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Stumped/Declining Market

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Michael Boyd

Thread Starter
Sophomore Member
Joined
Jan 15, 2004
Professional Status
Certified Residential Appraiser
State
Montana
I am appraising a custom house in an area where there is sufficient recent closed sales. Several closed within the past 90 days, however, the pending dates were considerably before the closing dates. I know from recent events and an analysis of active, expired and withdrawn listings that the market has slowed along with marketing times. Inventories are up, etc. Even had a local developer action off 11 houses in the $300,000 to $550,000 range for considerably less than the original list price.

The problem I have is that the closed sales I have available to me for custom houses competitive with the subject won't show a decrease in market prices although it is warranted. How do I address that issue? What adjustment can be made. Date of sale adjustments require the sale and resale of the same property with sufficient data to indicate any time adjustments. I've been doing this for 22 years and don't recall market conditions declining. I feel ignorant and lost...lol.....Help!
 

Dennis J. Black ASA IFAS

Senior Member
Joined
Mar 5, 2002
Professional Status
Certified General Appraiser
State
Florida
Who said time adjustments can only be supported by the sale of the same property twice? That is a really good method of support, but not the only method. Also 22 years would take you back to 1986. I will not elaborate further.
 

masmia

Sophomore Member
Joined
Oct 16, 2007
Professional Status
Certified General Appraiser
State
Florida
Analyze the price trends per quarter for similar properties for the past twelve months and see what that tells you. If the trend for your sub-market differs than the total market address any differences in the report. Example, the overall market area shows declining property values however, properties similar to the subject show a stable trend in values. Go the extra step in demonstrating this in your market conditions description.
 

jay trotta

Elite Member
Joined
Feb 8, 2004
Professional Status
Certified Residential Appraiser
State
Connecticut
DJB....giving away your age....rofl...and knowledge

a lil quiz fer ya MB - how did you reconcile when the market was "Increasing"....so to speak ??
 

Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
Market values appear stable for homes most similar to the subject.
However MLS reports that the immediately surrounding marketplace has some ___ months of inventory at current absorption rates, which is considered __________.

Long term market trends since 1/1/05 show values in this marketplace are declining/stable/increasing (See attached chart) :icon_idea:

2007 to 2008 raw price & $/ft comparisons show prices in the area have increased by ____%/ are stable/ have decreased by _____%.
Days on market have increased by ____% since same period in 2007.
Overall this pattern shows that the general markeplace is ______________.
Thus ________________________.
.
.
This is why they pay you the big bucks
 

Doug Wegener

Senior Member
Joined
Apr 14, 2005
Professional Status
Certified Residential Appraiser
State
Oregon
time adjustments

I am appraising a custom house in an area where there is sufficient recent closed sales. Several closed within the past 90 days, however, the pending dates were considerably before the closing dates. I know from recent events and an analysis of active, expired and withdrawn listings that the market has slowed along with marketing times. Inventories are up, etc. Even had a local developer action off 11 houses in the $300,000 to $550,000 range for considerably less than the original list price.

The problem I have is that the closed sales I have available to me for custom houses competitive with the subject won't show a decrease in market prices although it is warranted. How do I address that issue? What adjustment can be made. Date of sale adjustments require the sale and resale of the same property with sufficient data to indicate any time adjustments. I've been doing this for 22 years and don't recall market conditions declining. I feel ignorant and lost...lol.....Help!



You dont necessarily need closed sales of custom houses to support your time adjustment.

All boats rise or fall with tide. Same with all houses. You could take all sales in the subject zip code and do a regression analysis and derive a market condition adjustment that way.You just have never been taught to do it, despite being a certified appraiser. Its relatively easy to do.

Import all sales in the subject zip code into excel (many MLS systems are designed to allow this). Make two columns, one for sales price and one for sale date. Run a statistical analysis using the regression feature in excel. You will get the amount of daily decline. Multiply that by 30 and you will get the amount of monthly decline. Divide that by the median sales price and you will the amount of monthly time adjustment.

Make sure you use the contract date and not the closing date.
 
Last edited:

Caterina Platt

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
New Mexico
Michael,

Others may choose their broad area search methods for time adjustments, but personally, I choose to focus on the conditions for the subject's sub market. For instance, we have different buyers with different motivations purchasing the low end affordable dwellings vs. the high end, custom market. Our area demographics have far fewer buyers in the high priced range, and the activity taking place in these two submarkets is not necessarily equal to one another.

In Albuquerque, we can show a fairly balanced market in terms of supply and demand in most locations when you consider lower priced dwellings. Change that price level to $800,000+, and last I heard, we have a 7 year supply on the market. I will not simply run the numbers for a zip code and consider that data the final analysis.

Your time adjustments should be based on a collection of transaction data for similar dwellings from both time periods.

JMHO
 

Doug Wegener

Senior Member
Joined
Apr 14, 2005
Professional Status
Certified Residential Appraiser
State
Oregon
You have low end houses and $800,000 houses in the same zip code?
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
Doh!!!

Something in the OP didn't sound right and I spent 15 minutes looking through MLS and some of my reports from last month before I realized the OP is Michael Boyd from Montana and not Michael Boyd from Santa Rosa. LOL...
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
I also would look to the sub-market with in the area.

I would if the auction homes are in the sub-market area use then as well as an indicator of market conditions. If they are in the general market I would reference them in the report as to general conditions.

just my thinking.
 
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