Sales Price to List Price Ratio

[John Hassler]

Yeah, these are re-runs, but some questions remain un-answered.

So, I'll ask again. How to do calculate your SP:LP - original listing price, last listing price, time weighting them as Boyd suggested (which I like BTW) or some other method, and how do you address the points I brought up in post 15 when applying them to a listing?

 

[Mr Rex]

I use the most recent MLS data. Our MLS doesn't allow changing the MLS number to avoid detection of reductons etc. I also report DOM as 2 numbers if applicable: DOM/CDOM. Did one last week 662 CDOM. I have done one recently with 1300+ DOM, 1300+CDOM that sold for 25% less than list if that makes you feel any better.

 

[TJSum]

Yeah, these are re-runs, but some questions remain un-answered. Care to share?

Who are these mystery people that think the adjusted values of the comparables or listings are indicative of sales price of the comparable or listing? Do you have HOs suing someone when they find out your adjusted value of their sold comparable is lower than what they paid?

The arguement against applying a SP/LP adjustment is akin to saying don't make Time Adjustments to the sold comparables, someone might confuse your adjustment to that particular comparable to constitute an appraisal of that particular comparable as of the effective date of the appraisal.

So who are the users of these reports that are so misdirected and (step back) "mislead"?

The adjustments to the sold comparables are based on things that have happened in the past, known facts, to bring that sold comparable up to todays effective date of the report.

The LP/SP ratio is trying to say what will happen in the future, that is the difference. The future is unknown. Why not use the average or median days on market to tell them when the listing will receive a contract?

As to your first question, in real life, you know darn well the reason the clients want to see this adjustment on the grid is so all the adjusted values line up with each other on the report. When doing that, they are in fact using that adjustment as a prediction to equate the listings to sales.

That is not for me, sorry, no sale here. For those that do, have at it, you will not burn in appraisal h*ll, but you are leaving yourself open for credibility issues later on down the road if any of your reports come into question when all the facts of those listings are known.

As an example, lets say you use three listings on a report. Your LP/SP ratio is 95% for the market. So you apply a 5% adjustment to all of them. Two years down the road, for some reason this report goes to court. The first listing ended up selling for full price, the second listing ended up selling for 90% and the third listing expired with no offers. It is right at your 95% ratio, but none of the adjustments came close to the actual real life result. The opposing attorney can use these three examples to question your credibility. If your adjustments on these three listings were so far off, how hard would it to believe that your subject value opinion is just as far off...

 

[Mr Rex]

But you have your closed sales to hang your hat on. Don't they tell the story in its entirety?

 

[TJSum]

"• Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables. Reasonable market exposure is reflected by typical marketing times for the neighborhood. The comparable listings should be truly comparable and the appraiser should bracket the listings using both dwelling size and sales price whenever possible."




For those bored with our repeat, another question regarding FHA memo with this statement. How can you have a listing exposed to the market for a reasonable time but not have it overpriced at the same time? It seems to me the only listing with proper exposure, at correct pricing, is a listing that is under contract.

 

[TJSum]

But you have your closed sales to hang your hat on. Don't they tell the story in its entirety?

Not in its entirety, but they should stand alone as something separate from contracts and listings. All three are important, and provide different information to put the entire puzzle together. To try to make them equal with this adjustment is at the heart of my disagreement.

 

[Mr Rex]

It seems your analysis that deems a listing as "overpriced" may be an appraisal of said listing and perhaps predictive of sales price.

 

[TJSum]

It seems your analysis that deems a listing as "overpriced" may be an appraisal of said listing and perhaps predictive of sales price.

As I stated, our expertise should come in with choosing the proper listing (or contract), as is, not changing the price of any listing to what we think it should be. Once we do that, we cross the line of reporting the market to trying to set it.

 

[CANative]

TJ... Sp/Lp adjustments (IMO) are not price predictive. They simply represent market data adjustments to the competitive properties in the market at the time of value. No one is going to hang an appraiser for an opinion. And the Sp/Lp adjustment represents an opinion of the appraiser and probably one of the most supportable opinions among all the things we adjust for. The data is published in easy to understand statistics. It IS historical data because it is a measure of something that has already happened (the property sold for $X after having been listed for xx days at $xx)

 

[John Hassler]

I use the most recent MLS data. Our MLS doesn't allow changing the MLS number to avoid detection of reductons etc. I also report DOM as 2 numbers if applicable: DOM/CDOM. Did one last week 662 CDOM. I have done one recently with 1300+ DOM, 1300+CDOM that sold for 25% less than list if that makes you feel any better.

I didn't feel bad in the first place but thanks for asking. BTW I have no idea how decode what you wrote. Since you use MLS to get your SP:LP, is that ratio based on original or last listing price, and do you apply it to the original or last listing price of the listing you place in the grid? I'll understand if you don't want to answer.