Do you adjust listings in the grid?

[KD247]

so why is it a problem...

Here's a chance to condense the opinion I expressed earlier:

Asking prices don't represent a complete market action, so they are only useful for establishing a value "ceiling." The Principle of Substitution is based on the least expensive alternative, so the least expensive listings of similar properties are the most pertinent. Uniformly adjusting the asking prices of the least expensive listings at the same rate as for higher priced listings will lead to unreasonably low adjusted values and will also make the value ceiling less precise.


I always include an addendum explaining why I don't adjust the asking price and have never been challenged on it, even by lenders who "require" adjustment of the asking price.

 

[Queen City Gurl]

Agree to disagree ! I've been married a long time... I've gotten good at that !

I have utilized that practice for many years,,, long before the lenders have recently started to require an active listing. I too, have always explained my adj, and have never once been challenged on it. Guess, explanation is key !

 

[reliantappraisals]

I dont see a problem with adjusting if you want to.

the listing price/sales price shouldn't be a big concern.

your adjusting for characteristics just like in the sales comparison approach. who cares of the adjusted value of listings isn't realistic after you do your adjustments. call it a listing and dont consider it in your final value.

It really doesn't matter either way.

Doing it differnt isnt doing it wrong. Im a busy guy, I dont do the extra work on the listing. I could care less what a listing adjusts out to as it hasnt sold yet.

 

[ZZGAMAZZ]

Because the door is open and I've always wondered although it's beyond my license, does DCF requires an extraordinary assumption?

 

[PropertyEconomics]

Because the door is open and I've always wondered although it's beyond my license, does DCF requires an extraordinary assumption?

Just ONE extraordinary assumption?

 

[Michigan CG]

I have no problem adjusting listings when it is reasonable...and in my Iowa market it is meaningful information for the most part.....the listings are mostly realistic showing the upper end of value.

However, in the last 4 days up here in foreclosure land (SE Michigan) the listings are meaningless....The prices of owner occupied are what they owe plus the Realtor commission and a little extra padding.

I have seen 1,600-1,800 SF ranches listed for $164,900-$289,900; all built within the last five years, all within 5 miles of each other. The ones in the $160-180k range are foreclosures (there are three or four), the ones in the $200-290k range are owner occupied (there are about 10-15).

It is very hard to constantly tell the wife to quit looking at list price...it doesn't mean anything.

 

[KD247]

... 1,600-1,800 SF ranches listed for $164,900-$289,900... ...it doesn't mean anything.

I agree with you that asking prices don't mean much, except in regards to the Principle of Substitution, which many appraisers apparently don't understand or don't appreciate the importance of.

So, let me get this straight. Say you're appraising a 1,600sf 2003 home and there's a nearby listing of an identical property at $164,900. The broker says it's been on the market for four months, with only one lowball offer. The most recent closed sales indicate a value of $200,000, so that's your final opinion of value?

And then the next day, you're buying a Ford F150, and the one you want has a sticker price of $28,000, but using your best negotiating skills, you've talked the salesman down to $26,025. As you're waiting in the sales office, your wife notices that inside the showroom is the identical car, your favorite color and all the same options, with a big $24,990 painted on the windshield. Just then, your friend, a car expert, calls to tell you that anything between $26,000 and $27,000 is a good price. You've already done your best bargaining on the first car, so what do you do? Tell your wife to quit looking at the lower asking price - it doesn't mean anything?

 

[Michigan CG]

KD....I agree with you whole heartedly....To explain better, that was just an example. She (the wife) will exclude houses she wants because of the list price according to the MLS.....and I have to keep telling her list price doesn't mean anything. Just because they say $299,000 doesn't mean they won't accept $240,000.

 

[Richard Carlsen]

What a couple of authors say about the Principle of Substitution....


"The principle of substitution states that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable replacement property."

"The appraisal process relies heavily on the principle of substitution in developing an estimate of value. This principle holds that typical potential buyers in a marketplace usually are unwilling to pay more for a property than the cost of acquiring an equally desirable substitute property."

 

[KD247]

Because the door is open and I've always wondered although it's beyond my license, does DCF requires an extraordinary assumption?

Only if it's extraordinary. If the market routinely considers discounted cash flows in their decision making, you might be dealing with standard, not extraordinary assumptions.

Extraordinary assumptions are appropriate for where you believe something is probably true, but it can't be verified and there are significant indications that it may not be true.

My question: Don't extraordinary assumptions and hypothetical conditions usually pertain to unknown facts (or predictions) and not appraisal theories? For example, would it be appropriate to state the extraordinary assumption that the Income Approach was applicable? It just doesn't sound right to me.