Appraising an Active Listing

[screalestate]

Aside from disclosure is there any other issue with appraising an active listing for a refinance?

 

[TJSum]

Probably a good idea not to appraise it higher than the list price if it has been exposed to the market with no offers as of yet. Of course it is common sense, but how many times have we seen it done. m2:

 

[Anthem]

Had one last year that I will probably never forget .. it was listed for almost a year at $950,000 .. of course the borrower wanted more than that .. I didn't come close to $950 k He stated in his formal written complaint that plenty of people wanted to buy his home they just couldn't afford it

 

[Doug in NC]

Probably a good idea not to appraise it higher than the list price if it has been exposed to the market with no offers as of yet. Of course it is common sense, but how many times have we seen it done. m2:

That was going to be my advice too. I wouldn't say it can't happen in the current economy, but chances are pretty slim. I'm seeing properties listed at often over 10% above market, especially in the $500K and above range where supply is in the 9+ month range.

 

[444nutman]

Probably a good idea not to appraise it higher than the list price if it has been exposed to the market with no offers as of yet. Of course it is common sense, but how many times have we seen it done. m2:

I have reviewed those before. You are like WTF listed for 5 months and somehow you think it worth 15% over the listing. That appraiser is smarter than the market or just hitting a number. Wonder which one?

 

[Charles Knutson]

The list price is the ceiling -- based on the theory that if it were worth more than the list price, there would be buyers lined up around the block.

That's how I explain it to LOs and underwriters and homeowners and anyone else who thinks the value should be significantly higher than the list price. There are cases where the value could be more than a few percent higher than the list price, but beyond that -- is thin ice and open water.

 

[David Sawyer]

That was going to be my advice too. I wouldn't say it can't happen in the current economy, but chances are pretty slim. I'm seeing properties listed at often over 10% above market, especially in the $500K and above range where supply is in the 9+ month range.

Wow! What a great market! Wish I had a market like that to work! Many of my sub-market areas, the year-date decline in certain areas is as high as -33% with 7+ years of inventory.

This leads me to one of my favorite "soap boxes", realtors that have blindfolds on and do not follow the market trends or whatever their excuse is. Or maybe they are just plain stupid! Please, let me try to restrain myself on this subject. A good example: I completed a report on a pending sale a few days ago, contract was $375,000 signed in mid Feb. My final value was $340,000 with a declining market of 20% this year. Subject was a 1400 sq ft residence, built in 1974 on a direct access canal (sailboat) to the river/gulf with no updates. The list price was $475,000 and had been on the market for 454 days (plus 90 since contract signed) with no price reductions, for a L/P vs S/P ratio of 78%. Comps were DOM & (L/P v S/P) 188 DOM/ 100%, 136 DOM/ 90.23%, 479 DOM/ 84.1%.

I always put this info in the grid on all comps. Then I always put 2 pendings/actives and make ajustments for active/pending sale of the individual market difference in the L/P v. S/P ratio with a statement that the actives/ pendings are not considered for value since there is no credence in the fact that they are not closed sales but are a reflection of the market.

 

[PL1957]

The list price is the ceiling -- based on the theory that if it were worth more than the list price, there would be buyers lined up around the block.

While that may be a good general rule of thumb, it's not always the case. Conditions of the listing need to be looked at carefully to see if they may affect a potential sale. Among factors I've seen:

1. Listing with an out-of-town brokerage and being shut out by local brokers until the original listing expires and is shifted to a local guy;

2. Listing a property for sale with a condition that occupancy can't take place until after the current school year is out;

I'm sure people can think of others.