Definition Of "market Information"

[ZZGAMAZZ]

Concerning the definition of a "market," regardless of whether it is regional, municipal, local, neighborhood, etc., with regard to the relative as well as the absolute status of the subject property of each residential appraisal assignment:

I'm suddenly struck with the realization that all of the data used to describe markets is based on properties marketed for sale . . . without ever having wondered whether those properties--especially the critical "condition" factor--reflect the true population of housing stock in a market.

Realizing that the question might tarnish my little remaining credibility, I ask the Forum for its thoughts.

 

[Meandering]

I'm lost as to what your concern is.

If people are living in their homes, not trying to sell them, and have not maintained those homes to at least a C3, who cares? What's inside their homes in not on the market, nor for public display.

 

[Amy Perkins]

The market value is based on a sale or listing because that is how the price is generated. However, if appraisers started using appraisal refinances to determine value as well as listings and sales we would have more data. Fannie Mae already has this, but it's only a "market" if something is for sale. Think of the word "market," then think "mark it" with a price. Does this help? I am trying to answer a very vague question. Most of the time if something isn't marked for sale, it won't. You ask what is a market? It is a group of things for sale that are similar in some way. How many times have you heard an agent say, "Nothing is on the market"...

 

[Terrel L. Shields]

I'm suddenly struck with the realization that all of the data used to describe markets is based on properties marketed for sale . . . without ever having wondered whether those properties--especially the critical "condition" factor--reflect the true population of housing stock in a market.

FHA and usually F-F requires a home to be in good repair. Much of what we appraise in the very old "stuff" is not in good repair, and isn't on the market. Since FHA was the way many, if not most older homes sold in the past, they had to be fixed up. Therefore, these homes that are in the sold books (MLS) are often, on average, in better condition than the flawed homes we are valuing. They have been fixed up to sell and that is basically the only reason they are fixed up is to obtain secondary market financing for a buyer...without which they would have to sell in the as is market (cash or short term lending). I am basically saying that the typical older home is probably in worse condition on average than the sales used for comps.

In the bigger picture, "market information" includes sales, it includes costs, it includes income data, and under sales it includes the land value and the improved value, as well as encompassing the general and specific information in the market and the subject alike. "Market information" is everything. Market is everything, including cost and income. Many miss that and argue that neither are "market" because they are not based on sales... Depreciation is based on sales. GRMs are calculated on sales, so yes, they are all market information.

 

[Amy Perkins]

In my market there are massive estate sales; all older folks who pass on. Their house is still in the original dated condition. After they sell, big dumpster is out front because it's time for a remodel. You drive in front and take a picture after it is remodeled and it looks a lot nicer. Many of these homes do not even have an MLS photo. If it's fixed up then there are lots of photos. This is because when they bought long ago, it was more affordable. Now, you can buy a two million dollar fixer upper in a really nice area on an acre by the beach, maybe close to a million for a nice tract home. People spending that kind of money of a property will gut it and rebuild. If those homes don't have willing sellers then how is that part of the market. Until we can walk through anyone's house, we will never truly know the entire inventory of off market homes. Frankly, I hope that day never comes because it is a violation of freedom.

 

[gregb]

In my market there are massive estate sales; all older folks who pass on. Their house is still in the original dated condition. After they sell, big dumpster is out front because it's time for a remodel. You drive in front and take a picture after it is remodeled and it looks a lot nicer. Many of these homes do not even have an MLS photo. If it's fixed up then there are lots of photos. This is because when they bought long ago, it was more affordable. Now, you can buy a two million dollar fixer upper in a really nice area on an acre by the beach, maybe close to a million for a nice tract home. People spending that kind of money of a property will gut it and rebuild. If those homes don't have willing sellers then how is that part of the market. Until we can walk through anyone's house, we will never truly know the entire inventory of off market homes. Frankly, I hope that day never comes because it is a violation of freedom.

We work in two different markets. Living in Santa Barbara since 1966, appraising since 1989, but I can see how a more recent newcomer would perceive the market of Santa Barbara in a different way.

 

[Amy Perkins]

I am just talking about Hope Ranch and Montecito markets. I just did one where literally every comp had a Marborg dumpster out front.

 

[Amy Perkins]

North County and South County are very different worlds, I agree.

 

[Mike Garrett RAA]

Many of those "estate properties" are targets for flippers in my market. I'm doing one right now. Prior sale price $83,000 on 05/26/2016. Basic remodel and not really good quality work. Under contract 01/17/2017 for $205,000 with $5,000 in concessions. 1952 rancher with 1063 sf GLA. Want to guess what it will appraise for?

 

[Ken B]

Concerning the definition of a "market," regardless of whether it is regional, municipal, local, neighborhood, etc., with regard to the relative as well as the absolute status of the subject property of each residential appraisal assignment:

I'm suddenly struck with the realization that all of the data used to describe markets is based on properties marketed for sale . . . without ever having wondered whether those properties--especially the critical "condition" factor--reflect the true population of housing stock in a market.

Realizing that the question might tarnish my little remaining credibility, I ask the Forum for its thoughts.

There is no question in your post, only statements. Ask a question and we might be able to answer it.