Asking price adjustments for listings?

[TJSum]

LP/SP ratio is a fact.

Isn't the LP/SP ratio a fact for homes under contract? Unless you include listings that are withdrawn, expire and go through price changes prior to receiving an offer within your ratio, you are applying it to the wrong data set.

 

[Michigan CG]

If the client requires listings and adjustments to those listings (which I think is a very reasonable request) then not adjusting the list price could produce misleading results which is a USPAP violation.

USPAP Preamble page U-6, lines 152-153 state: ...."analysis, opinions, and conclusions to the intended users of their services in a manner that is meaningful and not misleading.

 

[Mr Rex]

Isn't the LP/SP ratio a fact for homes under contract? Unless you include listings that are withdrawn, expire and go through price changes prior to receiving an offer within your ratio, you are applying it to the wrong data set.

No, LP/SP is a fact of what properties that were listed sold for at the last list price. (at least in my MLS) So applying it to withdrawn, expired, or price changes provides what info?

 

[Webbed Feet]

Who invited the Duck?

So, do you disagree with adjusting a listing based on SP/LP ratios? (Sometimes yes, sometimes no. This one is the classic "that depends" answer.) What about citing the Realtor who says the property is overpriced by $20,000. Is a Realtor not a market participant and considered an expert. Do we not cite real estate professionals as sources of information and apply them to our appraisals? (I would personally not cite such statements unless they were emailed to me so I had them in writing. At that point I may, or it depends again, as I would simply be stating a fact that somebody involved in the transation stated "xxxxxxxxx" to me.)

If all the comps are selling for $95.00-$110.00/SF and the listing is at $120/SF is that not an indicator that the property is overpriced? Are appraisers allowed to make qualitative adjustments? (I don't care what we think it is an indicator of !!! Opt to shoot your mouth off, via your keyboard and fingers, saying it is YOUR OPINION that it means this, or means that, relative to a statement regarding the value of that listing.... And you just appraised the listing.)

Adjusting a listing is not an appraisal, it is reconciling a comparable property to your subject property.

Correct, adjusting an active listing is not. But what you posted to say became a real estate appraisal of the active listing. I gracefully allow you to take it back! LOL But stick that in a report, and you can't take it back. It's too late, you appraised a property not your subject property with no USPAP compliance in having done so. There is a vast difference in saying.. "This comp is believed to represent an indicator of the upper range of value for the subject." and saying "This comp sold for WAAAAAAAAAAAAAAAAAAAAAAAAAAY over the market for it." The former is analyses of the subject appraisal per Standards One and Two, the later is an appraisal of the comp per Standards One and Two.

 

[TJSum]

No, LP/SP is a fact of what properties that were listed sold for at the last list price. (at least in my MLS) So applying it to withdrawn, expired, or price changes provides what info?

That is the point, only contracts would fit that description. When using a listing, it is unknown whether that listing will join the data pool or not.

 

[Webbed Feet]

If the client requires listings and adjustments to those listings (which I think is a very reasonable request) then not adjusting the list price could produce misleading results which is a USPAP violation.

USPAP Preamble page U-6, lines 152-153 state: ...."analysis, opinions, and conclusions to the intended users of their services in a manner that is meaningful and not misleading.

Wow! You and I are really at odds today...

If the client requires listings and the client requires them to be adjusted, what you have are possible unacceptable assignment conditions, or possible acceptable ones. Not providing them, or adjusting them, becomes only a USPAP SOW violation due to the required engagement contract assignment conditions. Not due to anything at all to do with "misleading results" unless doing what they conditioned would cause misleading results.

There can be no assumption that not following assignment conditions would result in less than credible results or misleading results. In fact, depending on the circumstances, complying with the assignment conditions could do that! If so, they would in fact be unacceptable assignment conditions.

You are quoting parts of USPAP out of context to the issue.

 

[Mr Rex]

That is the point, only contracts would fit that description. When using a listing, it is unknown whether that listing will join the data pool or not.

So I shouldn't adjust listings for GLA before they join the pool either?

 

[Eric C]

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?

 

[CANative]

OMG...

Listings represent the competing market and the data is relevant whether it's just in the workfile, in a spreadsheet listing in the report or a sample of the competing properties is presented in a sales grid. If it's in a grid the adjustments (if warranted) need to be made.

By "asking price adjustments" I assume you mean the error between listing price and closed price and this is just a matter of analyzing statistical data. Just do it.

 

[John Hassler]

Run a similar analysis and identify whether the FP added $1000 or $2500 in contributory value in each individual sale? Garages $3000, $5000 or $7500 per car bay? What about GLA, how much variation from each sale to the next? Be exact, as that is what you seem to allude is required for any adjustment.

OK, lets do as you ask using the same data set.

Instead of the figures I presented being a SP:LP percentage lets say they represent the extracted surplus GLA adjustment $/sf of the 84 sales. If you will recall, the data set had a range of 92 to 121 with a median of 103 so these would be $/sf in this exercise. In my market this would be fairly typical $/sf range for surplus GLA of a 2,000 sq ft home worth around $700,000.

Lets say the subject is 2,000 sq ft and one of the comps is 2,200 sq ft. If I use the median adjustment, $103/sf in this example, my adjustment is $20,600 but even at the most historical extreme of $121/sf the adjustment is only $24,200 or a maximum error in the adjusted price of $3,800. No error is desirable but a $3,800 error to one comparable on a $700,000 property probably does not have a substantial impact on the credibility of the appraisal report for most intended uses.

On the contrary, an 18% error made when applying a SP;LP in this same example of a $700,000 home is an 18% error in the adjusted price, or $126,000. There are not many instances that I am aware of where a $126,000 error in the adjusted price of a comparable would not have an effect on the credibility of the report of a $700,000 property.

Same data and same potential error rate but the application of one has a dramatically different effect on the adjusted price than the other. This is only one reason I dislike SP:LP adjustments.