Would You Guys Buy This Arguement?

[Metamorphic]

This is a $250 job AMC job, right? I'm pretty sure my Supervisor is making his normal rate on this one, but that doesn't concern me since I'm a trainee. "I" am making an absolute KILLING on this one, since trying to figure out the correct cost basis for this comp is taking forever.

If you are into the analysis, I would also look for past sale prices of current comparable listings. You may find some trend there.

Good Idea.


If I were analyzing your chart, I would interpret a general downtrend in the past 2 years. The homes that first sold more than 2 years ago may have net positive increases in sale price, but are likely skewed up by large increases in 05. If you disregard all but the resales that have taken place since 2006, I see a general down trend. That is the salient data, the way I see it. I see
-2% to as much as -20% per year indicated by those sales.

I see that too. But all that data is at a price point 1/2 of what I'm looking at which calls into question its applicability. All the high end data is positive.

As for FNMA, this statement might help when some underwriter does not think sales over 1 year can be used:

I know I can use it, but I still have to use it right.

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[Metamorphic]

Ok, I searched for current listings that have sold within the last 4, in the $750k+ range. I found 6. The average change per month is 0.15% appreciation! Even if you assume a 3% sp/lp, you're still looking at positive territory with 2 years of appreciation on the books.

That's the good news. But then I start digging.

The first 37%'er has several expired listings over the last couple years, each one with a higher price. No evidence of improvements. This suggests to me the owner has their head up their rear and really isn't interested in selling.

The -17%'er is an REO.

The 12%'er is at an air park. The previous sale was listed as plus or minus the hanger...plus evidently since the current listing offers it as an extra but apparently not part of the list price. So its not clear if the hanger was part of the old sale price or if it was a side deal.

The 10%'er was sold as a partially complete home. The listing is for a finished house. m2:

The -1% seems reasonably normal except that its a Rental which not very common for $900k houses in this area. Suggest to me some level of distress on the part of the seller....like maybe they had to move and decided to rent to help cover when it didnt sell right away. Who really knows, but its definitely funky. m2:

The 3% is a circa 1890 Victorian that's has several listings and sales in the MLS which collectively suggest there's been a small parcel sold off at some point and unspecified renovations going on. m2:

 

[Marcia Langley]

Meta,

It may be true that the micro market of only comparable sales/listings is simply too small a sample from which to determine a trend.

If that is true, it would be better to just say so in your report and to analyze the sales of a broader range of properties for your trending analysis. Thetrends you detect could be applied to the comps.

Don't dismiss the advice from other posters that says you are trending over too long of a time frame. The important time range is no greater than the oldest sale in your report. If you use sales much older than that to analyze the trend, you run the risk of improperly averaging a former overall increase with a current overall decline.

The client needs to know if prices have been declining in recent months, not what it has averaged out to over several years.

 

[Beth Stevens]

Just my two cents...........Don't try to apply an exact scientific theory to a very non-exact business. Somewhere in all that data, you've got folks that paid $$ for a house "just because they liked it," or it had some "appeal" that is not scientifically based. I think we all have a tendency sometimes to get too hung up on the scientific end, and forget that these are human beings with unexplainable tastes and preferences that sometimes drive the price they pay!!

You've done a GREAT job showing me that you're performing due diligence, and that you've thoroughly examined your market. Disclose that! If there are not solid conclusions to be drawn, explain that also. You could probably examine that data 2,000 times and come up with 2,000 different theories--none of which may be correct. Tell what you KNOW and move on.........

Best regards,
Beth

 

[Metamorphic]

Meta,

Don't dismiss the advice from other posters that says you are trending over too long of a time frame. The important time range is no greater than the oldest sale in your report. If you use sales much older than that to analyze the trend, you run the risk of improperly averaging a former overall increase with a current overall decline.

The client needs to know if prices have been declining in recent months, not what it has averaged out to over several years.

See, I actually kind of disagree with that theory. When I do statistical market analysis, I like to start the analysis with data in 1995 at the latest. By documenting at least a little bit of the up side of the market as well as the down side I'm in essence proving my method, showing how it relates to the regional/national picture. Its like bracketing comps in that it forces a mathematical/theoretical discipline. If you only show the last little bit of data it begs all sorts of questions about cherry picking end points, seasonal influences, natural disaster stuff, changes in lending practice, news stories about environmental/legal/developemental effects, etc.

 

[Metamorphic]

I think we all have a tendency sometimes to get too hung up on the scientific end, and forget that these are human beings with unexplainable tastes and preferences that sometimes drive the price they pay!!

Agreed, but if we dont at least try to do this via some rigorous, repeatable method, we start down a path the ends with us writing a number on a piece of paper, signing our name and handing it to a LO. To the greatest extent possible I think we should only play the unexplainable tastes preference card when its absolutely unavoidable, other wise what's the difference between an appraisal and a BPO?

You've done a GREAT job showing me that you're performing due diligence, and that you've thoroughly examined your market. Disclose that! If there are not solid conclusions to be drawn, explain that also. You could probably examine that data 2,000 times and come up with 2,000 different theories--none of which may be correct. Tell what you KNOW and move on.........

Best regards,
Beth

Funny, I just got finished explaining all this to my supervisor, and he basically said the same thing.

I think I'll mow the lawn and then start filling out the URAR.

 

[Marcia Langley]

Meta,

Keeping years worth of data is fine. But it is not applicable to the trend line of the last 12 months. I'll stand corrected regarding "no older than the sale date of your oldest comp".

What I should have said was to show the trend line that demonstrates market trends that are meaningful for making your adjustments.

If you are forced to use a comp more than a year old, your trend analysis should go back at least that far. I always show trending for the most recent quarter over the same quarter a year ago to show the trend not seasonally affected, the trend of the last few months (3-6 depending on how old my comps are), and any other trend comparisons I need to account for one time events that affected those trends.

Reconciling all those factors together helps define the overall trend.

But the fact remains, if your market has been in a noticible decline for the most recent 12 months and was increasing an equal amount the previous 12 months, it is misleading to have a zero market adjustment in your grid for sales that were less than 1 year old.

 

[PropertyEconomics]

Questions ...

How High End is the home you are working on?
How many sales are represented within each of the measuring time periods?

 

[Metamorphic]

Questions ...

How High End is the home you are working on?
How many sales are represented within each of the measuring time periods?

I'm expecting the number to come in about 1.05 mil.

On that original graph, each line represents an individual property that sold twice. Each end of each line is defined by those sales. As I said earlier, its a paired sales analysis where the the variable is sale date instead of two different properties sold at the same time with slightly different amenities.

 

[Louis Pompeo]

I Repeat.

You're ALL kidding.......Right?