We all know appraisals are being scrutinized more these days than in the past by underwriters and reviewers. We also know the main reason(s) for this, if we keep up with the news and happenings within the Real Estate Industry. With the declining market so wide spread, there is a reinforcing of expectations on the part of underwriters and reviewers and is being carried over to appraisal standards.
One of the main areas of an appraisal that is being looked at closely (in a declining market) is the support for the value conclusion. An Appraisers responsibility is to certify that they have performed an objective and complete analysis of quantifiable data supporting their conclusion, with a strong emphasis these days on property value trends - supply and demand - concessions - sale dates and proximity of comparables - marketing time - days on market.
There have been numerous Blogs, Posts, Comments, recently and in the past about concessions, disclosures, absorption rate, matched pair sales, cost to cure, all of which should be addressed in the reports. But there is one thing that is probably over-looked, neglected, or unknown that needs to be included. That is: List-To-Sale Price Ratio.
List-To-Sale Price Ratio, sometimes referred to as Sale Price Ratio, is a simple calculation to determine the ratio percentage between the list price and the sale price. Formula: Sale Price divided by List Price equals Ratio (%). What this indicates, and what it is being looked at for is, seller's past willingness to negotiate and by how much.
Realtors can, and some do, use this as a marketing tool for clients by telling sellers their sale price ratio is higher than others, which means a higher return at closing, by getting the property sold at or closer to the listing price. For appraisals, I calculate the average in the subject's market area and include the results in my comments.
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