Active Listings Falling Short of OOV

[lfurr]

Probably open up a can of worms on this one. But, if AFTER my adjustments, the active listings I've selected fall short of the opinion of value I've placed on the subject, should that necessarily be a red flag and a guaranteed stip?

I have always wondered about this since, technically, we do not pull comps until after we inspect the subject and, technically, we do not pull comps based on selling price or listing price.

That being said, once adjusted, if my active listings are, say $8.00 and $8.50, but my sold comps support an opinion of value of $9.00, which I choose to place on the subject, so what?

Thoughts appreciated.

 

[Randolph Kinney]

What does your market trend analysis indicate? Prices increasing or decreasing? Inventory increasing or decreasing? Concessions, DOM, absorption, etc.

 

[lfurr]

Great question Randolph. In fact, in this case my market trend analysis does show the "Median Sale Price as % of List Price" as slightly over 100% (100.07, to be exact). And the two sales I am referring to in this case are both pending sales. All in all, it's a pretty stable market, and sales prices have remained that way for quite some time here in south central PA. Concessions are there, but are common and are typically in the 2-5% range.

 

[ctapraser]

Probably open up a can of worms on this one. But, if AFTER my adjustments, the active listings I've selected fall short of the opinion of value I've placed on the subject, should that necessarily be a red flag and a guaranteed stip?

I have always wondered about this since, technically, we do not pull comps until after we inspect the subject and, technically, we do not pull comps based on selling price or listing price.

That being said, once adjusted, if my active listings are, say $8.00 and $8.50, but my sold comps support an opinion of value of $9.00, which I choose to place on the subject, so what?

Thoughts appreciated.

This could be a sign of a decreasing market, very dated comparable sales and/or listings that are not truly comparable.

Have you made an adjustment for List price/sales price ratio, I would assume (at least its true in my market) that all properties in your market do not sell at 100% of list price.

Sometimes one of my comparable listings will adjust below my OMV but it is still within the value range of my comparable sales. I just explain that not all comparable listings will adjust above my OMV as some of the listings (after sold) would be the same as the "inferior" sales included as comparables.

The only time I can see it would be an issue is if 1, the adjusted listings fall well below the value range of your comparables and/or the included comparable listings are well below the sales before any listing/sales adjustments...

 

[CindyR]

Principle of substitution anyone?

 

[Mike Kennedy]

Re: "And the two (*listings?) sales I am referring to in this case are both pending sales." (*under binder or contract)


"both pending sales" i.e. the active listings

a. what's the list > sell ratio on the closed sales v the "pending sales"

b. what did the listing and selling agents say when you confirmed the contract prices? i.e. how were their list prices set (CMA? owner's demand, etc.)

c. what were their seller's motivations prior to the contract date?

d. if the most directly competitive active/uc listings available are slightly or more than slightly Inferior - double check your adjustments and if solid - then "their adjusted values are what they are". Just be sure no one can come behind you and identify more competitive actives/uc lists (or closed sales for that matter) than the ones utilized.

 

[Meandering]

If your listings adjust lower than your opinion of market value, and it's going through an AMC, expect a stip, and expect to be able to support why the completion is below your opinion of value when considering the principal of substitution. It does happen sometimes because the listings just are not as comparable as the sales, so explain it in the report before the stip happens. Otherwise, it could be that the market is starting to decline.

I would deeply consider supply and demand and days on the market way ahead of price changes. If you have a large oversupply, it's possible that only the top end is selling, and is skewing the prices when considering all of the data.

Although, I did see this stupidness from a reviewer, 7 sales 140 listings "appraiser to comment why the 1004MC shows an increase(median price 150-160) yet stated the market is declining."

Wait until the only sale is the 3.6million one, then we'll call it all increasing regardless to the balance of the data.

:new_all_coholic:

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[Mike Kennedy]

"Median schmedian"

 

[Doug DeMars]

How dated are your closed transactions?

Could be this time of year is a bit tough to capture "top dollar"...maybe the market is starting to turn a bit down? I'm not a big fan of appraising within micro-trends...even in a "stable" market...things turn down a bit during the winter and then pick up by Spring.

It is true though...pool amenities will sell for a higher premium during the summer than in the winter. What to do...what to do...change adjustments because the time of year? Yep...you can expect a stip.

 

[J Grant]

Listings often signal the most recent trend in a market, though of course a few listings can be an outlier, the main activity will show a trend.

Is there more listing inventory than several months ago? Are the other listings besides these two pendings also priced lower than your sales?

What are days on market for listings now?

You mention adjusted prices, look at unadjusted prices of both your listings and sales.

Per principle of substitution, why would a buyer pay more for your subject as of effective date, when they could buy a similar home listed for less?

The answers to these questions help you reconcile market value.

The first page of report asks if prices, and days on market, are increasing, stable, or declining...the ING part being an active verb. (ongoing activity)