Placing weight on PENDING SALES

[JeffSH]

I just wouldn't say I gave it most consideration....

Definitely prevents revision requests like OP. I've received them a couple of times too.

 

[Tiffany Gibbons]

Why would one assume that an arms-length transfer was influenced by the involvement, or non-involvmenet, of an appraisal?

I was wondering more about the financing. I mean I've had contracts that say we know the contract is $100,000 over what the home is worth, we don't care, we'll pay it. I don't understand not wanting to know what's on the contract. That's all.

 

[Sadie]

90% easily, almost all of them.

The ones that did are in violation of their fiduciary responsibility to their clients. They aren't supposed to do that.

 

[Sadie]

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.

This is poorly written and doesn't explain what they want.
If you are using non closed sales as a primary basis for your MVE you are using unverified data as your basis. Just because a realtor told you the contract price at a certain date and time, doesn't mean that will be the final sales price. How many times have you received an amended sales agreement with a different price dated after the original agreement was signed? And people lie.

 

[The Bob]

The ones that did are in violation of their fiduciary responsibility to their clients. They aren't supposed to do that.

It's about 50/50 with me. In a rising market there isn't much risk with properties selling at or over list. In a declining market you really don't want to be saying what the seller accepted and the deal falls through. If they disclose the contract price on a pending I always ask if they are OK with me including that in the report. If not I will just summarize something like..."agent reported 10 offers with accepted at/over/under list".

 

[Sadie]

It's about 50/50 with me. In a rising market there isn't much risk with properties selling at or over list. In a declining market you really don't want to be saying what the seller accepted and the deal falls through. If they disclose the contract price on a pending I always ask if they are OK with me including that in the report. If not I will just summarize something like..."agent reported 10 offers with accepted at/over/under list".

To even disclose that is a violation on their part. Count your self lucky

 

[Yuanyin]

To even disclose that is a violation on their part. Count your self lucky

In Colorado, it's not a violation to disclose the contract price unless they specifically have a non-disclosure agreement with the seller.
The NAR Code of Ethics does not prohibit the disclosure of a contract price.

NAR: While some REALTORS® may be reluctant to disclose terms of offers, even at the direction of their seller-clients, the Code of Ethics does not prohibit such disclosure. In some cases state law or real estate regulations may limit the ability of brokers to disclose the existence or terms of offers to third parties.

 

[George Hatch]

This is poorly written and doesn't explain what they want.
If you are using non closed sales as a primary basis for your MVE you are using unverified data as your basis. Just because a realtor told you the contract price at a certain date and time, doesn't mean that will be the final sales price. How many times have you received an amended sales agreement with a different price dated after the original agreement was signed? And people lie.

Strictly speaking and just for the purposes of discussion....

The traditional protocols for verification include noting principals in a transaction as a primary source (they have direct knowledge of the details) whereas MLS and public records are characterized as secondary sources which are derived from the principals. So while I would call a pending sale uncertain as to whether it will/won't close at that price, I wouldn't invoke the "unverified" argument to explain why I don't think it should be heavily weighted in a reconciliation. If the OP personally verified a pending with one of the principals they have a clear shot at being more familiar with the details of that transaction than will an appraiser who comes along 2 months later and relies solely on the MLS without personal verification.

"The lender accepts" reflects what the lender thinks is meaningful to their decision, but it doesn't necessarily reflect how the buyers and sellers and brokers (or appraisers) who are operating in that market would treat that information. And really, the definition of MV is oriented to the participants in these transactions, not the lenders who are funding them. Personally, I think that's a problem and I think we SHOULD be using some form of mortgage value (value to a lender) for these assignments, but I hold the (small) minority opinion on that one.

 

[Yuanyin]

This is poorly written and doesn't explain what they want.
If you are using non closed sales as a primary basis for your MVE you are using unverified data as your basis. Just because a realtor told you the contract price at a certain date and time, doesn't mean that will be the final sales price. How many times have you received an amended sales agreement with a different price dated after the original agreement was signed? And people lie.

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.

 

[Sadie]

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.

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