Placing weight on PENDING SALES

[Yuanyin]

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[Yuanyin]

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.

I always appreciate your feedback George Hatch. You're very smart. I did use a weighted average! I should rethink that for the future.

 

[TerryRohrer]

I always appreciate your feedback George Hatch. You're very smart. I did use a weighted average!

Here is the portion of the reconciliation that was rejected: 4 and 5 were under contract and the contract price was verified with the agent. Reconciliations are different for every report, and I don't always use a weighted average. But in this case, the sales were all very similar and it was considered valid.



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The greatest danger there, I expect, is that the weights are likely not your own, but derived from some unknown algorithm hidden within your appraisal software. I can't imagine a circumstance where I would opine as to a weight of 14.98% for Comp #2. At some point, someone will ask you to justify those weights. At that point, your problems start multiplying.

 

[Yuanyin]

The greatest danger there, I expect, is that the weights are likely not your own, but derived from some unknown algorithm hidden within your appraisal software. I can't imagine a circumstance where I would opine as to a weight of 14.98% for Comp #2. At some point, someone will ask you to justify those weights. At that point, your problems start multiplying.

I can reproduce the math longhand. it's not very difficult. But you're correct. It does come off as a canned statement. I appreciate your response.

 

[NC Appraising]

Never say that you put weight on a listing or a pending for a mortgage appraisal.

I just say that the pending or active listing were used for support. For some reason, support/supports or supporting gets the green light.

Or you can also say that actives or pendings supports current or changing market trends.

Do not fret. Just part of appraising for the mortgage market. Check boxes.


Here is a SLA from one of my clients:
Comparable listings should not be utilized except in rare cases where the appraiser is documenting a trend in home values that cannot otherwise be documented with comparable sales. Comparable listings should be separated out from comparable sales and placed on a separate sales comparison analysis grid, with appropriate comments as to why they were included in the assignment.

This is their required statement that I have to put in my reports:


Listings, if utilized in this appraisal, are included to provide information on comparable properties currently for sale in subject’s market area. Active Comps have not been used to develop the adjusted sale price range for the subject as they are not closed market transactions.

 

[Fernando]

Do you know the sales price of the pending sale?
The house across my block sold $300,000 below asking price.
The amazing thing is that my daughter said a price she was willing to buy it and she was right. Appraising must run in her blood.

 

[redfish]

Pending sales are just a data point that I provide in the SCA to support my conclusions. Maybe the adjusted list price of the pending sale is supporting a conclusion I have drawn in the market conditions/1004MC and is the basis for some type of market condition change adjustment that I am applying to a closed sale in the SCA or maybe its included because it would have directly competed with the subject during the exposure period used for the development of the opinion of value. I use the weighted average reco for some clients that like to see it but I have never included a pending or listing in the weighted average. Its so much smoother when I can get away with a narrative reco using qualitative jibberish, but still I don't comment on the submarket inventory examples like I would the sales in a summary of my qualitative reco narrative.

 

[George Hatch]

I always appreciate your feedback George Hatch. You're very smart. I did use a weighted average! I should rethink that for the future.

I NEVER average in any way for a reconciliation. There's virtually always a sale or two that are more indicative than the others and which is of more effect on my conclusions. At the very least, some sales will be more recent to the effective date than others.

 

[Fernando]

I NEVER average in any way for a reconciliation. There's virtually always a sale or two that are more indicative than the others and which is of more effect on my conclusions. At the very least, some sales will be more recent to the effective date than others.

I was surprised he did a weighted average in reconciliation.
I'd been doing the Fernando way with my feelings with which comps should be more reliable especially in considering location (numero ono), sales date, and net and gross adjustment numbers.

 

[Yuanyin]

I was surprised he did a weighted average in reconciliation.
I'd been doing the Fernando way with my feelings with which comps should be more reliable especially in considering location (numero ono), sales date, and net and gross adjustment numbers.

The sales were all very similar, all in very close proximity and all with very few adjustments. It wasn't a simple average. It was a "weighted average". I have seen threads on this forum where some like it, some don't. It has it's purposes and is supportable.

My main question was about placing any weight on pending sales. If they were placed in a report, they were probably weighed in some fashion whether the appraiser admits it or not.

Freddie MAC and Fannie Mae both address listings and Freddie Mac goes so far as to state when listings should be weighted and how their weight should be addressed.