As Of Effective Date: Meaning

[J Grant]

"With verified pending sales, talking with good local RE market professionals, trend analysis, being informed of the surrounding factors that influence value, to name a few."

Let RE professionals tell us how hot the market is and rely on a a pending sale rather than the closed comps indicators. Are you currently appraising in this market?

Am curious as to how Mr Rex accomplishes it.

 

[residentialguy]

That is correct. I've been appraising full time for 20 years and I have appraised in every market condition...declining, stable and increasing.

I assume that you have the same problem appraising lower than the lowest comp, too????? Gotta bracket...it's the only way, lol

 

[Mr Rex]

What makes them listings better indicators, since they have not closed yet? Why are they better?

And if a time adjustment has already been applied, and the highest comp sale is still below a SC price, what justifies appraising it over that? Because a listing is at a higher price? (assuming subject is an ordinary property nothing special about it where informed buyers would pay a higher price to get the superior product)

Why are appraisers frightened of appraising to what the closed sale comps indicate if it turns out to be below a SC price,, assuming time adjustments and listing influence has been considered? The world does not come to an end. They either negotiate the price down to the OMV or buyer puts in more cash. Sometimes the deal dies. Is it our purpose to keep a deal going? Why are people afraid to appraise where best indicators are ? Per the cert on the URAR, it states the the sales comparison approach is relied on, SALES is the word they use not listings)

Please don't take things out of context. Listings can be a better indicator of the market due to a limited supply etc. Closed sales are not the only market dynamic to consider.

Given your mindset, values would be flat forever unless cash buyers enter the market and deliberately pay more than market value.

Oh by the way since we are dropping initials, my mentor was a SRA as well.

 

[residentialguy]

verified pending sales, talking with good local RE market professionals, trend analysis, being informed of the surrounding factors that influence value

JG, what would you do?
A town with one large employer that employs over 50% of the town. The company recently announced it is closing as of 4/1/16. Identical homes were selling for $300k up until then. Now they are active on the market for $100k. Your subject sale is $100k. all closed sales were $300k up to the end of March. One closed sale for $200K on 4/5 and one closed sale for 175k on 4/12 and $150k on 4/17. No closed sales at $100k.

Now we go to my parameters: the pending sales were verified at $100k, the RE agents verified that the re market is only worth $100k, market trend supports $100k, and the surrounding factors support a decreased value.

Do I have support with my approach and apply it to you appraisal? Or would you opine the MV at the lowest sale of 150K because you can't get out of bracket mentality?

 

[residentialguy]

Please don't take things out of context.

I don't think she'd have enough posts to be a Junior Member if you deleted the ones containing things that were taken out of context.

 

[Ken B]

I am an SRA, among other things.

You can't bracket market change using sold sales only. For that matter, market change can't be bracketed. But it is trended using all market evidence of change.

It is good business practice to make an effort to bracket physical attributes of the subject property, if at all possible, not because you have to, but because you get less client call backs. That said, it is recognized that some properties don't fit in the box.

 

[J Grant]

Can't post too long, ( later can)

I typically don't "bracket" market conditions though I try to use a most recent sale whenever possible. Market conditions /a time adjustment is easy to develop. I tend to bracket for key value physical features pools, views aka the big ticket items, I don't bracket for low value items like a half bath or a fireplace.

The advantage of bracketing is that it is not subjective nor is it a cost/value conundrum such as relying on what it cost to build a pool. Prices don't lie. Bracketing shows what the market paid for the pool, the view, or in adverse situations, the market $ penalty for backing up to the landfill. Bracketing is like any other technique, has to be in context and additional support the more the better. But focusing on bracketing, a picture is worth a thousand words. Bracketing is a "picture" it is a fact, Comp X sold 3 months ago with similar pool as the subject. Here is the price and DOM, after adjusting for other items the pool is isolated out at 20k . Look at other elements of support as well, but when bracketing is available, why are some against using it?

Yes there are times it's not possible to bracket; though that can show us something as well such as the feature is a super adequacy and not in high demand, (like when nothing sold with an indoor ice skating rink in the past 20 years). If a high value feature contributes value, usually some past sales or out of area similar sales with it can be found to at least see how market reacted, even if we don't put it on the grid.

 

[residentialguy]

Yes there are times it's not possible to bracket; though that can show us something as well such as the feature is a super adequacy and not in high demand, (like when nothing sold with an indoor ice skating rink in the past 20 years).

....or other factors can show us that the market value is higher (or lower) than the other similar closed sales.

 

[J Grant]

Res Guy, your post 105 is an extreme situation, ( a plant closing, houses lose 2/3 value overnight, listed for 100k recent sales are 300k.) Two choices: make a huge downward adjustment for the market condition to the recent sales, or decline the assignment . The cert says we have adequate data for a reliable sales comparison approach, and without recent sales showing the huge drop in value, would you consider you had adequate data? Perhaps if one went to another town that experienced a plant closing and then a big value drop immediately after, one could find sales reflecting that, which would be a way to handle the assignment. (the bracketing you hate so much)

Since you asked how I'd handle it, I'd look for another area which experienced similar plant closing and huge drop in price, use one or two as closed sales, make a negative adjustment down to local closed sales, use listings and explain etc. Note above I'd find SALES , or at least evidence of other sold properties from towns that experienced this kind of economic upheaval. In a situation like this, the listings show evidence of economic impact of something, as opposed to undue stimulus of 5 buyers in a bidding war simply because the market is "hot".

 

[J Grant]

Res Guy, I wanted to hear Mr Rex's thoughts on it, I did not ask him what he did because I think bracketing is the "only" way! Now I recall the silliness of trying to communicate with you...lol .

I consider and analyze current listings and trends of market. I presume we all do. The question is, how much do we factor in that compared to the rest of our appraisal development, such as the closed sales indicators ?

The purpose of assignment is to develop a market value opinion. It is expressed as price, and the MV definition specifies the terms of sale for that price ( well informed buyer and seller, price not affected by concessions etc) The Market value definition is linked to our appraisal development, it is not a stand alone assignment segment.