As Of Effective Date: Meaning

[J Grant]

How do you factor time adjustments? I run time adjustments by closed sales up to effective date. Do you factor in time adjustments to the listings when they show a jump in price?

 

[residentialguy]

Same here. I don't include actives...but a trend is a line that continues in the same direction. Simple example (removing all other factors): If you have 12 sales all going up by $3k each month from to 4/1/15 to 4/1/16 and my effective date is 5/1/16, you would add $3k to the last sale that took place on 4/1.

 

[J Grant]

That's what I do as well. I adjust from sales contract date not closed date.

Which leaves the question, if I make time adjustment up to and including the trend to effective date, and next round of listings jumps in price beyond highest adjusted most recent sale, how is that accommodated ? Am I missing something?

After applying a time adjustment result is a highest adjusted sale price . Unless the subject property is superior I cant' see how even an upward trending market results in a OMV above that.

 

[Terrel L. Shields]

How do you factor time adjustments?

I was loath to make time adjustments. If I am dealing with a $100,000 house or a $1,000,000 house, and my comps are no more than 90 days, any change over a short term can be no more than statistical noise. And since you had a seasonality impact (lower in winter and higher in spring) making a straight line adjustment for time seems a waste. In the end, prices would be up year to year by 4-6% but to say that 90% of that didn't come between March and June ?, well probably. But if prices were going up by 8% plus from say March to June, and then settled down by say 3% by fall.... ? Was the property really worth 8% more than a Feb. comp? Individually rarely even when the overall "trend" might declare so. I didn't adjust for $1,000 fireplaces, upgrades, landscaping, etc. and with the rarest of exceptions I saw no reason to make time adjustments in a market where a clear trend was difficult or impossible to establish. And I challenge anyone to pull 10 pairs of sales 3 months apart and derive a time adjustment. You need to look at a large data set or you are just sampling too small of a dataset to be mathematically significant.

 

[J Grant]

Terell I tend to appraise along the same lines. I can apply monthly adjustments to a recent sale that closed 3 weeks ago, but may not do so, if the sales that closed in the last 90 days have absorbed the latest round of price increases. In a rapidly increasing market, may makes sense. A case can be made for either.

I was trying to figure out how Res Guy and Mr Rex accomplish what they say they do, give strong weight to the pending and listings over the closed sales. Even if I apply a time adjustment right up to the last sale I can not see how a jump in price is made to a higher price listing assuming equivalent quality properties.

What I find as well, at least in my area, is prices increased first two quarters, relatively stable after that, now a sudden jump in list prices. So a time adjustment up to the last sale in a market that has been stable in price for last 4-6 months is being generous.

 

[residentialguy]

That's what I do as well. I adjust from sales contract date not closed date.

Which leaves the question, if I make time adjustment up to and including the trend to effective date, and next round of listings jumps in price beyond highest adjusted most recent sale, how is that accommodated ? Am I missing something?

After applying a time adjustment result is a highest adjusted sale price . Unless the subject property is superior I cant' see how even an upward trending market results in a OMV above that.

Depends on the other external factors, but with those out, I agree. The MV would be $3k above the last sale, in my B&W test book example. That still is above all the other closed sales, but probably not at the newer listing pipe dream prices. Pending sales, (if verified and found to be in sync with conditions of MV def), will be considered. How much...it depends

 

[J Grant]

Res Guy, your last post makes sense. I probably would not even give it that last 3k , but who knows.

I think buyers and RE agents recognize when properties are over priced, whenever the OMV is below SC price, they seem to have no problem re negotiating down to a SC price or what happens other times is they split the difference, seller comes down in price, buyer puts some more cash down, the new price is higher than my OMV but lower than original SC price. The parties work it out.

I find the deal goes forward 90% of time when the OMV is below SC price. Even if a deal "dies", a person does not die. If a deal dies, one or both of the parties did not want it bad enough or were not capable of making it happen.

 

[residentialguy]

I was trying to figure out how Res Guy and Mr Rex accomplish what they say they do, give strong weight to the pending and listings over the closed sales. Even if I apply a time adjustment right up to the last sale I can not see how a jump in price is made to a higher price listing assuming equivalent quality properties.

On a trend, even the last sale is adjusted. The trend goes up to the effective date of the subject, it doesn't stop at the most recent comp. That is adjusted, too. Trends just don't stop.

 

[Mr Rex]

You can also trend line the closed sales and trend line the list prices, if they begin to diverge it is telling you that the market is going up faster than the closed sales reflect.

 

[Ken B]

. Trends just don't stop.

Until they do, anyhow.