LIST to SALES price ratio?

[Lee Lansford]

No where am I seeing it as s/p vs l/p ratio in these threads! Should it not be as s/p vs l/p instead I am seeing l/p vs s/p

What is being asked (IMHO) is the relationship expressed as "Avg. Sold Price / Avg. List Price". My local MLS provides the "list price" as the list price at the time of sale.

 

[rbrienza]

Call the brokers... develop a excel spreadsheet.

Here is one that I did for a commercial property.

 

[CANative]

I've been doing this almost since the day I started appraising because it was logical. None the MLS systems I use started making this data available (as an automatic MLS reporting item) until a couple of years ago.

I had a large handfull of sale and listing printouts. All I did was divide the sale price by the list price and scribble the calculation on the sheet. 105%, 97%, 96.4%, 91%, etc., etc. I used the most logical percentage for the listing comp.

Almost any property will sell if the price is right. If the price is wrong it will either sell too fast or take too long. That's why there is a wide variance in Sales price to list price. That's why you can't just make casual adjustments to listings for this. You have to track down the listing history and hunt for price changes and interview agents to find out what's going on (tenant is uncoopertive, back yard is a mess, seller refuses to list at a reasonabel price, agents won't bother showing the property because the seller refuses to list at a reasonable price, etc., etc.)

This 1004MC monkey business can cause an misleading appraisal report if we're not careful. IMO of course.

 

[Elliott]

If you include Final LTS, then it seems it would be in the spirit of
reading tea leaves to give Original LTS, along with Total DOM and
DOM from last price change. When I'm asked to explain long
marketing times I usually blame the corrupt lending system and
financial panic in the fall of 2008 and they don't ask for further
explanations.

 

[TJSum]

This has been an ongoing discussion for the past year regarding the LP/SP adjustment. At least in my region, once the property is properly priced, the LP/SP ratio seems to have more to do with how much seller concessions are included in the deal than anything else. For all those putting great faith in the LP/SP adjustment, how do you factor in or out sellers concessions?

I am not a fan, and put this type of comment in my report to satisfy those clients who believe in this junk science...

"Comparable 7 is currently under contract, however the price quoted is the listing price only as contract prices are not made public until settlement occurs. No adjustment was made for the listing price status, as predicting contract prices could prove misleading given the assumptions required. No listing status adjustments were made on listing comparable 8 for the same reason. The median list price to sales price ratio for this marketing area during the past year was 97% as found on the 1004mc Addendum. The list price to sales price ratio supports the subject's value opinion for these two comparables. No adjustment was placed on the market grid for the LP/SP ratio so as not to mislead any reader of this report that it could be a prediction on what these homes will sell for."

 

[timd354]

I've been doing this almost since the day I started appraising because it was logical. None the MLS systems I use started making this data available (as an automatic MLS reporting item) until a couple of years ago.

I had a large handfull of sale and listing printouts. All I did was divide the sale price by the list price and scribble the calculation on the sheet. 105%, 97%, 96.4%, 91%, etc., etc. I used the most logical percentage for the listing comp.
Please do tell us how you determine the "most logical" percentage. Would that be the median, the mean, the most common percentage or the one that you liked the best for that particular listing comp?

Almost any property will sell if the price is right. If the price is wrong it will either sell too fast or take too long. That's why there is a wide variance in Sales price to list price. That's why you can't just make casual adjustments to listings for this. You have to track down the listing history and hunt for price changes and interview agents to find out what's going on (tenant is uncoopertive, back yard is a mess, seller refuses to list at a reasonabel price, agents won't bother showing the property because the seller refuses to list at a reasonable price, etc., etc.)

This 1004MC monkey business can cause an misleading appraisal report if we're not careful. IMO of course.

