Do you adjust listings in the grid?

[nevalues]

Do you adjust listings in the grid? Nope

Then why grid them?


Why not? Is there a rule that says if they are in the grid of a "form" page, they must be adjusted?

I have added active listings as a 4th or 5th comp and did the adjustments needed but I always added the following comment: Listing has been added as per lenders request and is given no weight on the final opinion of value.

 

[Richard Carlsen]

Two thoughts:

#1) Active listings on the sales grid page could be seen as misleading to the reader, even if they are noted in the comments, simply because they are gridded in the "Sales Comparison" grid of the report. There is a simple solution to this. Most appraisal software programs have a separate page of "Additional Listings" that can be separated from the sales grid to avoid any confusion between listings and sales.

#2) The sales grid belongs to the appraiser. It is there to demonstrate his work. As such, appraisers should strongly oppose any requirements that lenders or UW's should try to place on the use of this grid.

 

[nevalues]

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

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.

I agree with you 100%. I just completed an appraisal on a single family that was listed for sale for $529k and was on the market for 84days and was withdrawn few weeks ago when the owner decided to keep it and refinance. My final opinion of value came at 387k. I called the listing broker before I completed my report to ask her where she came up with this listing price and does she think that the market supports the asking price. Her answer to me was and I qoute "" oohhh it is assesed for $510 so yes it is worth this much". So I said, Thank you for your help and hanged up the phone, but what I really wanted to say is: you clueless ......................etc. This is just an example of how unreliable an asking price can be and trust me there is a lot of realtors out there that think the same way this one did.

 

[nevalues]

Two thoughts:

#1) Active listings on the sales grid page could be seen as misleading to the reader, even if they are noted in the comments, simply because they are gridded in the "Sales Comparison" grid of the report. There is a simple solution to this. Most appraisal software programs have a separate page of "Additional Listings" that can be separated from the sales grid to avoid any confusion between listings and sales.

#2) The sales grid belongs to the appraiser. It is there to demonstrate his work. As such, appraisers should strongly oppose any requirements that lenders or UW's should try to place on the use of this grid.

I agree with you on this, but sometimes you do not have a choice. The lender returned the report and asked me to add an active listing as a 4th comp. Its either do what they ask for or they will reject your appraisal. I did what they asked for and put my comment in bold letters. If the reader misses my comment, that is his problem, not mine. You try to be as clear as possible. Thats what the comment field is for. If he needs glasses he should go and get one. I do not think its my job to order him a pair.

 

[KD247]

...select the lowest priced actives that would require minimal adjustments...

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

Lobo Fan's term "that would require minimal adjustments" indicates that the listings used in the report would be the lowest priced of the best comparables.

 

[Mike Kennedy]

Lobo Fan's term "that would require minimal adjustments" indicates that the listings used in the report would be the lowest priced of the best comparables.

the highest priced, MOST SIMILAR, competitive active may require the fewest and the lowest $$ adjustments

 

[Mike Kennedy]

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

PE, devils' advocate question - pls post the USPAP reg and an example of a "supplemental" which specifically describe how to select a "proper" active listing and stipulate mandatory use of "the lowest priced listings".

 

[Jonsey]

Because if YOUR client had to take back that property and put it on the open market to sell (JUST LIKE A RELOCATION APPRAISAL) which is the most probably selling price given current market conditions?????

If FNMA and the general appraisal community had adopted the ERC methodology from the beginning it would pretty much have eliminated much of the inflated value problem, IMO.

etc. etc....great post, Joyce.

 

[Richard Carlsen]

pls post the USPAP reg and an example of a "supplemental" which specifically describe how to select a "proper" active listing and stipulate mandatory use of "the lowest priced listings".

Ain't none that I know of.

Standards Rule 1-4 (a) simply says the following:

(a)
When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion.

The only thing that I see in USPAP is the appraiser must analyze comparable sales data. Says nothing about listings.

However, Standards 1-3 (a) does say:

(a)
identify and analyze the effect on use and value of existing land use regulations, reasonably probable modifications of such land use regulations, economic supply and demand, the physical adaptability of the real estate, and market area trends;

To my way of thinking, listings, expireds, withdrawn, DOM, list/sell rations, etc. all come under "economic supply and demand" as well as "market area trends." However, they are considered as part of the analysis for the appraiser understanding the market and making his estimates. Therefore, the appraiser must look at listings but nothing that I know of in USPAP or any Supplemental Standards, other than specific client requirements, requires specific inclusion of listings in a grid nor do they specify which listings to use.

 

[Mike Kennedy]

Ain't none that I know of.

To my way of thinking, listings, expireds, withdrawn, DOM, list/sell rations, etc. all come under "economic supply and demand" as well as "market area trends." However, they are considered as part of the analysis for the appraiser understanding the market and making his estimates. Therefore, the appraiser must look at listings but nothing that I know of in USPAP or any Supplemental Standards, other than specific client requirements, requires specific inclusion of listings in a grid nor do they specify which listings to use.

Absolutely Correct.