S;LP Ratio

[Sean Wilson]

I need to go to the basics for arguments sake.

How do you determine the S:LP Ratio?

How do you determine the proper amount to adjust?

Under what circumstance is it evident that the S:LP Ratio adjustment is necessary?


Under what circumstance is it evident that the S:LP Ratio adjustment is not necessary?

 

[Lawrence R.]

I'll take the first one.

A sales to listings ratio is like any other ratio...

It is the mathematical relationship of the two numbers expressed as a fraction(percentage)

it is the relationship of the final selling price to the ORIGINAL listing price.

sales price/listing price= sales to listing ratio.

It can the be used to indicate a possible selling price for a property based on its listing price in a non-volatile market.

 

[ZZGAMAZZ]

Based upon my limited experience I feel it is helpful to add the caveat that:

"It is virtually impossible to determine seller pricing strategy and buyer motiviation for a sample size of properties large enough for the analysis to be meaningful. Consequently the list/selling price ratio that is the basis of adjustment to the active listings in the SCA includes a margin of error of an estimated XXXXX%."

This might be a chicken-s... way to dodge the issue but it seems silly to devote time to providing data that appears valuable, which actually requires a degree of rigor above and beyond what I'm willing to conduct.

 

[JonGalt]

My formula for calculating list to actual sales price is rather simple. This is the formaula that should be used when using an active listing and the AMC asks you for the L to S ratio adjustment:

Go to your local Hobby ahop and pick up a 12 sided D&D die, roll the die on the desk, whatever number comes up is your percentage ratio and your set. If you're in a bind you may use 2 standard dice instead.

:Eyecrazy:

 

[Lawrence R.]

Based upon my limited experience I feel it is helpful to add the caveat that:

"It is virtually impossible to determine seller pricing strategy and buyer motiviation for a sample size of properties large enough for the analysis to be meaningful. Consequently the list/selling price ratio that is the basis of adjustment to the active listings in the SCA includes a margin of error of an estimated XXXXX%."

This might be a chicken-s... way to dodge the issue but it seems silly to devote time to providing data that appears valuable, which actually requires a degree of rigor above and beyond what I'm willing to conduct.

I agree. I left out any redeeming/condemning qualities of it, since the OP said he just wanted a basic description.

 

[ZZGAMAZZ]

Today's assignment is based upon the $170K purchase of a 2-bedroom 1000 sqft condo in avg condition.

The list price of a near-by 1500 sqft, 3 bedroom condo with numerous upgrades is $150K. Called & called & called and finallly called the owner instead of the listing agent. The owner indicated that the list price as a short sale at $150K received several offers, although the lender decided not to accept anything less than $185K, which was acceptable to an all cash buyer.

Selling price $185K. List price $150K totallly meaningless. Who's gonna do this for a sufficient number of active listings for the l/s ratio to be meaningful?

 

[NUTSaboutAPPRAISING]

Hi All,
Most MLS data have market statistics where the sp/lp ratio, avg DOM, avg sale $, etc is included.
I have been adding listings to some of my reports, and adding market stats to show changes in (subject property's) market areas. I use the sp/lp ratio adjustment to show potential selling price. The research takes another five minutes in my routine but the info is worth the effort; and the UWs seem to appreciate it (who'da thought that!).

 

[Lawrence R.]

Hi All,
Most MLS data have market statistics where the sp/lp ratio, avg DOM, avg sale $, etc is included.
I have been adding listings to some of my reports, and adding market stats to show changes in (subject property's) market areas. I use the sp/lp ratio adjustment to show potential selling price. The research takes another five minutes in my routine but the info is worth the effort; and the UWs seem to appreciate it (who'da thought that!).

And once you have the number, what do you do with it? How many listings do you think it would take to render instances like what ZZ is talking about insignificant?

 

[CURT VAN HOOSER]

Nice catch ZZ...

Nuts,

Make sure you can defend your adjustments.

 

[Marcia Langley]

Make sure you can defend your adjustments.

Exactly. And you also have to be able to defend an adjustment of zero.

In this market, clients are increasingly skeptical of zero.


In my analysis, I'd start by citing the total MLS report's overall statistic, add a comment about the MLS statistic for the sub market or neighborhood, and then determine the statistic for the handfull of sales that are most comparable.

The total MLS statistic in my market (and considering the local specific quirks in my local MLS) is accurate enough and a large enough sample to be credible. Of course that statistic is always a ratio to the "final list" and does not consider listing history.

Depending on my submarket size, it may also be accurate enough and a large enough sample to be meaningful. If not, I tweak it or explain why it is meaningless.

My short list of truly comparable sales can also be queried for automatic MLS statistics and "purified" if needed.

Then I have all three elements to reconcile. I might give more or less weight to any of the three elements depending on what I know about the data.

Once you have reconciled the data, it would only take one or two sentences to report your reasoning in comments.

=======

Lender clients usually fall into three camps. Camp 1 will question you if your adjustment ratio is not directly demonstrated by the comps used in the grid. Camp 2 will question you if your adjustment ratio does not match the greater market. Camp 3 will never question that adjustment.

As a usual practice, one needs to be prepared to back up their reasoning for both camp1 and camp 2.