What is your definition of Oversupply?

[EVAUSA]

I look at the listing/sales ratio in conjunction with the absorption rate. "Within a one mile radius, there are 38 active listings, 4 pending sales, and 26 closed sales within six months. At the current absorption rate of approximately 4.5 sales per month, it will be approximately 8.5 months to absorb the current inventory. This data, coupled with increasing forclosures and lengthening marketing times indicates an oversupply of listings." This is my lead into my Declining Values comment, the Grand Finale.

 

[Couch Potato]

Don: My comment implied that market analyses can't matter because the concepts aren't defined, or if so the definitions--from a practical appraisal perspective--are a very closely held secret. Consequently, the market analysis included in a typical residential SOW is a pedantic exercise valued by appraisers as a form of self-aggrandizement . . . "full of sound and fury" so to speak...kinda like one of my graduate advisors once told when I was having trouble determining which statistical model to apply to a RESEARCH paper. . . he said, "the key to getting your thesis finished is to realize that nobody...nobody...gives a $hit"

In the case of an academic paper, you are so right. In the case of an appraisal report, you are also right for most appraisal reports. The only time you are wrong is when someone loses some money, and is looking for someone to blame. It is so easy to make a case as a lender that had good information been provided on the general market, a different decision would have been made in spite of the accurate opinion of value. Odds are nobody will give a $hit, but an appraiser needs to be prepared for that one time when somebody does. :new_smile-l:

 

[Mike Garrett RAA]

Brings up an interesting point...what is going to happen when the GSEs start going after appraisers? I was told there is a whole floor of lawyers at Fannie Mae in Dallas preparing to do just that.

 

[dane84094]

This formula came from an underwriter from an un-named lender.

active sales / (pending sales + closed sales) = 1.8 or less is considered by the lender as "in balance".

 

[ZZGAMAZZ]

Couch Tater: Yours is a very interesting comment because I was just preparing to ask the Formum and/or my E&O carrier whether liability can be based upon an illogical or incorrect market analysis. I realize that anybody can sue anybody, but does historical precedent exist for this scenario?