Placing weight on PENDING SALES

[Yuanyin]

Poorly written request. I would respond by asking specifically what they are requiring. Put it back on them.

I called their review dept and the appraiser said you can't put weight on sale that hasn't closed. I said yes you can. She said beef up the reconciliation then. Yesterday afternoon I resubmitted the report with a more detailed reconciliation and it was accepted.

 

[ucbruin]

I called their review dept and the appraiser said you can't put weight on sale that hasn't closed. I said yes you can. She said beef up the reconciliation then. Yesterday afternoon I resubmitted the report with a more detailed reconciliation and it was accepted.

What comment did you add to the report....

 

[George Hatch]

I called their review dept and the appraiser said you can't put weight on sale that hasn't closed. I said yes you can. She said beef up the reconciliation then. Yesterday afternoon I resubmitted the report with a more detailed reconciliation and it was accepted.

You wrote it out in longhand and my guess is that explanation probably took you less than 5 minutes.

One thing you want to keep in mind about reviewers is that the appraisal isn't just limited to the SR1 development, but also has to hit the high points for the SR2 communication of that development. It's not enough for a reviewer to understand what you're doing; it has to be clear enough for the non-appraisers to understand. They're not appraisers and they're not mind readers. We don't write for the reviewers and they don't sign off solely on the basis of what they understand. We write for the users and the reviewers review to ensure the user will be able to understand.

 

[ZZGAMAZZ]

I was not using non-closed sales as the primary basis. I applied 2 pending sales and they were given some weight since they are under contract and leading edge indicators for the subject. They were not the highest prices sales and the appraisal was not at the limits of the market. Not even close. It was in fact mid-range for the style and condition.

I just thought it was a specific underwriter who doesn't like to see any weight placed on pending sales.

Of course pending sales can be weighted. But apparently, some underwriters don't like to see that. Maybe they should NOT have a lot of weight, but they can be weighted. If you're using listings/pending in your analysis of market trends, even the listings that are not on the grid, you are still putting weight into them. But I feel like this is semantics. I was only asking other PPL opinion. Can you put weight on a pending listing? That was it. I believe you can, but personally, I wouldn't steak much weight in them B/C they are not closed sales and they don't have a settled sales price.

I can tell you here in my area I'm seeing the LP drop weekly, we are entering a declining market. I'm seeing that reflected more in the LP and contract than the sales b/c we have very few sales in the past 30-60 days.

The use of listings is covered in the Fannie Mae selling Guide and Addressed further in the Freddie MAC selling guide as well as having a specific place in the Freddie 2-4 unit appraisal:

Freddie MAV seller Guide CH 60: If there is an absence of recent comparable improved sales, the appraiser must consider that absence in estimating the market value. Current contracts and competitive property listings can be helpful to round out the appraiser's analysis if they are indicative of the state of the current market. The weight given to a contract or listing might be different from the weight given to the actual sales transactions, and the appraiser must discuss these differences in the Appraisal.

Appraisal Institute also recognizes the use of listings/pending in the analysis.
AI Test Question 296
The market value appraisal of a single-unit residential property is dated today, which is one month after a significant increase in interest rates. The 30-year fixed rate mortgage loan increased by 1.5%. The appraiser found no sales or pending sales within the last 30 days. The real estate brokers have stated that there were no sales in this market because of the higher interest rates. This appraisal analysis will be heavily dependent on:

Group of answer choices

• Luck
  
• The income capitalization approach
  
• Current comparable listings as well as older comparable sales
  
• The cost approach

I appreciate everyone's answers and it's helpful to hear other opinions on topics like this. But sometimes it's difficult to cover topics that have nuance in only a couple of paragraphs back and forth.

Wow. If that test query reflects the level of difficulty of AI tests, I'll pursue those designations ASAP. State Questions here in Cali seem to be written by contrarian peeps who purposely use verbiage constructed to reflect non-real-world scenarios (or else I'm just as smart as I hope...)

 

[ZZGAMAZZ]

I called their review dept and the appraiser said you can't put weight on sale that hasn't closed. I said yes you can. She said beef up the reconciliation then. Yesterday afternoon I resubmitted the report with a more detailed reconciliation and it was accepted.

Very nice example of how the real world scenario plays out, from start to finish. Thanks for sharing.

 

[Fernando]

I have an exception. If you know for sure the sales price, I will give it more weight if needed.
There were times when I appraised the pending sale, I would be most knowledgeable of the circumstances and price of that current pending comp.

 

[ZZGAMAZZ]

I have an exception. If you know for sure the sales price, I will give it more weight if needed.
There were times when I appraised the pending sale, I would be most knowledgeable of the circumstances and price of that current pending comp.

I previously appraised a comp, once or twice only, out of 2,000 assignments. How do you possibly receive assignments so similar to previous assignments that the same comps are applicable, although I the issue might be affected by coverage territory, housing stock, population density, etc.

 

[RCA]

Correction: I have been using only closed sales for regression. * Although I used the Sale Date rather than the Closed Date for the transaction date. ) --- At least up until this past March. All adjust to the effective date of the appraisal. I avoid pending because in this area, it is impossible to get anything more than an unreliable verbal on pendiing sales prices - but usually I can't get that.

So, would I start to using pending sales for valuation - no. I could put them in the grid with the listing sale price. But I would not give them any weight. It is just that I haven't done that for quite some time. If I were to start taking residential appraisals in this down market - then of course I might very well add them to the sales grid - but without weight. I am not at all inclined to use sales-list price ratios for valuing pending sales. But surely this depends on the area you are working in.

