Do you adjust listings in the grid?

[Mike Kennedy]

I agree. That's we get the big bucks. :icon_lol: and........that's why selecting either closed, contracted sales, OR active listings which are the MOST similar is so crucially important. It also separates quality appraisals from the smorgasbord of other "valuation" vehicles and the "appraisal" reports customed designed for pet droppings.

 

[Lobo Fan]

If there are say 50 closed sales that you used on the report in the total closed similar sales area, and the list price to sales price percentage was 93% for all of them, then wouldn't using an active listing in the grid at full price be misleading? Just being devil's advocate here.

In cases where they want actives shown, I have taken to using the listings grid, which does not factor into the appraised value. I am just showing them to illustrate the current market.

I still am undecided as to which is the best option. Put them in as 4-6 and factor them into the final value or put them in as listings only. If on the grid, do I discount them based upon the closed sales history?

 

[KD247]

KD247: Actually, for conventional (non-REO) mortgage appraisals, I suggest arbitrarily using either the lowest OR the highest is improper.

Do they not teach the principle of substitution in Appraising 101 anymore?

Perhaps they're just teaching it differently than I understand it; where the LEAST expensive, directly competing, and currently available sale sets the uppermost limit of value.

 

[KD247]

If there are say 50 closed sales that you used on the report in the total closed similar sales area, and the list price to sales price percentage was 93% for all of them, then wouldn't using an active listing in the grid at full price be misleading? Just being devil's advocate here.

If you were trying to develop a trend line by using an aggregate number reflecting average asking prices, it would make sense to adjust the average by the average amount of negotiated reductions.

But, the Principle of Substitution calls for the least expensive alternative and it would be a mistake to assume that the least expensive alternative will have its asking price reduced the same amount as other listings. In fact, it's a pretty safe bet that no single listing will have its asking price reduced by the exact average LP/SP ratio.

 

[Lobo Fan]

That makes the most sense of anything I have read so far. So I would select the lowest priced actives that would require minimal adjustments and put them in the comp grid at full price? That would be the easiest to explain to someone and arrive at a defendable value.

Thanks, I have been struggling with this concept for some time now.

 

[McPheeters]

Sorry folks, I'm not adjusting them. Period. As far as the grid goes...it's just a page from Fannies form; ("the form is not the appraisal"..... is there an echo in here?). Upon further consideration of this topic, I will concede that the Additional Listings page/grid is there for adjustment purposes, however in practice it is more for convenience; a place to list the Listings. Therefore, I shall refrain from using this page/grid in the future and will take the additional time to type out or scan the MLS sheets for the listings that I feel best represent the Subject when applying the P of S.

I'll bet this thread will in any moment, degenerate into a debate on the cost approch.......

 

[hastalavista]

I am not going to forecast a sales price that hasnt occured for a buyer that doesnt exist. Simple as that.

PE-

But we forecast vacancy rates on a property with no lease agreements and tenants that do not exist? :new_smile-l:

Or is that not a relevant comparison (and, it may not be)?

I personally practice this way: If I conclude that there is sufficient evidence (historical relationships such as LP/SP ratio, interviews with the listing agents or parties in contract, paired listing-price analysis, etc.) I will comfortably and confidently forecast an adjustment, apply it, explain my rationale to the reader, and move on.

 

[KD247]

Last edited by Denis DeSaix : Today at 02:34 AM. Reason: reworded- first time sounded unintentionally sarcastic!

Yeah, that's better. Now it sounds intentionally sarcastic!

...explain my rationale to the reader...

After thinking about this topic a bit, it seems that the explanation is the key. Too many appraisers try to combine bits and pieces of several different rationales and end up with a meaningless analysis.

Regardless of whether the appraiser considers listings to be indicators of market value, indicators of the upper limit of value, or just plain worthless, the reader still needs to be made aware that listings are different than closed sales because they only involve an asking price. And the appraiser should also explain how that asking price relates to the development of an opinion of value. To merely say that "listings were considered" isn't adequate.

You know, one thing we haven't touched on is how listings relate to the way buyers make their decisions. Most buyers that I've followed start with individual listings and investigate them one at a time until they find one or two that come closest to meeting their needs. Only then, when the buyers are contemplating an offer, will they take a look at comparable sales for an indication of what they should offer. And sometimes they skip that step and simply make an offer based on their budget or their intuition.

If the buyers' world revolves around listings, it makes sense to give listings a reasonable amount of consideration when we're predicting how buyers will react to a property.

 

[Couch Potato]

Perhaps they're just teaching it differently than I understand it; where the LEAST expensive, directly competing, and currently available sale sets the uppermost limit of value.

No one property sets anything. The only time a single listing could be a determining factor would be if that listing was the subject property. Even then there will need to be other data factored into the formation of the opinion.

Why do people insist on trying to invent "one size fits all" rules?

 

[PropertyEconomics]

That makes the most sense of anything I have read so far. So I would select the lowest priced actives that would require minimal adjustments and put them in the comp grid at full price? That would be the easiest to explain to someone and arrive at a defendable value.

Thanks, I have been struggling with this concept for some time now.

If the lowest priced listings are not the best comparables .. you have violated USPAP and the supplemental standards most likely.