Re-listing properties, misleading DOM and list prices

[Smokey Bear]

I check the listing history for subject and comps, but when running quarterly statistics, where 100 properties have sold, it's not realistic to look at listing history for each one to determine if it was relisted. I did it once on a sampling and found that 75% were relisted, but I'm not going to do that on every quarter, it took me an hour to do just one.

Yes, the prices were reduced, but what happens is when you run statistics, it only uses the numbers from the last listing, so DOM is lower, and L/P to S/P ration is dead wrong, that's why they do it. The entire listing history is relevant to what is going on in the market. There's no reason why they can't reduce the price on the same MLS listing, they just don't want to because it keeps the numbers looking better than they really are. What the statistics show is 30 days on market and S/P within 95% of list price, instead of 90-270 days on market and price reductions of 10-15% which is what's really going on. Sounds pretty misleading to me.

 

[Smokey Bear]

Reporting listing history of a comparable sale solves the problem (obviously) but do you grid 31 DOM or 231 DOM?

I check the absorption rate. If you've got an oversuplly that will take 6 months to sell even if no new listings are posted in that time, then I'm using the larger number.

 

[Artemis Fowl]

What the statistics show is 30 days on market and S/P within 95% of list price, instead of 90-270 days on market and price reductions of 10-15% which is what's really going on. Sounds pretty misleading to me.

It tells me that the listing agent did a poor job of advising her customers OR the seller had dillusions of grandeur that only a long marketing time could bring him back to reality

.

I use absorption rate but I'm just thinking out loud (always dangerous) and fishing for others' thoughts here...

It seems that there are many factors that could affect list price. Ed's quote in particular is what I was thinking about as that is not an uncommon factor. This leads me to question whether less consideration should be given to the 90-270 DOM (which is based on a subjective opinion or wishful thinking) vs. the 30 DOM sale price (which is based on more objective data... ie. it actually sold).

I put DOM in the comparable grid. This is why I ask what you would report in the sales comparison grid for DOM, if you do it.

Reporting market market conditions should contemplate price reductions as that is exactly what the market is doing. But, is it valid to reconcile estimated market time by weighting DOM as described above? After all, the comp sold at a given price after a given DOM and we base our value opinion on that data. IF we base estimated market time using listing data that is 10 to 15% higher than eventual sales price...shouldn't we estimate the value differently too? Aren't we dealing with 2 different statistics? Are we merely passing on the misleading data when estimating marketing time? MV is based on "typical" market behavior of buyers and sellers...sellers do not "typically" list at MV.

Struggling to articulate my thinking here so I hope it's coming across correctly...

 

[Smokey Bear]

If the total DOM, with price reductions, is an anamoly, I'll call the agent and find out why, they'll often say that's what the owner wanted and refused to reduce price until they saw it wasn't selling. But when my research shows that 75% of the current active listings have been relisted and reduced in price and have been on the market 90- 220 days, AND the absorption rate looks to be around 6 months with the oversupply, then the data is consistent, and the 30 DOM shown on the most recent MLS is not reflective of the market. Even if it's priced right at the end, there's still the absorption rate to consider, and this market has an oversupply right now, and median house prices dropped 10% in the last 30 days in that market.

 

[Mike Boyd]

Well, the RE agent's job is to get the property sold. If it takes relisting every two weeks to get it done, so-be-it. I do not see it as an ethics issue and it seems like a lot of trouble just to skew the days on market. The listing data is designed for real estate sales people, not real estate appraisers. If you need an accurate DOM then you have to research it more diligently.\\

In my history of selling real estate I have found that many agents only look at new listings. The older ones are easily forgotten. So, to relist it brings it forward to be looked at again by the agents. I hardly think the intent is to deceive appraisers. I agree with John M., however, the only relevant DOM figure is how long it had been listed at the price it was when it sold.

 

[Mike Boyd]

It is hardly a secret that we are in a declining market. Newspaper headlines scream that reality. But, from an underwriting standpoint, I think they are looking for more of a long term affect. For example, if the community is a single industry/employer town and that company goes out of business, values are likely to fall and remain down until that company is replaced by other industry. If you check the box that says "declining market" you need to explain if it is cyclical and typical or if it is something more serious and maybe even permanent. Cycles are constant. I can't remember how many I have experienced in my 42 years in real estate but it seems we are always in either an up or a down cycle. Right now it is down, 9 months ago it was still going up. I predict it will stabilize in a few months and then resume its upward trend. It seems worse now because the up cycle involved double digit increases month after month for several years. There are prospective buyers out there that are too young to remember the early 1990s when we had our last down cycle.

 

[Mister Ed]

Listing history of a "subject" property is always relevant and should be reported. Especially in your case Ed.

Specific to the questions I posted is the issue of comparable data listing history. How much weight do you give to a 200 DOM when list price is totally out of wack with eventual relisted 31 DOM sales price? Is it really accurate to state that it sold after 231 DOM? I guess that's technically true but is it misleading? Does it accurately reflect avg DOM for a n'hood? Do you report marketing time based on 31 DOM or 231 DOM?

Reporting listing history of a comparable sale solves the problem (obviously) but do you grid 31 DOM or 231 DOM?

John,

I misread your question.

Let me clarify using the scenario you ae using so we are on the same page.

In the case of above, in the sales grid, I would state: "DOM 231*"

In the comments section below, I would post something (in bold print) to the nature of: "Sale #3 was listed for 200 days for $300,000. Upon expiration, it was then relisted at $225,000 and after 31 DOM went under contract for $222,000."

I have a separate comment section in my addenda that is boiler plated with fill in the blank sections where I would explian that in the subject's market area typical exposure/marketing time is (for the fun of this scenario) 30-90 days. Sale #3 appears to be an anomaly (did I spell that right?) because of the initial listing being much higher than what that market area will bear.... Yada Yada Yada.

I choose to report it the way I do because I believe that:
1. I must report the total days that sale was on the market to not be misleading (by withholding part of the story)
2. I must clarify the nature of that listing history just as I would the subject to not be misleading (by withholding another part of the story).

I really think we are on the same page, though (or at least in the same chapter of the same book and just a few paragraphs apart).

-ed-

 

[Smokey Bear]

If the total DOM, with price reductions, is an anamoly, ...

Sale #3 appears to be an anomaly (did I spell that right?)

Looks like one of is misspelled it. TC, where are you when we need you?

 

[Terrel L. Shields]

Churning is the practice by which an agent/brokerage re-enters a listing in the MLS for the purpose of making it appear to be a “new” listing when in fact, it is not.

MLS recently sent out letter to everyone saying don't do that. But even the honest ones are having problems getting the stinking MLS to correctly upload and some say to heck with it....just relist the turkey with a new number. In fact, our MLX is so inept that we cannot even get a new listing on the MLS and have been trying for 4 solid weeks....MLS says call Florida and Florida says your local can handle it...

 

[Renee Healion]

This has been going on forever. It's just new to appraisers who have never been in this part of the cycle. Good reminder for the newbies to search the property not just the listing.