Lets put Historic to bed.

[Mztk1]

I started using listings and pendings in my report long before the banks started requesting them. I used them because in order to establish a believable opinion of value as of the effective date of the report, they were necessary. If I didn't use them I'd have been coming up with values even I didn't believe.

Your friend may have lost in court, but he may not have explained his method very well and may not have clearly instructed the court how it was necessary. As a professional it is not his method but his believability that is at stake. Hearing only one side of the situation means little to me. It is very possible that 9/10ths of us who use listings and pendings on this board would agree with the judge if we were presented with the same information the judge was.

Personally, if banks asked me to stop using listings and pendings as comparables I couldn't. It is a USPAP requirement that I provide credible reports. In my area there is no such thing as a credible appraisal without the use of pendings and listings and lenders cannot ask me to provide something that is a violation of USPAP.

 

[toddmallard]

jim I understand, But there are active listings in most areas that range from much higher than need be, to well below the market. Do we choose the comps just to support our findings. Example, My subject's estimated value is $200,000. There are active listings with the same DOM, that are asking $250,000 and $180,000. I can select either the upper active listings to support a higher estimated value or select the lower listings to support a lower estimated value.

Some appraiserd o that. what the broker needs they get, and proved by the actives.

I know some will say "why not select the lower actives" well why? I can justify that my subject is in better condition, or better upgrades, or whatever. You can't hold me for my opinion. remember its an opinion of value.

 

[The Warrior Monk]

We're only getting one side of the story here, so comments are based on speculation.

even though the appraiser used the low end of the comparables to determine the estimated market value, the active comps should not have been on the appraisal form.

FWIW, this statement is problematic. Using the "low end of the comparables" is not determining market value.

the judge stated that no one could forsee the actual sales price of those comps. So what i am saying here is, Watch out. We loose on both sides.

We don't know how that data was presented.

It is true that we do not know what the properties will sell for, if at all. But in general they would tend to set the upper limit of value, which is the manner it would have to be presented.

Also, "should not have been on the appraisal form" is unclear. Does that mean in the grid and adjusted? That does create a problem when using a lending for. Adjustments wouldn't be made to the list price, but rather the predicated sales price (list price times some list/price ratio). I would avoid that...too much speculation for me...though many appraisal texts would disagree.

 

[The Warrior Monk]

jim I understand, But there are active listings in most areas that range from much higher than need be, to well below the market. Do we choose the comps just to support our findings. Example, My subject's estimated value is $200,000. There are active listings with the same DOM, that are asking $250,000 and $180,000. I can select either the upper active listings to support a higher estimated value or select the lower listings to support a lower estimated value.

Some appraiserd o that. what the broker needs they get, and proved by the actives.

I know some will say "why not select the lower actives" well why? I can justify that my subject is in better condition, or better upgrades, or whatever. You can't hold me for my opinion. remember its an opinion of value.

The data has to be analyzed in the context of the rest of the data. If there is one listing at $180,000 and the rest at $250,000, the $180,000 listing could be a one shot deal...maybe the homeowner has to get rid of the home immediately and requires a cash deal, and once it's gone, only $250,000 listings are left. However, if anyone can go into the neighborhood and have the choice of a dozen of so homes similar to the subject at $180,000, different story altogether.

 

[Baron Von Squidlo]

To ignore listings and pendings is to ignore what you were taught in Appraisal Principles. Remember the principles of substitution? The maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable replacement property. Informed buyers are going to buy the least expensive similar home.

 

[Diego Lopez]

Lee I am on your side. I always use actives and pendings. My friend who's name will not be disclosed, lost in court. the USPAP side was not challenged "civil court" the use of active sales were. He LOST, the judge found that the active sales could not be used to correctly value the subject. even though the appraiser used the low end of the comparables to determine the estimated market value, the active comps should not have been on the appraisal form. the judge stated that no one could forsee the actual sales price of those comps. So what i am saying here is, Watch out. We loose on both sides.

Todd, I've had this discussion with other appraisers, and one lady in particular shares the judges’ view and she is probably the most experienced appraiser I know. I personally use listings/pendings to establish a time adjustment, but Being an appraiser and a RE sales person I can tell you that while competing listings do have some weight in the buyers decision making process, but I've noticed buyers are emotional begins and sometimes price is not the only factor in their minds.

Remember that a list price is not set in stone; it can fluctuate depending on demand. For example, I have a listing that I'm trying to sell, At $350,000 I was not getting any calls what so ever; I lowered the list price to $325,000 and now Im swamped with people interested in the house; So the sales price is most likely going to be higher than $325,000 but less than $350,000. I'm planning on increasing the list price to $335,000 and see how it goes. So in that sence, the judge is right.

I guess, this is one that can go both ways, and hopefully, if it comes down to it, it's your way.

 

[Riick]

"Active listing #5 was reduced in asking price from $196,900 to $184,900 7/08
Listings #4 & #5 both appear extremely overpriced to the appraiser, and are not considered indicative of subject's market value."

"List-price to sale-price ratio adjustments were not made. According to statistical theory applying the list-to-sale price ratio adjustment to the average asking price of a large pool of asking prices of homes *can* result in a fairly reliable average sale price for that sample *group*; however, applying the ratio to any individual asking price in that group will most probably not provide a valid result. Thus, the active listings above are used only to show the probable upper limit of value for the subject in the current market. These listings were given no weight in the analysis of subject's current market value."
.

 

[Mztk1]

"List-price to sale-price ratio adjustments were not made. According to statistical theory applying the list-to-sale price ratio adjustment to the average asking price of a large pool of asking prices of homes *can* result in a fairly reliable average sale price for that sample *group*; however, applying the ratio to any individual asking price in that group will most probably not provide a valid result. Thus, the active listings above are used only to show the probable upper limit of value for the subject in the current market. These listings were given no weight in the analysis of subject's current market value."
.

I like that Riick! :new_smile-l:

 

[Mztk1]

jim I understand, But there are active listings in most areas that range from much higher than need be, to well below the market. Do we choose the comps just to support our findings. Example, My subject's estimated value is $200,000. There are active listings with the same DOM, that are asking $250,000 and $180,000. I can select either the upper active listings to support a higher estimated value or select the lower listings to support a lower estimated value.

Some appraiserd o that. what the broker needs they get, and proved by the actives.

I know some will say "why not select the lower actives" well why? I can justify that my subject is in better condition, or better upgrades, or whatever. You can't hold me for my opinion. remember its an opinion of value.

I don't care what some appraiser making value does. What I care about is what I do in the context of finding out what the market value of the subject is. I choose the listings that are most reflective of the market. It can be a difficult analysis. If I chose listings to satisfy a conservative value I am just as wrong as choosing listings to prop up a value. I choose listings and pendings as a way to prove the market value to myself first, and the reader second. That way, if a judge asks why is used them and what purpose they serve, I can give a very honest and convincing answer.

 

[Riick]

In the dim mist of memory is my very first appraisal class,
where the instructor summarized the process this way.

Now, after you go through all the steps and have photos and measurements
and notes galore, it's time to sit down on the curb, across from the subject
property, look at it, look at your notes, and ask yourself:
"What would that house really sell for??"
.