.

 

[George Hatch]

I don't use sale/list for all properties, I use sale/list for the properties I've qualified as being the subject's direct comparables. IMO and apart from doing analyses on larger geographic areas it just doesn't matter what the less comparable properties are doing because those aren't the properties the subject is most directly competing with (hypothetically) as of their respective dates of sale.

Same with other variables. In my view more similar is more relevant in an SC analysis whereas less similar is just about irrelevant. The macro data dump is useful in analyzing the entire neighborhood or community of whatnot for it's overall trends, but that's more about developing context to better understand the comparable data in the SC.

None of that being any sort of comment relating to the utility and effectiveness of using MARS.

 

[RCA]

I don't use sale/list for all properties, I use sale/list for the properties I've qualified as being the subject's direct comparables. IMO and apart from doing analyses on larger geographic areas it just doesn't matter what the less comparable properties are doing because those aren't the properties the subject is most directly competing with (hypothetically) as of their respective dates of sale.

Same with other variables. In my view more similar is more relevant in an SC analysis whereas less similar is just about irrelevant. The macro data dump is useful in analyzing the entire neighborhood or community of whatnot for it's overall trends, but that's more about developing context to better understand the comparable data in the SC.

None of that being any sort of comment relating to the utility and effectiveness of using MARS.

Well, in my opinion, "neighborhood competing properties" holds only for a certain percentage of buyers. Some are willing to look into the larger market areas for "competing" properties. Really, properties usually do compete with similar properties that may very well be located on the other side of San Diego or wherever. "Location" is just one characteristic of a property. Consider how uniform the United States is in its urban infrastructures. They all seem to have exactly the same Walmart, Costco, McDonald's, etc., the same damn perpendicular streets, and so on. They look very uniform for the most part. Neighborhood mostly means, for most people: (1) Proximity to work, (2) Quality of district schools, (3) Degree of pollution and so on down the line. Wherever you work, everything within a certain radius is pretty much the same distance (allowing for the varying traffic patterns) - and that radius, if you set it at several miles, could very well go through several neighborhoods or even different market areas.

Don't make so much of neighborhoods - because you have already admitted in other posts you pretty much think the same in that regard. Market Area is more important. But buyers do often span multiple market areas in their quest for a home. Of course, the reality is that the boss is all wrapped making sure your comps are within a one mile radius and hopefully in whatever neighborhood you decide upon.

Yes, weight proximity in finding comps - but if you can't find otherwise similar comps, don't be afraid to expand your "competing " area.

Look at the Sale Price/List Price ratios for Burlingame, CA 9/1/2019-9/1/2022: The average is 105.1%, max is 161.5% and min is 60.6%. That is quite a spread and indicates that in some neighborhoods, the Sale Price/List Price Ration is unsuitable as a basis for estimating closed sale price from listing sale price.

SaleList Ratio	Sale Date
161.5%​	3/1/2022​
140.7%​	10/18/2021​
140.6%​	4/5/2022​
140.0%​	12/5/2021​
138.3%​	2/25/2021​
137.8%​	2/26/2022​
134.1%​	4/26/2022​
133.4%​	2/17/2022​
132.7%​	8/10/2021​
131.8%​	12/4/2021​
131.3%​	12/10/2021​
131.1%​	3/10/2022​
130.7%​	3/30/2022​
130.5%​	7/2/2021​
130.2%​	3/3/2021​
130.0%​	4/5/2022​
130.0%​	8/20/2021​
129.8%​	5/20/2022​
128.8%​	1/29/2020​
128.4%​	3/9/2021​
128.1%​	7/22/2022​
128.0%​	9/24/2021​
127.8%​	1/14/2021​
127.7%​	3/30/2021​
127.6%​	4/21/2021​
127.4%​	1/25/2021​
127.3%​	1/22/2020​
127.1%​	3/11/2021​
126.9%​	8/24/2021​
125.1%​	4/12/2022​
125.1%​	11/15/2021​
93.7%​	11/14/2019​
93.7%​	8/23/2022​
93.6%​	12/24/2020​
93.5%​	10/8/2020​
93.5%​	1/23/2021​
93.4%​	6/17/2020​
93.4%​	1/28/2021​
93.4%​	11/6/2019​
92.8%​	6/17/2021​
92.7%​	11/1/2019​
92.6%​	5/12/2021​
92.6%​	1/5/2021​
92.6%​	4/17/2020​
92.4%​	8/25/2020​
92.4%​	10/6/2021​
92.4%​	10/27/2020​
92.3%​	8/27/2020​
92.3%​	1/21/2021​
92.2%​	2/21/2020​
92.2%​	10/26/2020​
92.1%​	8/3/2020​
91.8%​	9/19/2020​
91.8%​	4/21/2021​
91.7%​	5/21/2020​
91.6%​	8/25/2020​
91.3%​	4/23/2021​
91.3%​	6/22/2022​
90.7%​	7/12/2022​
90.6%​	5/7/2021​
90.6%​	6/30/2022​
90.5%​	8/11/2022​
90.4%​	5/24/2020​
90.2%​	4/13/2022​
90.0%​	11/13/2020​
90.0%​	6/19/2020​
89.7%​	11/21/2020​
89.2%​	9/24/2021​
89.1%​	3/25/2022​
88.5%​	4/21/2020​
87.6%​	7/2/2022​
84.5%​	4/14/2022​
81.7%​	7/13/2022​
80.1%​	1/20/2021​
60.6%​	5/20/2020​