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I can’t decide whether that’s going to help his ratings or hurt them.

No matter. Those numbers aren’t going down any time soon. Eventually someone else is going to bring it up again.

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sdr,

You and I are apparently using different definitions of Market Value. You appear to be using the “willing buyer / willing seller as demonstrated by the sales contract” version, which is typical of the way most realty agents define value. There’s nothing wrong with that considering the role of a realty agent. You only need to find that one special buyer who can be sold on the merits of this very special property. Whether or not that special buyer (or seller) is making a mistake is not your problem.

My role is different, and so is the definition of value that I’m using. The definition I’m using is “typical buyer / typical seller, no undue motivations” and as demonstrated by the predominant trend. I specifically don’t care about your special buyer and as far as I’m concerned there is no such thing as a “very special property”.

I never make the mistake of confusing the two perspectives, and neither should you.

If you can demonstrate (using actual sales data) how the market in this neighborhood is INCREASING right now then it might be okay to dismiss as irrelevant the 4 and 5 month old sales in the subject’s immediate neighborhood. If not…..

Now I’ll concede that maybe our subject really is better than everything else in its neighborhood and maybe using those three sales would involve accounting for their inferiority to this property, thus resulting in a higher “most probable price” opinion. Who knows, maybe those differences would warrant $75k in aggregate upward adjustments. I’d have to see those differences first, though. In lieu of information to the contrary I’m trying to keep my assumptions to a minimum. More assumptions = more margin for error.

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sdr,

You and I are apparently using different definitions of Market Value. You appear to be using the “willing buyer / willing seller as demonstrated by the sales contract” version, which is typical of the way most realty agents define value. There’s nothing wrong with that considering the role of a realty agent. You only need to find that one special buyer who can be sold on the merits of this very special property. Whether or not that special buyer (or seller) is making a mistake is not your problem.

My role is different, and so is the definition of value that I’m using. The definition I’m using is “typical buyer / typical seller, no undue motivations” and as demonstrated by the predominant trend. I specifically don’t care about your special buyer and as far as I’m concerned there is no such thing as a “very special property”.

I never make the mistake of confusing the two perspectives, and neither should you.

If you can demonstrate (using actual sales data) how the market in this neighborhood is INCREASING right now then it might be okay to dismiss as irrelevant the 4 and 5 month old sales in the subject’s immediate neighborhood. If not…..

Now I’ll concede that maybe our subject really is better than everything else in its neighborhood and maybe using those three sales would involve accounting for their inferiority to this property, thus resulting in a higher “most probable price” opinion. Who knows, maybe those differences would warrant $75k in aggregate upward adjustments. I’d have to see those differences first, though. In lieu of information to the contrary I’m trying to keep my assumptions to a minimum. More assumptions = more margin for error.

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I (probably) wouldn’t have come out in the low $800s, but I see no indication in that neighborhood that prices are INCREASING relative to earlier in this year.

You may not care for the sales in those two neighborhoods but that’s what is there. Just to remind you, neither the 02/2007 nor the 03/2007 sales in this neighborhood are dated from the perspectives of even the most paranoid of lenders. That’s 2 closed sales in addition to the 6.5 month old sale in that immediate neighborhood. Even if I used a more recent sale from the nearest “similar” neighborhood to the north as my 3rd sale without adjusting for its demonstrated superiority in the market I’d still be compelled to give more weight to the more proximate sales. Not only are they more similar in location, they were built by the same developer and subcontractors, they have more similar design and floorplans, and they would have sold with similar options.

If anything, the 6.5 month old sale is the one that supports the highest value indicator – as an agent you should be encouraging its use, not discouraging it.

Remind me one more time about the 3 most important factors in real estate? (Location, Location, Location)

If we’re talking about a subdivision home, it would take an act of God to justify going outside the neighborhood in order to exclude inside sales that bracket our property’s characteristics. I would have to be able to positively demonstrate that prices are INCREASING relative to the dates of sale of those earlier sales, enough so to completely discount them as being indicative of the current value. In other words, I’d be saying the market is so hot that a 4-month old sale is too dated to use at all.

