Most weight to pending sales!

[Chelley Bahner]

NOT in my market! You must be working in a unique market area.

No, I don't think my market's unique. I just think that sellers are still oblivious to the fact of the matter. Listings are still higher than closed sales here. If I used active listings in my reports and didn't adjust for them being active listings, my values would come out inflated.

 

[Dee Dee]

Using and adjusting for active listings is absurd unless there are lower listings out there, which, I'm sure, is rare. I haven't seen any yet. They do nothing but muddy the waters. If you want to find a decline in a market, look at sale trends over the past month compared to the month before and so on... Even in a declining market, listing prices still tend to be a little higher than sale prices.

Not in my world, where both sellers and their agents are finally starting to figure out that if they don't price it competitively they may end up losing potential buyers to those who really want to move their properties.

AL in the Springs? You'll see the same thing there before too long.

 

[c w d]

How did the destruction of the property three days after the seller and buyer had a 'meeting of the minds' and agreed to sale price not afford a good market indicator?

How does it afford a good market indicator when the appraisal to close the deal comes in significantly higher or lower?

I've lost count of the number of "pending" deals I've killed when I allowed things like closed sales influence my opinion of value.

With that in mind I only use pending/actives as indicators of market trend.

How can you render a value for today based on still variable pricing to be set tomorrow?

 

[Chelley Bahner]

Not in my world, where both sellers and their agents are finally starting to figure out that if they don't price it competitively they may end up losing potential buyers to those who really want to move their properties.

AL in the Springs? You'll see the same thing there before too long.

You must have looked it up on dora... Where are you at?

Yeah, you're right. I do think it's coming.

The article Moh Malekpour posted says it all about what I'm seeing right now. Homeowners acknowledge that the market isn't good, but "know" their properties aren't affected by it. Not only is their property still worth at least what they paid for it, but it's most certainly worth more because, well, it's their property.

I am starting to see some longer marketing times on the overpriced stuff. The question is, how long do they go before they make that cut? Until then, I can't put a lot of reliance on active listings, on blind hopes that the market isn't affecting "my property."

 

[Dee Dee]

Chelly,

Welcome to the forum!
I'm in the southern 'burbs of Denver.

Over the winter I've noticed that sellers in the Denver area are getting a reality check and seem to be more competitive with their pricing than in the past. Now it's not uncommon for listings to be lower than recent sale prices on similar homes.

I am starting to see some longer marketing times on the overpriced stuff. The question is, how long do they go before they make that cut?

Perhaps when they realize that they could easily join the ranks of sellers who end up as short sales, or go into foreclosure, because of their stubborn attitude. Buyers are smelling blood, and very few will overpay like they would have just a few years back.

When it becomes common in a market area I think it's misleading if an appraiser fails to acknowledge and discuss those lower active listings in their appraisal. Imagine the consequences of not giving those listings some weight if the subject property goes into default in a year or two. Any thorough reviewer would be rubbing the appraisers nose in it, especially in cookie-cutter neighborhoods with model matches where it's obvious that there was a downward trend. It's just as bad as not mentioning if there are multiple short sales and REO's in the 'hood.

I think Mike Neff summed it up quite well.

 

[Doug Meyer]

You cannot use it as a sale comp if it has not closed. What if the house burned down in those 3 days or if the buyer died? Report it as a pending sale.....or, wait the 3 days until it closes and ask the title company to provide the document number.

They had a back up offer on the house. Bidding war took place here. Also, I explained the situation and should be no problem.. Credit Union on a 2nd mortgage inhouse transaction. But I would normally agree with you in most cases!

 

[RSW]

I agree with David. Use the principal of substitution. If there are no homes listed above or at where the subject property appraises, and your closed sales are 90 - 180 days or more old, then It is only logical that the subject would not or should not appraise higher than the listing price of the active listings.

 

[Chelley Bahner]

Chelly,

Welcome to the forum!
I'm in the southern 'burbs of Denver.

Awe, thanks! I've actually been lurking for a while. )

 

[Chelley Bahner]

I agree with David. Use the principal of substitution. If there are no homes listed above or at where the subject property appraises, and your closed sales are 90 - 180 days or more old, then It is only logical that the subject would not or should not appraise higher than the listing price of the active listings.

I concur. But so long as active listings are significantly higher than recent closed sales, they're just fishing and adjustments need to be made.

My marketing area must still be in denial. ) The way new listings are priced, you'd think we were in a booming seller's market.

 

[Joyce Potts]

Fannie Mae does allow for use of pending sales:

See guidelines:

406.02: Selection of Comparable Sales (06/30/02)


The appraiser must comment on the reasons for using any comparable sales that are more than six months old. For example, if the subject property is located in a rural area that has minimal sales activity, the appraiser may not be able to locate three truly comparable sales that sold in the last 12 months. In this case, the appraiser may use older comparable sales as long as he or she explains why they are being used.
The appraiser may use the subject property as a fourth comparable sale or as supporting data if the property previously was sold (and closed or settled). If the appraiser believes that it is appropriate, he or she also may use contract offerings and current listings as supporting data.

Which is why Fannie Mae is in the shape she's in.

I rest my case.