Another great poll from www.appraisalport.com.
My comments: I have always looked at listings, pendings, expired, etc. to tell me what is happening in the market today. Sales are the past.
Recent articles below in the May 2016 issue of the Paid Appraisal Today discuss using listings, particularly in markets that are declining or increasing. Lenders, of course, are way behind. They are just now complaining about low appraisals on purchases and want appraisers to use pending sales. Also, having no closed sales higher than the listing price is ok!!
- Practical tips on qualifying the 1004MC and preparing a Market Conditions Summary – most examples are declining markets
- No man’s land & the aggressive real estate market
- How to handle rapidly increasing prices in your market
Using listings is the essence of the principle of substitution and shows the upper limits of value. The principle of substitution is a powerful tool. It helps conclude logical ceilings for estimated values. The principle is fairly simple and easily understood. It is used by most of us every day. It is a comparative principle in many of our purchase decisions. The principal basically states; no one would pay more for items (in this case real estate) than substitutes, serving the same function, i.e., most buyers would not pay $200.00 for a cell phone, if the same phone (or one with comparable utility) sold for $100.00 at other near-by locations. A purchase at the greater price would be economically irresponsible. This same principle holds true with real property. If the subject’s value, indicated in this report, exceeds the value of similar listed properties, possibly something is missing. In fact, it is probably incorrect. While there are always deals of a life time, generally mitigating circumstances exist. Typically, these sales are forced liquidations. This is why one sale (or listing) is not a market. Further it is why adjustments for difference exist.
Thanks for the Most Excellent explanations!!