I know you’re bullish on this neighborhood but can you prove SIGNIFICANT price increases in the last 6 months? Let’s compare the subject’s own prior sale in 2005 with the early 2007 sales; does that indicate increases to you? I’m just not seeing it.

Maybe things will look better next month after a couple more pendings close; but I doubt it.

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I (probably) wouldn’t have come out in the low $800s, but I see no indication in that neighborhood that prices are INCREASING relative to earlier in this year.

You may not care for the sales in those two neighborhoods but that’s what is there. Just to remind you, neither the 02/2007 nor the 03/2007 sales in this neighborhood are dated from the perspectives of even the most paranoid of lenders. That’s 2 closed sales in addition to the 6.5 month old sale in that immediate neighborhood. Even if I used a more recent sale from the nearest “similar” neighborhood to the north as my 3rd sale without adjusting for its demonstrated superiority in the market I’d still be compelled to give more weight to the more proximate sales. Not only are they more similar in location, they were built by the same developer and subcontractors, they have more similar design and floorplans, and they would have sold with similar options.

If anything, the 6.5 month old sale is the one that supports the highest value indicator – as an agent you should be encouraging its use, not discouraging it.

Remind me one more time about the 3 most important factors in real estate? (Location, Location, Location)

If we’re talking about a subdivision home, it would take an act of God to justify going outside the neighborhood in order to exclude inside sales that bracket our property’s characteristics. I would have to be able to positively demonstrate that prices are INCREASING relative to the dates of sale of those earlier sales, enough so to completely discount them as being indicative of the current value. In other words, I’d be saying the market is so hot that a 4-month old sale is too dated to use at all.

I know you’re bullish on this neighborhood but can you prove SIGNIFICANT price increases in the last 6 months? Let’s compare the subject’s own prior sale in 2005 with the early 2007 sales; does that indicate increases to you? I’m just not seeing it.

Maybe things will look better next month after a couple more pendings close; but I doubt it.

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Eck. In all honesty, the question wasn’t addressed to me in the first place, and I just stuck my two cents in; so I guess I deserve whatever comes as a result of that.

The one thing I would point out is that my perspective is different than that of a realty agent because I don’t deal with the front end of the transaction – the establishment of the listing price, the marketing, the negotiations, the contract, and all that. I only see the end results, and deal with the end result of other transactions. I usually am looking backward in time for what I can demonstrate the value to be based on events past. By definition an agent is dealing with the prospective buyer and the prospective sale price and they would generally be looking forward.

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Eck. In all honesty, the question wasn’t addressed to me in the first place, and I just stuck my two cents in; so I guess I deserve whatever comes as a result of that.

The one thing I would point out is that my perspective is different than that of a realty agent because I don’t deal with the front end of the transaction – the establishment of the listing price, the marketing, the negotiations, the contract, and all that. I only see the end results, and deal with the end result of other transactions. I usually am looking backward in time for what I can demonstrate the value to be based on events past. By definition an agent is dealing with the prospective buyer and the prospective sale price and they would generally be looking forward.

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“Most relevant”? We’ll have to be content to disagree on that one.

The larger one is in no way directly comparable – Not only is it that much larger, but the homes in that entire project are larger all the way around. Remember what I said about avoiding projects with dissimilar units?

The smaller one is newer than our subject or the three in its’ neighborhood, and again, a paired sales analysis from earlier this year indicates that this project has also historically sold for more than ours. Check out the sale on Corte Fresa that sold in 01/2007 (right in the middle of the 3 I mentioned). At $875,000 it sold below its list price, and was STILL 5% higher than the “equivalent” sales I noted from the subject’s neighborhood.

It remains to be seen whether this pending sells within its range, but even if it does sell at its upper end it still indicates back to the same trend indicated by the 3 sales I noted and the 5 or 6 other sales I alluded to. If it sells at the bottom of its range it indicates to a slightly lower value.

