Placing weight on PENDING SALES

[Yuanyin]

LENDER
Report Rejection Reason
Appraiser to update the weight of the comps to apply to sales only and not pending sales. Thank you..

FANNIE MAE SELLING GUIDE:
Can active listings be used to establish value?
B4-1.3-07
The sales comparison approach to value is an analysis of comparable sales, contract sales, and listings of properties that are the most comparable to the subject property.

The appraiser’s analysis of a property must take into consideration all factors that have an effect on value. The appraiser must analyze all closed sales, contract sales, and offerings or listings of properties that are the most comparable to the subject property in order to identify any significant differences or elements of comparison that could affect his or her opinion of value for the subject property as of the effective date of the appraisal report. This is particularly important in changing (increasing or declining values) markets. Analyzing closed sales, contract sales, and offerings or listings is an important analysis in any market and will result in more accurate reporting on market conditions, including trends that indicate that sale prices for contract sales and asking prices for recent offerings or listings have changed.

 

[ucbruin]

I would never say I gave most consideration to a pending/listing....

 

[TerryRohrer]

I prefer not to as it necessarily requires some conclusion regarding the probability that the sale will close at the contract price. Most of the time, I can't verify the contract price, so will not weigh those much, if at all.

 

[Yuanyin]

A standard statement I sometimes use may go something like, "Most weight was placed on x, y and z due to recent sales date, physical similarities, location etc, LESS weight was placed on comparables 4 and 5 since they are under contract without a settled sales price.

But I don't say no weight. What would be the point of using them at all then?

 

[George Hatch]

I do a sale/list ratio and DOM for all of my comparable sales so as to get an idea where most of the pendings might end up, and I say as much in my reports. The sale/list ratios for those sales - including the ones I didn't present in the SC of my report - are facts. Not opinions. When I'm looking at pendings, I'm also looking at some of the pendings I didn't present; so I'm usually not looking at only one or two of those, either.

Within the context and comparison with the closed sales data I consider pendings to indicate to the bleeding edge of the market trend whether the value trend is increasing (seller's market) or decreasing (buyer's market). If all the closed sales are closing at 98% or 100% or 110% of the list price then in lieu of information to the contrary I'm going to expect the pendings to do the same.

Having said that, I do *exactly the same* when the markets are in decline and the most recent sales are selling for well below their respective lists. I don't do one thing when the markets are hot vs another when the markets are cold.

 

[ucbruin]

A standard statement I sometimes use may go something like, "Most weight was placed on x, y and z due to recent sales date, physical similarities, location etc, LESS weight was placed on comparables 4 and 5 since they are under contract without a settled sales price.

But I don't say no weight. What would be the point of using them at all then?

Instead of saying less weight....
Consider saying pending adds support to comp X....

 

[TerryRohrer]

A standard statement I sometimes use may go something like, "Most weight was placed on x, y and z due to recent sales date, physical similarities, location etc, LESS weight was placed on comparables 4 and 5 since they are under contract without a settled sales price.

But I don't say no weight. What would be the point of using them at all then?

Well, it is your call whether or not to "use" them. Sometimes, the SOW requires the inclusion of pending sales or listings. That does not mandate that an appraiser rely on them in any way.

 

[Yuanyin]

The report reject reason was
"Appraiser to update the weight of the comps to apply to sales only and not pending sales. Thank you.."

Is this based in fact or is this a particular underwriter?

I haven't found anything anywhere where it states an appraiser cannot place weight on an under-contract listing.

 

[Fernando]

If pending is good comp, I would sweet talk agent in giving me the sales price and when will close.
Knowing this information and agents usually don't lie to me, I give it more weight in my head but not saying it in report. That's how Fernando does it!

 

[George Hatch]

The report reject reason was
"Appraiser to update the weight of the comps to apply to sales only and not pending sales. Thank you.."

Is this based in fact or is this a particular underwriter?

I haven't found anything anywhere where it states an appraiser cannot place weight on an under-contract listing.

They can't tell you what to think. But you also have to be smart with your explanations. You're almost never going to give MORE weight to pendings than your most similar sale.

Reading between the lines this is the kind of response someone might get if they used a boilerplate reconciliation that places equal weight on all the sales or which makes reference to a weighted average.