Sales Price to List Price Ratio

[Tazmaniac]

Anyone out there who has appraised awhile knows that this adjustment doesn't belong on an As is appraisal. I am getting more and more requests for an adjustment on my comparable listings, and even on my comparable sales. I keep telling them to get a BPO, but they think that they can force appraisers to do whatever they want. So, for anyone else out there who has this issue, Here is the best comment to write on the report. Hopefully together we can re-educate the underwriters.

"Sale Price to List Ratio:
This ratio adjustment appears to be a more common request. Unfortunately, it is not factual and highly variable depending on sales. For this reason, it is not adjusted for on an "As Is" appraisal report. Using paired data analysis, the ratio between two sale prices and the current sales vs. another set will generally be different as there is no set price for each home. The final price can fluctuate greatly in the negotiation process, and the appraiser cannot predict what a home will sell for. The appraiser can only develop a most approximate market value based on current sales, not listings. The homes listed could sell for more than they are listed for, which would totally skew any predicted adjustments. A BPO would probably be the best way to ascertain any probable Sales Price to List Ratio."

 

[Lee Lansford]

Anyone out there who has appraised awhile knows that this adjustment doesn't belong on an As is appraisal. I am getting more and more requests for an adjustment on my comparable listings, and even on my comparable sales. I keep telling them to get a BPO, but they think that they can force appraisers to do whatever they want. So, for anyone else out there who has this issue, Here is the best comment to write on the report. Hopefully together we can re-educate the underwriters.

"Sale Price to List Ratio:
This ratio adjustment appears to be a more common request. Unfortunately, it is not factual and highly variable depending on sales. For this reason, it is not adjusted for on an "As Is" appraisal report. Using paired data analysis, the ratio between two sale prices and the current sales vs. another set will generally be different as there is no set price for each home. The final price can fluctuate greatly in the negotiation process, and the appraiser cannot predict what a home will sell for. The appraiser can only develop a most approximate market value based on current sales, not listings. The homes listed could sell for more than they are listed for, which would totally skew any predicted adjustments. A BPO would probably be the best way to ascertain any probable Sales Price to List Ratio."

I routinely include current offerings and/or pending sales as additional "comps" in an appraisal conducted "as is" (or, for that matter, one that might be conducted "subject to..." 'whatever').

The local MLS can provide the relationship between Avg. Sold Price/Avg. List Price (both Final LP & Orginal LP) for virtually any "neighborhood" and time-period that one can define.

The relationship can be used in the analysis of the additional comps. As in all things, the appraiser is obligated to explain from where the information came and how the information and analysis are to be understood.

 

[Mike Kennedy]

The appraiser can only develop a most approximate market value based on current sales, not listings.

Source?

 

[Tazmaniac]

Mike, if you can predict what a sale is going to be, By all means become rich. Everyone else is not that lucky. The adjusting of a listing price to formulate a sales price for the listing is not USPAP compliant. If you cannot see that, well, you really need to change professions. On an AS IS report, you should never adjust a listing to what you think it will sell for. Cmon people, wake up and realize what you are doing.

 

[Tazmaniac]

To LEE, you honestly think the local MLS has the sufficient information to derive a ratio that will predict a sales price for a listing?

 

[Metamorphic]

You're making a mountain out of a molehill.

The whole process of putting listings on the comp grid is specious to begin with. At BEST they allow you to say "see, my OMV is less than or equal to what you could buy a comparable property for." However, there are typically so many listings in the market that you can pick several that are wildly overpriced so you can cover even an inflated OMV if you wanted to.

If somebody wants you to reduce the listings by some % for SP/LP why not? I just dont see how anything vaguely market real that you do to a listing comp can be "wrong".

 

[Lee Lansford]

To LEE, you honestly think the local MLS has the sufficient information to derive a ratio that will predict a sales price for a listing?

From my prior post: "As in all things, the appraiser is obligated to explain from where the information came and how the information and analysis are to be understood."

Thus, no "predicting" in what I do and fully explain in my report of an appraisal.

Many misunderstandings of what the appraiser communicates is often due to the appraiser's failure to properly communicate or a lack of comprehension skills on the part of the Intended User.

 

[Deleted member 77547]

I routinely adjust listings with a list/sales price ratio that my MLS system provides. I also include a statement that the listings were adjusted for "typical" buyer/seller negotiations and that the ratio was developed by the MLS system, a source considered reliable and that it is not a guarantee of a future closed sales price.

 

[Lee Lansford]

I routinely adjust listings with a list/sales price ratio that my MLS system provides. I also include a statement that the listings were adjusted for "typical" buyer/seller negotiations and that the ratio was developed by the MLS system, a source considered reliable and that it is not a guarantee of a future closed sales price.

You understand.

 

[Lee Lansford]

Mike, if you can predict what a sale is going to be, By all means become rich. Everyone else is not that lucky. The adjusting of a listing price to formulate a sales price for the listing is not USPAP compliant. If you cannot see that, well, you really need to change professions. On an AS IS report, you should never adjust a listing to what you think it will sell for. Cmon people, wake up and realize what you are doing.

The adjustment (at least when I do it) is not "to formulate a sales price for the listing".