Asking price adjustments for listings?

[Webbed Feet]

WEBBED,

let me ask you this, would then rather adjust the DOM of the listing if the asking price has not be lowered in a period of time longer than the average DOM?

I do not comprehend your question. DOM are a fact. There would be nothing to adjust relative to the subject property. However, there could be a difference in DOM reported depending on if the reporting was per the last MLS listing price change, or per the start of marketing for the comp regardless of a series of price changes that may be involved. Depending on the circumstances, analyses complexity, and what I am attempting to show readers of a report, I may only quote the DOM since the last price change. OR, I may go back and provide a litany of a comparable entire journey from very first known listing through a series of price changes on it. The "DOM" between these two reporting options could be drastically different.

 

[Digger88]

in the rare event i include listings first off if a property is listed too high its not a good comp. find good comps and use your 1004mc data regarding lp/sp ratio for your most recent data set.

 

[David Mescon]

The duck is on the right track here. Disagreement here is akin to agruing the inarguable.

I too only include active listings when required as an assignment condition. Although not the rule in my area, it is also not uncommon for properties to be listed at two to three times their eventual sale price, and to see overall marketing times for these properties of two to four years. One reason for this is cultural - there are people here who will only sell at a substantial profit - no matter how unrealistic that may be, or how long it might take to consummate such a sale; another, and more prevalent reason is the inherent vagaries of our market and sub-markets. Recognizing patterns of value here is generally like finding needles in haystacks. Realtors here often just don't have a clue what a particular property is worth. This is not to demean our local realtors who often have a better understanding of property valuation than many appraisers - it is a reflection of our nearly undefinable market. Not knowing where it will end up, they just start high and work their way down. To make things worse, we get buyers from Southern California, the Bay Area or Tokyo who will pay two to three times what a property is really worth, which ends up skewing our already vague market even more.

Listings, in our market, are essentially worthless as comparables. When clients insist I include them, I do, but I clearly state they are given little to no consideration in my formulation of an opinion of value for a given subject property.

 

[CANative]

From what you posted David it appears you are at least thinking about them, keeping track of them, considering them part of the competitive market, etc., etc.

Why does it take such a leap of faith to include this thought process in a grid?

 

[David Mescon]

From what you posted David it appears you are at least thinking about them, keeping track of them, considering them part of the competitive market, etc., etc.

Why does it take such a leap of faith to include this thought process in a grid?

Well, when I have a subject which is worth around $750k and four consummated sales between $500k and $1.35m; and, the median S/L ratio is around 97%, with a standard deviation of say 3%; but the most physically similar and proximate, (and sometimes only), available active listing within many miles in any direction is listed for $3.5m, there is a serious disconnect between reality and the seller's fantasy world. The only way this could be gridded yielding a remotely accurate indication of value for the subject would be to make a seventy-five percent adjustment in the "moronic seller's perception" section of the grid. You know how it would damage my delicate little psyche if I called anyone a moron. Besides, I'm not smart enough to have a thought process - just ask the folks who can't figure out why I keep rejecting their requests to work for about $20 an hour.

 

[PropertyEconomics]

A 3.5 Million listing is not a comparable for a $750K subject ... ignoring it would be the best thought process you might have.

 

[David Mescon]

A 3.5 Million listing is not a comparable for a $750K subject ... ignoring it would be the best thought process you might have.

Actually, it was by far the most similar property - it was just listed for a rediculous price. Oh yeah, someone from the bay area paid cash for it - over $3m! This is common here. We get a lot of anomalous sales that are just not based upon reality - both high and low. Lots of intra-family sales at seriously sub-market values; sometimes someone will just essentially "give" a house to someone they like who is poor, etc...

I'm an amateur radio operator. A fellow ham was bragging to me a few years ago about how he stole the lot he subsequently built his house on - he bought it for only $450,000 and they were asking $600,000. I just smiled at him. It was worth $300,000 on a really good day.

 

[Webbed Feet]

Actually, it was by far the most similar property - it was just listed for a rediculous price. Oh yeah, someone from the bay area paid cash for it - over $3m! This is common here. We get a lot of anomalous sales that are just not based upon reality - both high and low. Lots of intra-family sales at seriously sub-market values; sometimes someone will just essentially "give" a house to someone they like who is poor, etc...

