It works. I do it all the time and many times the Realtor says "Yeah, it is over priced but that is what they wanted. I would have listed it at $XXXX -$20,000". Then put that in the narrative of your report.

The missing element in many residential reports is the narrative explaining why the adjustments are made and where the justification of the adjustment.

There are two types of adjustments, quantitative and qualitative. A good appraiser uses both.

 

[John Hassler]

Because its a client requirement in some cases:

In order to ensure that FHA receives an accurate and thorough appraisal analysis, the inclusion of comparable listings and/or pending sales is required in appraisals of properties that are located in declining markets. Specifically, the appraiser must:

• Include a minimum of two active listings or pending sales on the appraisal grid of the applicable appraisal reporting form in comparable 4-6 position or higher (in addition to the three settled sales).

• Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables. Reasonable market exposure is reflected by typical marketing times for the neighborhood. The comparable listings should be truly comparable and the appraiser should bracket the listings using both dwelling size and sales price whenever possible.

• Adjust active listings to reflect list to sale price ratios for the market.

• Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sale price ratios.
• Include the original list price, any revised list prices, and total days on the market (DOM). Provide an explanation for DOM that do not approximate time frames

Just because it's a client requirement doesn't mean you are allowed to ignore USPAP and potentially create a misleading report.

I recently ran a six months of sales (84 transactions) for an area of very conforming tract homes. The SP:LP ranged from 92% to 121% with a median of 103%. To further break it down: 26 sold under 100% SP:LP; 50 sold from 100% to 109%; and 8 sold for 110% to 121%. 35 of the 84 were 5% higher or lower than the median. Additionally, 77 of the 84 sales sold in under 100 days and the median was 38 days.

While a median or average can be calculated, it does not mean it can effectively be applied. Do you remember the stories of the two hunters who shot at a charging bear? One shot right by 5' and the other, left by 5' but on average they killed the bear. If I were in a casino, applying a median may be the best figure to wager a bet. But that's all it is, a bet with a margin of error as high as 18% in my case above. Of course you could cherry-pick a listing to what you think would be the best property to apply your SP:LP adjustment however at that point the appraisal process is pointless.

You need to ask yourself at what point is an adjustment reasonable and credible? In the case I presented above the maximum historical error could be 18%. Breaking my data down further, 42 percent of the time the actual SP:LP differs from the median by 5%. When was the last time you applied a single adjustment which more than four out of ten times will result in an adjusted price of the comparable which had an error of 5% or more? At best, you could come up with an adjusted price and state the error potential based on historical data. Or, you could use a range for your adjusted price of the comparable with limits of the credibility based on historical data.

Personally, I provide listings but do not use a SP:LP adjustment. Rather, I explain that as of the effective date this is how the subject would rate against its immediate, non-cherry-picked, competition.

 

[TJSum]

"Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables. Reasonable market exposure is reflected by typical marketing times for the neighborhood. The comparable listings should be truly comparable and the appraiser should bracket the listings using both dwelling size and sales price whenever possible."

If a listing has had adequate market exposure at a certain list price, and is still a listing, doesn't that mean it is overpriced?

Per this guideline, we are to use listings with adequate market exposure, but NOT overpriced. ???

It seems to me the only data meeting this definition would be pending contracts.

IMO it is much sounder appraisal practice to use our appraisal expertise to chose the proper listings, and present them as they are, than to choose any lame listing and turn it into what we think it should be. Listings show one thing, actual sales show another, they don't need to be "equalized" by giving them a pretend sales price.

 

[Webbed Feet]

I do not see how it is possible to prove "over-listing" unless one literally appraises the comparable listing. Why? .. Not hired to do that.

The entire question smacks of worring over attempting to make the adjusted sales prices on the grid look purdy...... Why? If a client wants listings, and then attempts to demand I would explain why a listing's adjusted sale price was so high compared to everthing else... I would simply tell them to go ask the listing broker. They wanted a listing, I gave them a listing, I don't "consider" listings unless the listings were MY idea and I had a reason to consider them. To demand listings be used, regardless of what I think about the need to use them or not, places the cause of any strange results on the back of the client, not me.

 

[Webbed Feet]

I agree with Mr. Kennedy. To elaborate further an appraisal is an OPINION. If a client insists on listings then you provide the listings and explain. If the listing is overpriced then simply state it is your opinion based on market evidence and experience that the listing is overpriced. <....snip....>

Well!!! LOL.. Ok, in that case, as you have just provided appraisals of multiple pieces of real estate all inside one appraisal report.... I sure as heck hope you included a statement of the Highest and Best use for that listing! AS well as...... Hmmmm let me see......

A)
B)
C)
D)
E)

and a bunch of other letters........... with things like 1.1, 1.2, 2.1, 2.2 etc next to them.....

P.S. Oh..and by the way, don't forget to make a permanent record of the appraisal you did of that active listing. Because USPAP will require you to disclose at any time over the next three years if you ever appraise it again.

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