Active Listings Falling Short of OOV

[Restrain]

Shortage of listings , shortage of buyers . Have seen sellers cuttings prices to sell due to a lack of buyers. May be seasonal.

 

[J Grant]

How can appraisers write off a market change as seasonal? Unless it happens every year in that pattern?

 

[Terrel L. Shields]

2 listings is insufficient data to make a judgment about listings indicating a lowering of prices.

 

[J Grant]

2 listings is insufficient data to make a judgment about listings indicating a lowering of prices.

They are pending sales per the OP..pending's usually a better indicator than listings, however I agree, need to know the other listing prices and DOM of similar homes to determine a trend.

 

[Vermonter]

Year to date analysis will give you a better indication of a trend or seasonal fluctuation.

 

[TJSum]

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.

What is the days on market of these two contracts? If DOM is minimal it could mean they were underpriced. If this is the case check with the agents to see if multiple offers were seen, even if they don't share contract price details, usually they will tell you how many offers were had.

 

[ucbruin]

Principle of substitution anyone?

Question: if the principal of substitution is so critical (which in theory I believe to be true) then why shouldn't the appraisal process only include listings since the sold properties are not longer available to purchased?


As value is based on past sales, reports reflect history. So when it comes to appraisals isn't the principal of substitution some what skewed?

 

[HF Mudd]

IMNSHO, you have several choices:

• Reconsider your adjustments
• Reconsider your selection of listings
• Reconsider your selection of comparable sales
• Reconsider your OMV
• Stick to your guns - just be sure it's a hill you're willing to die on.

 

[J Grant]

Question: if the principal of substitution is so critical (which in theory I believe to be true) then why shouldn't the appraisal process only include listings since the sold properties are not longer available to purchased?

Because then it would be a price opinion, not a value opinion. The lender client wants to base loan on value priced property....if you were lending 200k to a stranger to buy a house, you would want to know the value, not just a price based on a couple of listings. (buyers are also interested in past sales btw and usually try to find out what things sold for....if not, they are not considered well informed)

As value is based on past sales, reports reflect history. So when it comes to appraisals isn't the principal of substitution some what skewed?​

​

It's not skewed, because the appraisal is creating a hypothetical sale of subject based on past sales where the sold properties are supposed to meet the principle of substitution...what were the most likely similar substitute homes the typically motivated buyer would have bought, had they been available as of the effective date.

However, it can be skewed if appraiser picks poor sold comps, either cherry picked to make a price point, or just bad selection. (the same can be true if they pick poor substitute listings as well)

 

[Ronald Hauser]

The OP asked if it was a red flag if his opinion of value was higher than the listing comps adjusted values and I believe it would jump out at me if I were reviewing your appraisal.