By the way - this was one of my replies on Bryant's blog:

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Hi Bryant - I think that is MY appraisal you are talking about!  I saw this on my phone tonight - saw the graph - and had to come jump on Active Rain to check it out!   Yup...that is my regression analysis for Poinciana.  In fact, I gave a seminar on pricing to some local Realtor offices here, and used the trends in Poinciana to point out what is happening.

Here is an overview of the market for the last 10 years folks:

Notice that is is not some generic figure pulled from national or regional data.  I know some lazy appraisers who apply general statistics with too broad of a brush.  Instead, this is data, pulled from the local MLS - and compared quarter by quarter for trends in list price/sf, sold price/sf, days on market and volume.

Bryant , I am glad you didn't sound too surprised or upset about this!  I have had quite a few agents call me or email me back on my adjustments - but in the end, the numbers speak for themselves!  I have in most cases, seen the agents go back to the bank and get the deal done, however, armed with the right statistics.

In some cases, where the bank was standing firm on a $5000 difference - how long do you think they would stand there if they knew they were losing $150 a day?  You would burn through $5,000 in a month!

But hey - the bottom is almost there!  With cash buyers coming out of the wood work - inventory is getting eaten up!  And in this market (Poinciana) it is entirely appropriate to use a foreclosure sale - since 60-70% of homes in that market area I surveyed were in some form of foreclosure. 

This is a great discussion and I would love to answer anyone's questions about it - I just wish this was on my blog for the Active Rain points!!  (Jealous!) 

Donald Martin commented that:

By the way most of the time the Appraisal is not "low" the contract is just to high.  When the seller adds the points to the price, you do know that the price is now, no longer "the price?"

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It is funny that people get hung up on "$150 per day".   That actually is $4,500 per month.  In a market where the median sales price for the prior 12 months was $77,250 - that is 5.8% per month decline.   That sounds like a lot too....but "$150 a day" sounds much more drastic, doesn't it?

I loved the comment above "the appraisal wasn't low, the contract was too high".  Great one Don!

And also that all the listing agents have access to this data.  All of it was an export from my local MLS with a defined criteria which can be duplicated. 

Since I love charts (yes I am such a nerd) - I'll also throw in that there is a BIG difference in the market between sellers and buyers, and maybe between listing agents and selling agents:

You see that the "average" list price to sold price ratio is 5.62%?  That means that the average home sold for 5.62% less than the current list price.   But when you compare that with the ORIGINAL listing price - the ratio is a whopping 23.20%!  

That indicates that the market is generally over priced by 17.58% on average (23.04% for median sales).   This is a HUGE indication of what is happening in the over optimism of sellers and general glee of the buyer looking for the best, most aggressively priced home in the market!

I think this is why I love the statistics so much.  This is the "science" of appraisal practice....the "art" is understanding the story that it tells.    When people talk about "art and science" they typically mean appraisers "feel" their way through adjustments.  One does not have to "feel" for the adjustments when you can interpret the data and patterns from available information.

Bryant - by the way, I read you post you referenced " "Let the Games Begin" - back n the day when prices were in the 6 figures.....you were right on the money then too!!  This is a great discussion!  Thanks for starting it!

Hi Gail!   Thank you for the compliments!

I used Excel 2003 to create this.  Anthony Young is a great appraiser from California, and he has a training DVD which teaches how to use Excel to make charts and graphs like this.  His website is www.GraphTheTrend.net - and the cost is pretty reasonable!

I like to use price/sf instead of sales price - as I feel it can "equalize" a wide range of data.  If I am looking at a wide area market, it could have sales as low as $80,000 and as high as $500,000 - but the low ones are for 800 sf homes while the high is for a 4,000 sf home for example.  So the price/sf would be $100 to $125 per sf - sort of leveling the playing field for comparison's sake.

If I am doing a more specific search - like for direct comparable sales to a particular home, then I would limit the data to +/- 1,500 sf for example, and homes built in a certain time period. 

If my subject home is 1,500 sf and built in 1990, then for a regression analysis (with the daily decline) I would select a data set of homes from 1,300 to 1,800 sf built between 1985 and 2000 for example.   That way, I would get older homes which may have been updated, as well as newer comparable homes within 10 years as competition.   I try to consider what I would be looking for if I was shopping for a replacement home.

Thank you so much Charles!  I really appreciated your words on Bryant's blog!  I am working toward my SRA also - I hope to have that and one day achieve the MAI as well!!

Sincerely,

Wow - the comments from some Realtors on Bryant's blog (where this is hosted) is amazing.  Some fully see the difference between a quality appraiser who understands adjusting the market, as long as the numbers are not just pulled out of the air.

Others just make blanket comments like this one:

"I saw it a few weeks ago for the first time here in the metro-Atlanta area and found it absurd and surprising"

How can making an adjustment for a declining market be absurd?  Surprising - yes!  But absurd?  What I find absurd is seeing adjustments which are not supported by any market data - or by old data - or by Regional or Statewide figures which don't apply to the local market.

Ft Myers, for example, is in worse shape than Central Florida.  Just ask Kat Bryce, a fellow appraiser in that market.

So what if we were adjusting prices, based on statewide "decline rates" if those rates also included all of Ft Myer which could skew the adjustments even further.

THAT would be absurd!  Or...making NO adjustments at all....THAT would be absurd. 

Thank you Bryant!  The exposure brought me some business already!  A new FHA order came in today from someone who was following your blog!  I'll tag team with you on a story any time that can happen!

Hey Charles - how right you are about the appreciating (inflating) market period!  I remember people being angry the value didn't come in high enough - even though the price was driven up by a bidding war which lasted all of 24 hours in some cases!  I remember a home selling for $310,000.  It hit the market, and in 2 days, was pending for $372,500, with an escalation clause where the current buyer would beat any other offer by $1,000 up to $410,000 !!!

You know - I put an offer like that in on a house myself in 2005!  I am SOOOO glad now I got beat on that one!  That house sold this past year for $215,000!  Price VS Value.....