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Would you adjust for short marketing time?

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hal380

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Apr 26, 2003
Professional Status
Certified General Appraiser
State
Connecticut
Good Morning All:

When you see the marketing time for the comps you are using is in the 45 - 60 day range, and then one of the sales sold in 10 days. While it is true that there may have been unusually strong motivation in this particular buyer for some unknown reason. The more likely reason is/was that this house was not properly priced.

Would you make some sort of upward adjustment to reflect the presumed under pricing of this house?

This is a hypothetical question. I have no specific house in mind, so I cannot provide any additional specifics.

I have seen this several times and have not made any adjustments, but tend to weigh this house less than the other sales.

Thoughts?

Regards

Hal
 

Carnivore

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Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Hal,

Thats is a pet peeve of mine with the Realtors Babes, many times they sell it in one day.

The question in my mind that needs answered first is always what is normal exposure time for the market segment.

exposure time
1. The time a property remains on the market.

2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions. (Appraisal Standards Board of The Appraisal Foundation, Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions")

Market value estimates imply that an adequate marketing effort and reasonable time for exposure occurred prior to the effective date of the appraisal. In the case of disposition value, the time frame allowed for marketing the property rights is somewhat limited, but the marketing effort is orderly and adequate. With liquidation value, the time frame for marketing the property rights is so severely limited that an adequate marketing program cannot be implemented. (The Report of the Appraisal Institute Special Task Force on Value Definitions qualifies exposure time in terms of the three above-mentioned values.)

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marketing time
1. The time it takes an interest in real property to sell on the market sub-sequent to the date of an appraisal.

2. Reasonable marketing time is an estimate of the amount of time it might take to sell an interest in real property at its estimated market value during the period immediately after the effective date of the appraisal; the anticipated time required to expose the property to a pool of prospective purchasers and to allow appropriate time for negotiation, the exercise of due diligence, and the consummation of a sale at a price supportable by concurrent market conditions. Marketing time differs from exposure time, which is always presumed to precede the effective date of the appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions" address the determination of reasonable exposure and marketing time.)
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
I always look to see who the agencies are and also the agent. Sometime it is the agency and sometimes it is the property. In a tourist destination area here in MA there is an agency that list most bank own properties and there stats say they are the number -one agency, but the bank own listings are greater than the private-owner listings. When a property sells quickly in comparison to others, is it the property or is it the participants that created the quick sale.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
... While it is true that there may have been unusually strong motivation in this particular buyer for some unknown reason. The more likely reason is/was that this house was not properly priced. ...
This is an interesting question, but it depends on what you think actually happens during the period that a property is on the market.

I've seen several different scenarios in different locations and for different property types.

Sometimes the amount of time appears mostly logistical, and consists of the sum of the time to get the property listed in the MLS, have the agents view it during caravan, then call their prospective buyers, have the buyers available to inspect the property, a few days for contemplation, and then a week or two for the offer/counter-offer period.

In other instances, the number of days on market appears random, particularly when there are only a few potential buyers for a specific type of property. If those buyers happen to see the listing on the day they happen to be in town, the immediate offer might have little to do with the price and more to do with the characteristics of the property. The flip side is that the same property might be on the market for a year, just because the right buyers didn't happen to be looking during that time period. Again, the unusual marketing/exposure time has little to do with the price.

Other neighborhoods seem to have an orderly process of initially asking well above market value and then reducing the price on a regular basis until they find that sweet spot.

Or how about areas that show extreme seasonal variances in market time; as when families are trying to move before the semester starts, or when a skier doesn't think of buying a cabin until the first snow falls, or when a beach house looks like the worst idea in the world during November but sounds pretty good in July.

I suppose the classic model for analyzing marketing times is mainly based on the idea that it takes a while just to "get the word out" to an adequately large number of prospective buyers. And, it's pretty obvious that low asking prices will usually (but not always) decrease marketing time. But, I don't think I'd be comfortable stating that short marketing time always indicates a low selling price. The model is just too inconsistent to be used for every property type, every area, and every season in all market conditions.

So, bottom line - I'd agree that, for a comparable sale that adjusts to an inexplicably low price, extremely short marketing time is good evidence that specific property may have been under-priced. But, I wouldn't say that unusual marketing times always reflects incorrect pricing.
 

fdjaynes

Sophomore Member
Joined
Feb 5, 2002
Professional Status
Licensed Appraiser
State
Arkansas
You could try calling the buyer to ask if there were atypical motivations to buy, or if the seller was highly motivated to sell. Much better than making adjustments based on unfounded assumptions.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
You could try calling the buyer to ask if there were atypical motivations to buy, or if the seller was highly motivated to sell. Much better than making adjustments based on unfounded assumptions.
Bingo! Far more questions are answered by talking to buyers, sellers, and agents than will ever be answered by massaging the data until a clean trend line appears.

Occasionally they'll offer important information that would otherwise have remained hidden, sometimes changing the whole analysis. And usually the answers are much simpler than those that appraisers conjure up after spending hours staring at numbers.
 

Wayne Tomlinson

Senior Member
Joined
Jan 25, 2005
Professional Status
Certified General Appraiser
State
Illinois
Instead of Bingo, you could also employ a Devining Rod or possibly an Ouigi board.

Most real estate transactions tend to involve people making decisions. It somewhere in one of your pre-license courses there happened to be a section on reading minds, please let me know who is offering that course.

Just as where many appraisers area sure that if it didn't sell through the local MLS, that it cannot possibly be a "useable" sale, or one of the other many things that render a sale suspect as in FSBO or public auction just is not useable.

In a nearby county there is an auctioneer who regularly sells residential properties. There also is an active and aggressive MLS. In doing some checking, there is little, if any, detectable bias one way or another

In my own town, there is no MLS at all. We still are able to do appraisals, it just takes more work.

I will agree that DOM can be a factor. but you have to be very careful in thinking that you will always know just what it means.

Wayne Tomlinson
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
I don't associate any significant importance in a 'short' marketing
period. It could just be a coincidence that the property met the
criteria of one or more buyers in the market, who are well informed
and been active in the market. If we assign significance to a short
marketing time for a property, maybe we should include the
number of days the buyer was 'looking', BLD, Buyer Looking Days, too.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
... maybe we should include the
number of days the buyer was 'looking', BLD, Buyer Looking Days, too.
Good one! If a bunch of people are watching a property and waiting for it to come on the market, is that part of the marketing period? Or suppose that everyone hears that a lakefront community is proposed. Does the marketing period start on the day they first hear about it, or on the day that the sales office opens? "Marketing Time" is such a vague concept, that I really get uncomfortable when people try to treat it as a physical event.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Instead of Bingo, you could also employ a Devining Rod or possibly an Ouigi board. ...
Wayne, I'm confused. It first sounds as if you're disagreeing and saying that interviewing market participants is black magic. And then you state that good appraisers use any and all resources available to them. I'm I reading you wrong?
 
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