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ERC Question Re: List Price vs Anticipated Sales Price

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Jim Bartley

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Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
I'm finishing up an ERC appraisal. My ASP is slightly higher than the current list price. The last time I did one like this I got a call from the client stating I had to adjust my ASP down to the list price. I stuck to my guns and did not lower the price. The house actually did sell for more than list. I've looked through the ERC guidelines, but I didn't see anything that states the ASP can not be higher than the list price. Need some ammo for the inevitable call. Any comments?
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
I have dealt with this one also. Unless your market is smokin', and you have buyers competing, why would anyone offer an amount greater than list price?

In my case, I also was higher. This market was stable with fairly lengthy typical marketing times (greater than my defined marketing period). In this case, I got a call, thought about it and reduced my ASP to list price.

I tracked it, and it sold lower than the list price--the market softens due to a slight elevation in rates.

But no, you don't have to reconcile to a lower list price--but if it has been on the market for say 30 days, and buyers are not competing, why would anyone offer more?
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
JimBob, I am unaware of any ERC rule that absolutely requires the ASP to be lower than the list price. But, stop and think about it, why would a buyer pay more than the seller was asking? Only situation I know of where that routinely happens is if the buyer is getting something more; like, for example, closing costs paid, an upgrade in carpet or some other amenity, or cash to put in his/her back pocket.

Now, if you are recommending that they do something to the property, that might raise the ASP as compared to what the property is like now, but I believe they want "as is" value for the ASP. Remember, it's Anticipated Sale Price, not Market Value; without knowing all the details, it's hard to say for sure, but I have trouble imagining an ASP higher than what is being asked for.
 

Jim Bartley

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Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
Steve & Verne,

I don't necessarily disagree with your views. The reason I posted this question was to get other opinions. My own view is that, ultimatley, it may not matter what the list price is. To illustrate, lets use an extreme example. Let's say this house is listed at $75,000 and I arrive at an ASP of $85,000. Remember I said extreme example. Assuming my opinon is accurate, would it be reasonable to think that the list price would be the upper limit of what this property would likely sell for? I don't think so.
 

Blue1

Elite Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
California
In my market, I have generally found the list price to be at the very top end of the market. Very few homes are listed below the market. If it were me (in my market) I'd be cross-examining the Realtors like a losing defense attorney (if you know what I mean) to try to find out why the home was listed below market. Call me cynical, but, there must be SOMETHING wrong with a home with a below-market list price......
 

jtrotta

Senior Member
Joined
Jan 16, 2002
In general if the agent has been seeing Relo homes selling quicker at just under the market, it could be the reasoning behind the List price. Also, most agents that handle Relo's - are consistent, they work them all the time and in that situation, at the prompting of someone else, they may be just under the market to make the office stronger competition for the end results (if ya know what I mean) 8O

8)
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Remember, it's Anticipated Sale Price, not Market Value

J & Blue, in view of this, it even makes your point more valid; depending. Regular listings (that are not re-lo’s) happen at the top range of the market value (normally). In my area, re-lo's are often even higher than that. However, that depends somewhat on what stage of the cycle you get the assignment.

I have found that many transferee's have very unrealistic expectations at the beginning. However, after being on the market a couple or three months, they often lower their prices (often, more than once) to something lower than the top range of market value. Their reasoning is that they will be better off to sell the house at something less than their ideal selling price than to have to take the re-lo companies offer.

It has been amazing to me how market savvy some of these people are. On the other hand, if you get some dummy making their first move, then all of the assumptions of the above paragraph might be out the window. Anyway, the short of it is: if JimBob ran into a savvy seller who underestimated the market just a little bit, the ASP could indeed be above the price the seller/realtor has on the property. I've never seen it happen, but I understand how it could happen. So, JimBob, that is one thing you might want to consider. Has your home been on the market for awhile and had its price lowered several times? If so, you might be more inclined to stick with your original opinion than if not.
 

Doug in NC

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
I haven't seen an example where the anticipated value is above list price. It is completely the opposite in my market.

I looked back at my accuracy over the past year recently (verifying sales prices vs. appraised values on relos). I have been trying to be very conservative, considering the downturn in the economy and heavy job losses. I have been right on the money on the $200,000 and below properties, but the upper end property valuations have been all over the place. Generally, despite my conservative estimates, I have been coming in too high. The problem is the large inventory on the market in the upper price ranges. I am seeing little to no appreciation in some markets over the past 3 years, and some sellers being relocated are even losing money.

These are changing times. For the first 7-8 years as a relocation appraiser, I never made a forecasting adjustment (was never necessary due to a strong real estate market). But now, I am starting to use this adjustment on a regular basis. With six month+ supply of homes in a market price range, you have to make an adjustment to promote a sale in under 120 days.

Doug in NC
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Doug, like you, I never used to make a forecasting adjustment. When the re-lo commpany asked for one, I would respond something like: "With MLS DOM averages below 90 days in this segment of the market, it would make more sense to make a positive forecast."

Not anymore. I noticed the change while everyone else seemed to be raving about the hot economy (before the dot.com bust). Inventory started to increase and DOM also increased drastically well before the blow out. I also noticed unemployment numbers inching up. One of the main things I noticed at that time was that it was often difficult to find good comps less than six months old - before it had been no problem. Since then, the market for housing has taken small steps to the positive or negative, but has not been as hot as it was before. Our market here is still not too bad off; but I've been making a forecasting adjustment on most of the re-lo's I've done in the last two and one-half years.
 

Charlotte Dixon

Senior Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Delaware
Days on Market is the key. If it's been on the market for 30 days or more (in my area) I wouldn't arrive at an Anticipated Sales Price that's more than the List Price. The ERC Companies (here we go again) will try to beat you down to what they want the Anticipated Sales Price to be. First they work on appraiser #1, then on appraiser #2. This will go back and forth, possibly a number of times (as in my last case) until they're happy with the result. If all else fails i.e.condition, location, site adjustments, they hammer away on market change and forecasting adjustments. If they can't beat and mold the appraisers in to what they want, they hire appraiser #3. Then, I've been told, they will note on the appraiser's record that he/she was not open to "re-thinking" the Anticipated Value that he/she stated. I just told the company in Milford, MA to take a walk. My fee was $600 for about 35 hours work; plus, they required each appraiser to re-measure the house and mine was correct the first time. In addition there were 6 argumentative phone calls from the reviewer who had an obnoxious attitude because she couldn't beat me down. I don't need this grief! ......... :roll: .......sorry I ran away with this :lol:
 
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