Active Listings:do you make an adjustment?

[adia9]

Hi fellow Appraisers,

I just received a condition back from underwriter conditioning why I didn't make an adjustment for an 'active' listing that I included in my report. I usually have not made an adjustment in the past. If I need to , is there a formula for this adjustment? dom is 130 days. How much do I adjust for? Please help . Thank you.

 

[Randy Pippin]

Hopefully you know the low, median, mean and average sales (and list) prices in the neighborhood. Determine the Average sales price and the average listing price, then determine the difference between them and deduct that percentage difference from the listing price. That would be a good start.

Ive been sick for two days with the flu so between the meds and the honey and whiskey I hope that made a little sense

 

[Kevin A. Spellman]

The problem with adjusting listings, you state a list price the day you send the report and the next minute, the next hour or the next day the same listing has a price reduction and new asking price is under your estimated value for the subject. The listing has no standing and is now unreliable and if a review occurs your report can easily be considered miss-leading. So if you adjust a listing, review the market reaction to price reductions and not forecast a sales price.

I would only present the known facts, the list price, market performance and its standing in respect to the current inventory. I do not adjust listings and present a listing or more with each report.

 

[wickedness1]

Wow Brenda! We have the same stip!

No we don't & won't adjust listings, but our local HOC wrote back to the lender stating:

"The 4150.2 states that current listings and preoperties under contract should be used as a supplement to the three primary settled sales and presented as additional comparable data only. As such, if they are presented on a grid, they should be adjusted.

It has been common practice in the past that these types of properties have been adjusted.

If the list to sales price adjustment can be clearly supported then an adjustment is warranted."

We will be calling the HOC tomorrow b/c according to the 4150.2 that this HOC representative got his information from it states:
Chapter 4 - The Valuation Process

4. Current Offerings and Listings Analysis
Using these types of sales are discouraged. However,
under certain slow market conditions or in markets with
rapidly increasing pricing, it may be acceptable to
include properties offered for sale. Proceed with
caution when analyzing and adjusting these offerings.
Recognize the inherent negotiability in price between
an offering and a consummated sale. Clearly label
these comparables as offering, listing, under
agreement, etc., but present them as additional
comparable data only.

This is open to interpretation and my interpretation is that I cannot forecast a future event. To do so may result in a misleading appraisal report.

BUT........."It has been common practice in the past that these types of properties have been adjusted"

Here is the link to the paragraph I quoted

http://www.HUD.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502c4HSGH.doc

 

[Mr Rex]

Which is more misleading? A listing comp adjusted for location, site size, condition, GLA, amenities, etc and a bottom line adjusted value that gleams like a diamond at the bottom of the Sales Comparison Grid, or a listing comp adjusted for all of the above and a market based list to sale ratio adjustment?

All adjustments to comparables could/can be seen as forecasting if you reach far enough, since they forecast an adjusted sales price in comparison to the subject in the context of time. Why a List to sale adjustment that is extracted from market data is treated differently than other market based adjustments escapes me.

 

[wickedness1]

Which is more misleading? A listing comp adjusted for locations, site size, condition, GLA, amenities, etc and a bottom line adjusted value that gleams like a diamond at the bottom of the Sales Comparison Grid, or a listing comp adjusted for all of the above and a market based list to sales ratio adjustment?

All adjustments to comparables could/can be seen as forecasting if you reach far enough, since they forecast an adjusted sales price in comparison to the subject in the context of time. Why a List to sales adjustment that is extracted from market data is treated differently than other market based adjustments escapes me.

Rex so 2 or 3 months from now when your listings sell you feel that your matched pairs analysis is going to be the exact same and cannot change over time?

Buyers won't look at things differently in the future? I think NYC buyers minds were different the day before 9/11 than the day after.

 

[Mr Rex]

Why didn't the sold comps sell for their adjusted values?

Comparables are adjusted to the subject. The subject is assumed to be sold. You are not appraising(offering an opinion of value) of the comps(sold or listed). Don't confuse the issue, like a non appraiser. Smiley face.

 

[Craig Farr]

Listings usually don't sell for listing price......especially nowadays when they start at $715,900 and close at $390,000! Why would you NOT adjust a listings price if you are using it as a listing comparable? Odds are VERY high that it will sell for less than listing price.
Thus, isn't it MUCH easier to argue for at least some discount percentage (based on ANY rational idea) than to argue for no adjustment at all? If you argue for no adjustment at all you are in effect saying that most listings sell at listing price, and that is simply not true.
Remember, the listing comp is simply a test of your estimated value from sold comps. That's all it is. It's a tool. Don't you WANT to know before you send the report (in which you have estimated MV at $260,000) that there are several listings of the same model house three blocks away at $251,900, $253,900 and $254,900?

 

[wickedness1]

Why didn't the sold comps sell for their adjusted values?

Comparables are adjusted to the subject. The subject is assumed to be sold. You are not appraising(offering an opinion of value) of the comps(sold or listed). Don't confuse the issue, like a non appraiser. Smiley face.

Yes, but comparables are a known fact. Listing sales prices are not known fact, therefore the buyers mindset can change over time. Don't confuse the issue, like a non appraiser. Smiley face.

 

[wickedness1]

Listings usually don't sell for listing price......especially nowadays when they start at $715,900 and close at $390,000! Why would you NOT adjust a listings price if you are using it as a listing comparable? Odds are VERY high that it will sell for less than listing price.
Thus, isn't it MUCH easier to argue for at least some discount percentage (based on ANY rational idea) than to argue for no adjustment at all? If you argue for no adjustment at all you are in effect saying that most listings sell at listing price, and that is simply not true.
Remember, the listing comp is simply a test of your estimated value from sold comps. That's all it is. It's a tool. Don't you WANT to know before you send the report (in which you have estimated MV at $260,000) that there are several listings of the same model house three blocks away at $251,900, $253,900 and $254,900?

Craig maybe you missed the point that we disclose & document that no adjustments were made because it would be forecasting. Our report is not misleading because it is well documented what considerations if any the lisitngs were given.