Your post shows the absolute ludicrousness of adjusting listings using and average SP/LP ratio. As we all know, some real estate brokers price their listings high, others price them low and some price them realistically. Thus, in order to apply such a ratio to listing comps any way that is meaningful, the appraiser essentially has to appraise each of the comparable listings in order to determine whether or not the list price is "reasonable" as unless you make some sort of value determination for the comp, the appraiser simply cannot determine if the listing price is too low, too high or is "reasonable". This is an absolutely ludicrous process and does nothing to improve the credibility of an appraisal report. Listing and pending sales should definitely be utilized by the appraiser in most appraisal reports but they are only really useful in establishing a cap on value due to the principle of substitution, nothing more and nothing less. When appraisers start attempting to prdeict the sales price of these active listings (which is only reason to apply a SP/LP ratio adjustment) then, the appraiser's analysis has gone off of the tracks and becomes less credible. It is absolutely shameful that some clients require such an adjustment.....just more idiocy from the mortgage lending world.

 

[TJSum]

When appraisers start attempting to prdeict the sales price of these active listings (which is only reason to apply a SP/LP ratio adjustment) then, the appraiser's analysis has gone off of the tracks and becomes less credible. It is absolutely shameful that some clients require such an adjustment.....just more idiocy from the mortgage lending world.

When appraisers apply that LP/SP ratio adjustment to the grid for any particular comp, and then disclaim they are not predicting anything.... to me it sounds way too much like Bill Clinton stating he did not inhale...

 

[CANative]

the one that you liked the best for that particular listing comp?

That's the one. It's an opinion. The opinion is supported by the data.

This is where the "creative side of appraisal" comes into play. Call it experience if you like. If a listing has been on the market 300 days and it's obvious the reason is a listing price beyond market acceptance it should be adjusted if it's presented in the report as a listing comp. How much? Look at the stats... properties on the market over 180 seeling at 84% of the list price. Adjust downward 16%.

It's not ludicrous. It's analysis. Market analysis.

 

[timd354]

That's the one. It's an opinion. The opinion is supported by the data.

This is where the "creative side of appraisal" comes into play. Call it experience if you like.
If a listing has been on the market 300 days and it's obvious the reason is a listing price beyond market acceptance it should be adjusted if it's presented in the report as a listing comp. How much? Look at the stats... properties on the market over 180 seeling at 84% of the list price. Adjust downward 16%.

It's not ludicrous. It's analysis. Market analysis.

The fallacy in this adjustment is thinking that you can take a ratio derived from a data set comprised of multiple sales and apply that ratio to just one sale and expect that ratio to be accurate as to that one sale. For instance in your example, you have a 84% SP/LP ratio....what this means is that some of the properties likely sold for more than that ratio (in some cases likely far more) and some sold for less (in some cases likely far less and this could be for multiple reasons both known and unknown to the appraiser. So, unless you are prepared to essentially appraise the comparable listing to determine exactly where in the spread of the SP/LP's in a particular market the sale of this property is likely to fall, then just blindly adjusting the comparable listing by some average or median SP/LP ratio is simply not credible.

 

[CJHNV]

My local MLS has suddenly added two % figures for each search:
. Final LIST price to SALES price % ratio
. Initial LIST price to SALES price % ratio

Final % is only figure we used to see.

In last search I did -low income urban area- the "Final %" was 95%,
but the "Initial %" was !!80%!!

So.... Which % figure would you use?;
....or would that depend upon how long the property had been listed ??

I put both final and initial sell/list ratio in the grid for sales comparison grid (ie 95% / 80%) and in comments I note that the "sell/list price ratios noted are reduced / initial list price"
This is a quick and easy way to show the client how things have changed.
Also - when they ask for it in the listing grid - I use either or both depending upon the listing. For example, if one listing comp has many days on market and several price reductions and is near where other listings are when they go Pending or sell, I would use the "95%" adjustment. If a new listing comes on the market and it's priced too high, I use the more aggressive number. If a new listing comes on the market and it's priced below the typical sale price, I call the agent to find out circumstances and may or may not use it or adjust it. Depends on the circumstances.

Also - I consider the "special conditions" - our MLS notes whether listings are Short Sale, REO, None (ie normal sale).