I have a client asking me to make a sale to list ratio adjustment for an Active listing Used in a report. What would be the correct way to perform this adjustment?
I still can't see why the LP / SP ratio is considered solid enough ground to stand on. In this market there are just as many listings that expire with no offers. What would happen to the ratio if these expired listings were included in the mix. It can't be done, because there is no sale. One is making too much of an assumption by applying this ratio that our listing will actually go under contract. One would also be assuming there will be no more price drops before a contract offer is obtained. It also leaves out the amount of seller paid closing help which at times has the biggest impact on that LP/SP ratio. Are new construction listings included in this mix, if so, they could also throw that ratio out of whack.
IMHO when clients demand this adjustment, they are treating this listing data totally wrong and are trying to find a way to "equate" them to actual sales. I do not want to lead them down this road, because all they are is listings, period. If the proper listings are utilized they demonstrate the value ceiling as of the effective date based on the theory of substitution and that is their only purpose.
How many times have appraiser's said in the forum over the past several months, "who knows how low those listings will have to go to see some action, all they are telling us is what the properties are not worth". When that truly is the case, that LP/SP ratio could give the client a false sense of security.