Question for my fellow ERC-ers

[Doug in NC]

Working on a report that has about 14 months of inventory, so a forecasting adjustment was in order. My first 3 sales were on the market from 145 to 515 days. My fourth comp occurred in the past month and sold in only 35 days. I attribute this to proper pricing. I made forecasting adjustment to the 3 sales that took over 120 days to sell, and I know that we are expected to adjust all sales across the board equally, but it doesn't make sense to me to make a forecast adjustment to the 4th sale which occurred in only 35 days. Selling so quickly, it seems that its pricing has already been adjusted in its lower sale price.

I know I won't be able to get away with adjusting 3 comps and not the fourth (because of ERC guidelines), but can someone explain to me why it is necessary to adjust the lower sale that occurred well under typical permissible marketing time? If you ask me, the difference between adjusted comps 1-3 and adjusted sale 4 should be the extracted forecasting adjustment.

 

[Michigan CG]

Doug I do not see where it says you must adjust all of the sales. I am referring to section 1, starting on page 16 of the Relocation Appraisal guide. Depending on who the client is can you just explain it in the report?

 

[Doug in NC]

Not sure which version year you have, but the 2001 guide says to apply "to each of the comps on a constant lump sum basis". I have also been quoted the requirement more than once by reviewers.

 

[Michigan CG]

Doug I also have the 2001 version. Can you tell me what page that is on, i cannot find it. I do notice in their sample report the same $4500 is given to all the comparables.

 

[stefan olafson]

Maybe just reverse the +/- sign on sale 4? Maybe it sold in only 35 days because it was priced to low?

If typical marketing time is longer, then that may be the reason.

Just trying to pique your interest.....

Identical lump sums, just different

 

[Mike Garrett RAA]

If you can't make sense out of the data...consider not using that sale. Famous Mikie-ism...."you can't make chicken soup out of chicken poop".

 

[Doug in NC]

Doug I also have the 2001 version. Can you tell me what page that is on, i cannot find it. I do notice in their sample report the same $4500 is given to all the comparables.

Statement is on page 115.

 

[Esox]

As you already stated, you have to apply the forecasting to all the sales. The property that sold in 35 days should be a decent indicator of what your forecasting should be when you compare its list price to that of your listings. I just finished a report where the rest of the comps sold in 180 to 240 days, and the most recent in 6. All the listings were listed 20-30 K over that sale and all had been marketed for 60 to 90 days. Showed me that they needed to come down significantly to sell, and that the sales needed forecasting to get down to that range also. I also adjust my listings to get a range of indicated list prices for the subject, and then multiply those indicators by the average list to sell price ratio to get a range of possible forecasting adjustments. Prudential used to send a formula along those lines with their requests.

I think having a sale or two that sold quickly when everything else is languishing shows the client what it takes to move the subject. It doesn't necessarily mean it has to be that low, but close.

Sometimes dropping that forecasting adjustment on all the sales is kind of weird, though.

Kevin