I’ll defer to your point on DOM (on the smaller one, anyway), although the CMA indicates average exposure times for all pendings are still in excess of a month. You’d still have to prove your point about selling at the top of those ranges, though.

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“Most relevant”? We’ll have to be content to disagree on that one.

The larger one is in no way directly comparable – Not only is it that much larger, but the homes in that entire project are larger all the way around. Remember what I said about avoiding projects with dissimilar units?

The smaller one is newer than our subject or the three in its’ neighborhood, and again, a paired sales analysis from earlier this year indicates that this project has also historically sold for more than ours. Check out the sale on Corte Fresa that sold in 01/2007 (right in the middle of the 3 I mentioned). At $875,000 it sold below its list price, and was STILL 5% higher than the “equivalent” sales I noted from the subject’s neighborhood.

It remains to be seen whether this pending sells within its range, but even if it does sell at its upper end it still indicates back to the same trend indicated by the 3 sales I noted and the 5 or 6 other sales I alluded to. If it sells at the bottom of its range it indicates to a slightly lower value.

I’ll defer to your point on DOM (on the smaller one, anyway), although the CMA indicates average exposure times for all pendings are still in excess of a month. You’d still have to prove your point about selling at the top of those ranges, though.

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A) As an appraiser I NEVER base an appraisal primarily on any one sale. I’m looking for the trend, not the exception; no one sale makes or breaks an appraisal – not ever. By the same token, I don’t limit the number of comps I analyze in a report to only 3 sales unless I have absolutely no other choice – and that never happens when I’m appraising homes.

B) I said that the oldest comp (12/28/2006) happened to be most similar overall except for the pool. I didn’t say I’d weight it that much more heavily than the other two sales. Trust me, If you didn’t like what the oldest sale was saying you REALLY wouldn’t be happy with the results with weighting the most recent sale.

C) I am required to back my opinion up and I am compelled to work with the data at hand. I don’t get to opt out of an assignment just because the data is sparse. I almost never get the data I’d LIKE to get. Nevertheless, a lack of recent or similar doesn’t give me more latitude to insert my personal discretion into an appraisal. The data is what it is regardless of how I “feel” about it.

D) If you’re saying that the lack of activity is due to the lack of supply and that there are more buyers than sellers right now then perhaps that’s so. I’m not interpreting average exposure times of 2+ months as being indicative of a smoking hot market. The same holds true for sales prices that predominantly wind up closing at the bottom of the listing ranges. Reasonable people may have to agree to disagree on that one.

E) If you’re rebutting one of my appraisals, you’re rebutting my selection of comparable data based on similarity and/or proximity. As far as my clients are concerned the only way an agent’s rebuttal would be considered more credible than my appraisal would be if they came up with data that was either more similar or more recent than the data I’m using. The only way that’s going to happen is if I’m incompetent with respect to researching the comparable data. They will not be rebutting one comp; they’ll be rebutting all of them, and that only works if all their comps are more similar than all of my comps.

F) I ALWAYS give the realty agents involved the opportunity to give me the data they think I should consider in an appraisal. In the last 10 years I think I’ve been handed a grand total of a half-dozen relevant sales transactions that I wasn’t already aware of. None of those occurred in assignments involving residential real estate – they were all commercial properties that were not listed in the MLS or on Loopnet and were not reported in COMPS. I honestly cannot recall the last time a residential agent came up with a relevant piece of data of which I wasn’t already aware.

H) The reason I give the agents the opportunity to feed me comps is not because I honestly think they’ll come up with something I didn’t already know, but to prevent them from saying I didn’t give them a chance. It works really well, too. That’s one reason I generally don’t get rebuttals or appeals, and why I never lose when they do appeal.

I) I obviously have a personal opinion about the regional trends, but that’s not the same thing as my professional opinion in any given assignment. I allow the data to speak for itself. Luckily for me, the data speaks quite well by itself.

I’ve signed a lot of appraisals with value conclusions that are, in terms of my personal opinions, very unreasonable. I can do that without a qualm because I recognize that nobody cares what I think on a personal level.