I'm an amateur radio operator. A fellow ham was bragging to me a few years ago about how he stole the lot he subsequently built his house on - he bought it for only $450,000 and they were asking $600,000. I just smiled at him. It was worth $300,000 on a really good day.

Brother Mescon,

With all respect for P.E., as I don't include him by reference at all here in this post, I would say at least 95% of appraisers across the U.S. would have no comprehension of what you are dealing with. I only have so in a drastically lessor perspective. In my view, most residential appraisers simply are not capable of dramatically switching gears from a market where a measily $5,000 difference makes or breaks a sale, to one where a $50,000 price difference barely has any meaning to a wealthy "value in use" driven market place. I doubt many residential appraisers "get it" that $50,000 might as well be something like lunch money to buyers in some markets.

So determining "the market" can be a real problem when the wealthy, or debt careless due to lots of cash flow today, purchase real estate like they are shopping at 7-11 ... run in, get it now, screw the price. $1.50 for a 50 cent item to them = about the same thing as $1,500,000 for a $500,000 item in a drastic example of the mentality stretched a bit to make the point.

 

[KenAZ]

LP/SP ratio is a fact. Listings are adjusted to the subject in the rest of the grid, so the adjusted price is NOT an indicator of the Listings market value.

The whole thing is not a fact. It is all a game. In many cases, short sale listings are lower than market, REO listings are below market to try to get a bidding war, and regular listings are far above market because they are trying to sell it above or at their mortgage. In the old days, listings were good indicators of the upper end of the market. In theze crazy times, listings mean nothing. They are only for show. When the markets stablize, then listings will start meaning something again.

I love (Sarcastically) when we are told to adjust downward for listings witn DOM over X. Hmm, Maybe the home was listing for 340 days with a listing price of $300,000, and then out of desperation they lower it to $200,000 yesterday. That stupid downward adjustment for DOM is completely misleading and worthless.

I have an idea, how about letting the appraiser decide if listings are relavent or not. m2:

 

[KenAZ]

A 3.5 Million listing is not a comparable for a $750K subject ... ignoring it would be the best thought process you might have.

How do you know that the two properties are not comparable? Only from the price? Is that how we do comparable searches . . by price? I thought that was a big no-no.

I think we throw around the word comparable too much, without knowing what it is. I have asked for the definition of comparable in this forum and have never got an answer. In fact, aren't all properties comparable, but only a few are "Good" comparables? Can't we make adjustments for size, view, location, etc? When I wrote my narrative, I was told to just use all sales in the past 3 years in the neighborhood. After proving all of the adjustments, and applying them to each comparable, I was very surprised at how close the adjusted values were.

I was once told that a $600,000 home is not comparable to a $300,000. They said that it was because someone that can qualify for a $300,000 home would not be able to qualify for a $600,000 home. My reply was "couldn't a person that was considering the $600,000 on a golf course, buy the same exact home for $300,000 without backing the golf course?"

Of course. And maybe that person would think that even if he can qualify for a $600,000 house, he would rather spend half the money and not get hit by golf balls all day. He could take his extra $300,000 in loans and buy rentals, start a business, buy a Lamborghini, etc.

It seems that this is a recent trend. Somehow the sales prices determine if something is comparable. The old fashioned way was to find the best comparables out of a large list of comparables, no matter what price.

How about if a guy gets an amazing deal for a house at $300,000. All of the sales in the area of the same house are at $600,000. Do you then say to the client "There are NO comparables available"

Of if the guy buys the house for $300,000, but he is from California and thinks this is a good deal in Arizona. You find that all of the same size houses are selling for $100,000. Do you say "Well these homes are not comparable because they sold for $200,000 less and do not attract the same buyer"

That was a mistake appraisers used to make in the 1980's. We were told over and over again, do not use price ranges to determine your comparables.

I just bought a home. This is a great market to buy homes. I looked at buying multiple cheap homes, buying two mid range priced homes, or buying an expensive home and using my old home as a rental. I am the same potential buyer and was looking at homes ranging from $20,000 to $300,000. All of the homes in that price range appealed to the same buyer.

So when someone tells me that at the top of the second page of the URAR that my low range of $50,000 is not comparable to $250,000 homes, because they appeal to a different buyer, I just have to laugh.
I can use myself as a source to prove them wrong.