Real Estate Bubble & Holding Realtors Accountable For Listing Prices

[celilola]

Two thoughts-one is that when I did more residential work, the highest sales were often in the very early spring periods. Central IL has a slowdown in sales during the winter but it comes back twofold in the spring and all else equal, early March is a great time to sell around here. Maybe not a great comparison for hot weather Arizona, but still thought I'd mention that.
Two-the toughest markets to value are ones in the early stages of flux...There is limited data to support that it is changing, and even though we know something is happening, putting a price point on it is a genuine challenge until the trend reveals itself. Changing trends are often not a smooth downward or upward slope-sometimes it jumps up or down suddenly.

Our markets sound very similar. We are in the mountains @ 7500ft elevation, not down south where its miserably hot (I think our record high was 97deg-once).
Flagstaff is historically one of the top 10 snowiest cities in the Country (2015 we were #8, this year I think we will beat that).

Sellers generally wait until early spring to list because it shows better without 4+/- feet of snowpack-but thats not to say our winter months are slow-not even close. Amazingly, right now in flagstaff, we have ONLY 17 SFR's listed for less than $400k-in a town with area median income of $50kish. We have no inventory. Buyers are jumping at anything they can afford.

In re to your "limited data to support" statement....what do we do? We see it changing, we see the market accepting the changes, but we cant prove it-even with verifiable/supported market condition adjustments. During the 2004-2006 boom in flag, we saw a lot of speculation and artificial appreciation- I personally bought a home in 2002 for $105k and sold it early 2014 for $210k....Lucky me-but this wasn't sustainable, it was monopoly money. I'm concerned that we are going into the same thing we saw 10+/- years ago....I know its not the appraisers job to keep the market down, but we shouldn't be contributing to the volatility. Scary times.

 

[celilola]

Six months ago is half a year. What are the other listings saying?

I can support a 3/4% per month market condition adjustment for the area over the past 6-9 month time frame.

 

[Gobears81]

In re to your "limited data to support" statement....what do we do? We see it changing, we see the market accepting the changes, but we cant prove it-even with verifiable/supported market condition adjustments.

Hence the hullabaloo There are appraisal theorists out there that would tell you to drill down on market analysis and your answer will be found, but we could do market analysis all day long and still not have supports for the degree in price changes in these types of situations. Still, the demand and supply factor is clearly one to drill down on, and if our markets are similar, while a reviewer may not buy looking at prior years to identify the degree of the early spring bump, it is something to examine at least in your own workfile that could help you determine a value. But at the end of the day, I have lost many nights sleep to doing appraisals in markets that are in the early stages of change.

 

[Dublin ohio]

I dont know what you mean about "around here", when I took my classes, the Fiduciary Duty was in the national courses-not state specific

To clarify "around here" I meant in my state. And what national authority regulates RE agents. In my state. RE agents are regulated by the state.

 

[residentialguy]

Agreed...the highest price POSSIBLE. An experienced and honest Realtor would look at my example of the $70k higher listing price and say, hmmmmm.

And selling agents get the lowest price possible and it sounds like that might be the lowest price possible. It is what it is. Bubbles are a market reaction. We report current market reaction as of the effective date...we don't police it

 

[George Hatch]

Not only is it not our job to "hold brokers accountable" with their buyers, it is literally none of our business. Not only is it none of our business but we CERTIFY to that effect on every appraisal report we sign. IRL, brokers act to advocate for the deal. I try never to lose sight of that fact or to judge their performance using "appraiser" benchmarks. We are not expected to act like brokers and they are not expected to act like appraisers. And may that ever be so.


I only care about researching and analyzing the relevant data to conclude to my opinion of "most probable" in a manner that is reasonably defensible. If what's most probable is people paying 10% over the listing prices and 30% annual increases in price then it is what it is - my only function is to observe and report. Not moralize on what I think the value "should be".

With that said, I do analyze pricing trends over longer periods of time so that I can RELATE where the current pricing is in comparison to prior periods, particularly the most recent previous highs and lows. I usually do that for the neighborhood (not the subject's market segment as such) and I usually go back to 2005-2006, which is when many of these market segments previously peaked. That way I can demonstrate how the medians changed every year since then and comment on where we are now in relation to the prior peak and subsequent trough - which I use as benchmarks for comparison and context. I leave to the reader to decide how meaningful that information is to their decision making.

I really should do another spreadsheet for downloads to turn that into a 3-minute operation, but I haven't been motivated enough to do that yet.

 

[djd09]

Everyone likes to police us. Turn around is fair play.
Factor in the whining when the purchase price is not met. This whining sometimes lands the appraiser on the do not use list. But let's pretend the system is not fatally flawed.

 

[Don Clark]

Everyone likes to police us. Turn around is fair play.
Factor in the whining when the purchase price is not met. This whining sometimes lands the appraiser on the do not use list. But let's pretend the system is not fatally flawed.

The only thing that is flawed is your understanding of the role of the real estate agent. Even the courts recognize "Puffing" as a legal tool of sales persons of evry stripe.

puffing
n. the exaggeration of the good points of a product, a business, real property, and the prospects for future rise in value, profits and growth. Since a certain amount of "puffing" can be expected of any salesman, it cannot be the basis of a lawsuit for fraud or breach of contract unless the exaggeration exceeds the reality. However, if the puffery includes outright lies or has no basis in fact ("Sears Roebuck is building next door to your store site") a legal action for rescission of the contract or for fraud against the seller is possible. (See: fraud)

 

[J Grant]

GH-I only care about researching and analyzing the relevant data to conclude to my opinion of "most probable" in a manner that is reasonably defensible. If what's most probable is people paying 10% over the listing prices and 30% annual increases in price then it is what it is - my only function is to observe and report. Not moralize on what I think the value "should be".

While it is not our place to moralize what the value "should be", it is our professional place to opine what the value "should be" (.according to our appraisal)

The appraisal develops a market value by vetting for value elements in addition to considering prices..... (vetting by means such as alteration approaches of cost or income, tests of comparison to each other, tests of adjusting for superior/inferior features etc). The definition of market value uses the word "should"..."what is the most probable price the property should bring'"...which differs from RE agent concept of MV as a price a buyer is willing to pay .

In an appraisal the opinion of market value derived from the SOW is linked to the to the definition of market value as type of value sought. Whereas RE agents can toss out phrases like "this price is market value" without doing an appraisal, or doing anything besides uttering the sentence.

In a rising price market, the most probable price in appraisal is likely to be on the higher side, due to market conditions. However, a bubble indicates something other than simply a rising market, it indicates shaky support in the general economy or intrinsic worth of the properties, such as there may be undue stimulus present, or buyers not acting prudently (which we are supposed to adjust for, or at least analyze and reconcile as part of the assignment)

 

[djd09]

If we can kill the bullseye and they can huff an puff all they want. In all reality the sale price is not a necessity to estimate market value.