Marketing time in declining market

[Punalava]

I am curious if declining markets in other areas are showing marketing times of under 3 months. Because this is the case for most markets in my area. Quarterly and year-to-date data for average and median DOM are typically under 3 months for sold properties. Distressed sales comprise a significant percentage of the market, and therefore, compete against and influence the values of non-distressed properties. It is common for sold properties to have marketing times of under three months since many sellers are aware that properties not priced competitively at the outset tend to stay on the market. If it does not sell at a given list price within approx. 3 months, it will unlikely sell at a later time without undergoing a price reduction. And in these instances, the marketing times are somewhat misleading, because the DOM after final price reduction are typically under 3 months.

Although the data has been consistent for some time now, I have yet to see other appraisers in my area indicate anything other than 3 to 6 months for marketing times. I might be all alone here, but I am going to trust the data and not my peers. I appreciate any feedback. Thanks!

 

[J Grant]

You did a great job of explaining why the marketing time is under 3 months right here, and that overpriced properties have longer marketing times, so put in the real marketing times you observe and the same explanation!

 

[J Grant]

we have same thing here...short marketing times with REO properties in a number of areas...usually precludes a recovery as investors are buying and eventually the inventory of REO will dry up.

 

[hastalavista]

Most of my markets are under 90-days regardless if the value trend is increasing, decreasing, or stable.

I agree with JGrant that you've done a good job explaining the dynamic.

 

[Terrel L. Shields]

Locally
In garden variety average houses, the marketing time is likely to be less than 3 months but with financing issues, can drag on under contract an additional 30 - 90 days.

For economic farms, they have consistently taken six months. For larger homes or McMansions, particularly in the more remote areas, they have to be discounted deeply to find buyers consistently within 6 months. Some have languished for over 2 years.

Unique properties that are bank owned either basically are given away or take a year plus to market. An indoor roping arena comes to mind. It has taken over 2 years to just change hands from initiation of foreclosure to another (2nd lien holder) buying out the first. A small fertilizer service company took over a year after the owner suddenly died and it reverted to the bank. His house, which was in terrible shape, is currently being remodeled by the bank because it basically was not salable in the condition it was. A small town service garage...over 1 year even though prices at fire sale pricing, no one could finance it willing to try and run a garage. Fun and games..

 

[SutnNC]

If I am reading what you have written correctly, I would view the market data the same/similar way and explain it similarly.

With "marketing time" being the period immediately following the effective date, I would like to see some explanation with regard to why marketing time is on page one but we go on to provide exposure as a further requirement somewhere else. Most if not all readers haven't a clue as to the difference (and NOBODY explains it). Then the wide spread between the SCA cdom vs exposure estimates vs marketing times that occurs sometimes; it get's messy in some areas.

I would assume that 99% of appraisers are reporting exposure time on page one. It makes sense since we're looking at data that precedes the effective date (for the majority of work that res appraisers do). I believe that it would make more sense to flip flop the two (exposure/marketing times). The marketing time is a bit more elusive (depending on inventory, often the time of year and just a heck of a lot of variables).



-If properties are listing typically above the market (in any given area) and are selling ultimately between that 3-6 month time, I would go ahead and check 3-6 months on page one. Then go further to explain why in the narrative addendum under market conditions.

- I too review the listing history of both the sales selected for the SCA then the total list of sales viewed in the field by me for the subject. The time between the last price change and any due diligence, contingency (some kind of offer) will be what I rely on regarding exposure time. Above market listings are misleading if we show a total exposure time for the subject that would include above market listings when we are providing our OMV based on the range of market data that the actual buying market is reacting to. I have had this discussion while spit-balling at local meetings and the response is usually, "aahh, that makes sense, I'm going to consider doing that".

Good post, I'll enjoy reading what others are doing/thinking out there.

 

[residentialguy]

The question comes, do you state the marketing time of a well priced listing, or do you include the additional marketing time we often see due to being a little too optimistic on the initial listing price?

 

[Mike Garrett RAA]

Price is the key regardless of the state of the market. Fairly priced properties, IN MY MARKET, seem to be selling in the 90 to 120 day range. I have considered this market to be stable for more than a year. The DOM is all over the place on higher priced properties. New construction is usually below 90 days but we have to remember the builders report what they want rather than the actual time on the market.

 

[Riick]

Last 6-7 years, most local markets here have sub-90 day marketing times;
but, some few markets have recently gone up to 90+ days.

What I've found interesting is the discount from Initial and Final Asking prices.
Some areas just don't (want to) get it, 5± years into this downturn.

Here are figures from last appraisal, in a market where sale prices are down 24% from their 2006 peak:

........... Discount from Initial asking price: 18%
........... Discount from Final asking price: 2%

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[Mike Garrett RAA]

Sales price to List price ratio (SP/LP) has been quite stable in most segments of my marketing areas. 97% is quite common.