Regression for GLA Adjustment

[George Hatch]

Easier to simply subtract the low from the high and apply multiple iterations (aka play with it) until the difference stops getting lower. Then you only need to watch the one number.

 

[Mike Ault]

But you get my point, right? Yes, the market psychology can and sometimes does get out of line with the previous trends, but in any case the current trend IS the current trend whether we think they should be operating that way or not.

But we have to honestly answer the question, "what is the most probable price that a property should sell for" given the constraints in the definition of market value that we are appraising under. I would contend that undue stimulus such as idiocy, bad advice, and collusion amongst third parties keeps us from automatically assuming that the typical sale in every market segment truly represents "market value", and should be reconciled as such.

 

[glenn walker]

Some of the stupidest people I have known got rich buying real estate at high prices.

 

[TerryRohrer]

But we have to honestly answer the question, "what is the most probable price that a property should sell for" given the constraints in the definition of market value that we are appraising under. I would contend that undue stimulus such as idiocy, bad advice, and collusion amongst third parties keeps us from automatically assuming that the typical sale in every market segment truly represents "market value", and should be reconciled as such.

I agree with the sentiment, but in practice, how do you parse the data along the shoulda and shouldnota divide? I would have no data in this market...the sheep are an orderly bunch!

 

[George Hatch]

I'm familiar with the idea that "fear of missing out" amounts to a form of coercion - the market made me do it. But by the time it's of effect of the majority of the buyers (or sellers in a down market) and the remaining percentage of buyers are are following suit because they can't make a purchase if they don't then that still returns us back to what's actually most probable.

What are you going to do? Ignore 60% of the sales as not being relevant to your valuation because their buyers were in a frenzy? What about when it gets to 90% or 100% -which we HAVE seen before.

 

[Fernando]

Some of the stupidest people I have known got rich buying real estate at high prices.

Real Estate prices in long run go up so even when bought high, still made lots of profit if held on to the property.

 

[Mike Ault]

I'm familiar with the idea that "fear of missing out" amounts to a form of coercion - the market made me do it. But by the time it's of effect of the majority of the buyers (or sellers in a down market) and the remaining percentage of buyers are are following suit because they can't make a purchase if they don't then that still returns us back to what's actually most probable.

What are you going to do? Ignore 60% of the sales as not being relevant to your valuation because their buyers were in a frenzy? What about when it gets to 90% or 100% -which we HAVE seen before.

I'm going to admit that undue stimulus exists, and account for it in my reconciliation. I may also take that factor into consideration during the all-important "problem identification phase-comparable selection process". Out to save another lender from making a bad loan enjoyed the discussion!

 

[George Hatch]

I had a family member buy a new home in San Diego county in 2004 for $640k, hold it until 05/2016 (12 yrs) and resell for $610k. Not only did they lose $30k off the nominal sale price + their costs of sale, + the costs of the home improvements they added, but they also paid ~$1000/mo in additional mortgage payments than they would have paid in rents. So no, "now" is not always a good time to buy RE.

 

[J Grant]

Clearly, the most probable price is not a fixed benchmark, it moves relative to other sales as of the effective date.

However, the MV definition IS a fixed benchmark. We use the same defintion of MV for a 200k house as for a 2 million $ house. We use the same definition of MV in a down market as in a hot market.

If I were theoretically to appraise a same house for a refinance year after year for 5 years and other than updating the house stayed the same, if prices rose or fell I would opine a different OMV each year - year one 600k, year two 630k, year three, 700k, year four, 640k, year five 590 k ( lol the market tanked in year five and it was red hot in year three). But the MV definition was the same each year, and used to vet terms of sale for the comps as well as to create the HC terms of sale for my subject MV opinion. w

 

[George Hatch]

I'm going to admit that undue stimulus exists, and account for it in my reconciliation. I may also take that factor into consideration during the all-important "problem identification phase-comparable selection process". Out to save another lender from making a bad loan enjoyed the discussion!

Arm's length sale