Hot Market

[Blue1]

Been experiencing a "hot" market in my area. Available inventory is extremely low causing prices to rise and market exporsure times to shorten. In this Market I am applying the principle of subsitution, that is, I am including active listings in all my reports. The question is, how much weight do you give them? In one area, listing prices exceed available sales by at least 10% and the typical listing to sale price ratio is 5%. Is it reasonable to include listing prices as the high end of prices in the area? Is it reasonable to place the most probable value (for the subject) above the comparable sale prices and slightly below the comparable listing prices? Any help would be much appreciated.

Thanks
Bruce M

 

[Thomas N. Morgan]

Blue 1,

Depends what use is to be made of the appraisal. From the standpoint of real estate sales, or Employee Relocation appraisals, you are right on target. I cannot think of a better way to get a realistic idea of value.

If you could find one of Mike Boyd's old posts on the subject of using listings and market trends (a foward look at value) instead of only closed sales (a look backward at value) you might get some assurances about your approach. Are you familiar with the Archives on the Old Forum? Much good information there.

Thomas N. Morgan (Florida)
State-Certified Residential Appraiser 0000052

 

[Tim Hicks (Texas)]

Lucky you. Here, I have noticed a drop in the upper end home sales and a drop in the upper end sales prices. Activity is way low on these properties and it seems the higher sales are all over six months old, hmmm. Now, you every day cookie cutter homes may have slowed a bit, but not much and no recognizable drop either.

 

[Ray Ohler]

A lot of times on relocations, they want you to do "forecasting". However, if you are not "projecting out" a sale date, the time adjustments made to the comparables to bring them up to the effective date of appraisal are all that is required. Reciting "marketing time" and "exposure time" does not change your effective date of appraisal. You appraised the property as of a specific date. If you "forecast", then you should make your value a "prospective" opinion. Play on words, yes, but could be turned upside down by a reviewer. If it isn't a "high-end" property and the exposure time is rather short, won't make a big difference.