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A) As an appraiser I NEVER base an appraisal primarily on any one sale. I’m looking for the trend, not the exception; no one sale makes or breaks an appraisal – not ever. By the same token, I don’t limit the number of comps I analyze in a report to only 3 sales unless I have absolutely no other choice – and that never happens when I’m appraising homes.

B) I said that the oldest comp (12/28/2006) happened to be most similar overall except for the pool. I didn’t say I’d weight it that much more heavily than the other two sales. Trust me, If you didn’t like what the oldest sale was saying you REALLY wouldn’t be happy with the results with weighting the most recent sale.

C) I am required to back my opinion up and I am compelled to work with the data at hand. I don’t get to opt out of an assignment just because the data is sparse. I almost never get the data I’d LIKE to get. Nevertheless, a lack of recent or similar doesn’t give me more latitude to insert my personal discretion into an appraisal. The data is what it is regardless of how I “feel” about it.

D) If you’re saying that the lack of activity is due to the lack of supply and that there are more buyers than sellers right now then perhaps that’s so. I’m not interpreting average exposure times of 2+ months as being indicative of a smoking hot market. The same holds true for sales prices that predominantly wind up closing at the bottom of the listing ranges. Reasonable people may have to agree to disagree on that one.

E) If you’re rebutting one of my appraisals, you’re rebutting my selection of comparable data based on similarity and/or proximity. As far as my clients are concerned the only way an agent’s rebuttal would be considered more credible than my appraisal would be if they came up with data that was either more similar or more recent than the data I’m using. The only way that’s going to happen is if I’m incompetent with respect to researching the comparable data. They will not be rebutting one comp; they’ll be rebutting all of them, and that only works if all their comps are more similar than all of my comps.

F) I ALWAYS give the realty agents involved the opportunity to give me the data they think I should consider in an appraisal. In the last 10 years I think I’ve been handed a grand total of a half-dozen relevant sales transactions that I wasn’t already aware of. None of those occurred in assignments involving residential real estate – they were all commercial properties that were not listed in the MLS or on Loopnet and were not reported in COMPS. I honestly cannot recall the last time a residential agent came up with a relevant piece of data of which I wasn’t already aware.

H) The reason I give the agents the opportunity to feed me comps is not because I honestly think they’ll come up with something I didn’t already know, but to prevent them from saying I didn’t give them a chance. It works really well, too. That’s one reason I generally don’t get rebuttals or appeals, and why I never lose when they do appeal.

I) I obviously have a personal opinion about the regional trends, but that’s not the same thing as my professional opinion in any given assignment. I allow the data to speak for itself. Luckily for me, the data speaks quite well by itself.

I’ve signed a lot of appraisals with value conclusions that are, in terms of my personal opinions, very unreasonable. I can do that without a qualm because I recognize that nobody cares what I think on a personal level.

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BTW, since you’re making a big deal about the use of older sales (necessitated due to the complete lack of current activity in that neighborhood), let me point something out:

I listed those sales in chronological order, the oldest sale being first. Usually I do it in reverse order on an appraisal report so as to demonstrate the trend in values, if there is one.

In looking at these three sales and when considering there has been no activity in this size range in the last 3 months, are these sales indicating to you that the market trends are still increasing in this area?

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BTW, since you’re making a big deal about the use of older sales (necessitated due to the complete lack of current activity in that neighborhood), let me point something out:

I listed those sales in chronological order, the oldest sale being first. Usually I do it in reverse order on an appraisal report so as to demonstrate the trend in values, if there is one.

In looking at these three sales and when considering there has been no activity in this size range in the last 3 months, are these sales indicating to you that the market trends are still increasing in this area?

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Agreed.

I also agree with DaC’s observation that Miami’s condo market is much more vulnerable than our local downtown market. The scale between these two market segments is completely different, with both the market and the surplus in Miami being much larger.

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Agreed.

I also agree with DaC’s observation that Miami’s condo market is much more vulnerable than our local downtown market. The scale between these two market segments is completely different, with both the market and the surplus in Miami being much larger.

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