The Relocation Appraisal Training Program

Transcription

1 The Relocation Appraisal Training Program Module 3 Developing the Market Change and Forecasting Adjustments in a Relocation Appraisal

2 Today s Instructor Arnold M. Schwartz, SCRP, SRA, Arnold M. Schwartz & Associates, Atlanta Georgia Welcome and Introduction

3 Course Objectives Understand normal marketing time and how it is calculated Understand the market change adjustment and how it is calculated Understand the forecasting adjustment and how it is calculated Apply the market change and forecasting adjustments in the relocation appraisal The Relocation Appraisal Training Program Module 1 Concepts in Relocation Appraising Module 2 The Worldwide ERC Summary Appraisal Report: An Overview Module 3 Developing the Market Change and Forecasting Adjustments in a Relocation Appraisal

4 Development of Estimated Normal Marketing Time for Subject Property and Market Segment Determining Market Segment Normal Marketing Time Two Step Process Step 1: Investigate the actual marketing time (days on market) of sold properties (both closed and under contract), as well as the current days on market of available competitive listings. (Marketing time is measured from listing date to contract date.) Step 2: Consider any transitional or developing market trends and their anticipated impact on this projection of normal marketing time.

5 Marketing Time Market Trends Analysis

6 Market Trends Analysis Market Trends Analysis

7 Market Trends Analysis Market Trends Analysis

8 Market Trends Analysis Market Trends Analysis Estimated Normal Marketing Time for Subject Property and Market Segment 180 Days

9 Marketing Time Market Change Overview

10 Price Change Analysis Price Change Analysis Prior 12 months 17.4% decline = 1.45% per month price decline Most Recent 12 months 18.7% decline = 1.56% per month price decline Overall price change analysis: 1.5% per month price decline

11 Sales Price Trend Sales Price Trend Comparable Sale # 1: $365,000 sale price / contract date 04/10/2010 Comparable Sale # 2: $348,500 sale price / contract date 07/20/2010 Difference - $16,500 3 months Calculate percentage difference: $16,500 $365,000 = 4.5% Price change: 4.5% 3 months = 1.5% per month price decline

12 Sales Price Trend Comparable Sale # 1: $365,000 sale price / contract date 04/10/2010 Comparable Sale # 3: $338,000 sale price / contract date 09/12/2010 Difference - $27,000 5 months Calculate percentage difference: $27,000 $365,000 = 7.4% Price change: 7.4% 5 months = 1.5% per month price decline Sales Price Trend Comparable Sale # 2: $348,500 sale price / contract date 07/20/2010 Comparable Sale # 3: $338,000 sale price / contract date 09/12/2010 Difference - $10,500 2 months Calculate percentage difference: $10,500 $348,500 = 3.0% Price change: 3.0% 2 months = 1.5% per month price decline

13 Sale/Resale Analysis Sale/Resale Analysis Comparable Sale # 1: Last sale date: 04/10/2008, Last sale price: $570,000 Closing date: 05/02/2010, Sales price: $365,000 Difference: 2 years -$205,000 Calculate percentage difference: $205,000 $570,000 = 36.0% (rounded) Price change: 36.0% 2 years = 18.0% per year or 1.5% per month price decline

14 Sale/Resale Analysis Comparable Sale # 2: Last sale date: 06/16/2008, Last sale price: $544,500 Closing date: 08/20/2010, Sales price: $348,500 Difference: 2 years -$196,000 Calculate percentage difference: $196,000 $544,500 = 36.0% (rounded) Price change: 36.0% 2 years = 18.0% per year or 1.5% per month price decline Sale/Resale Analysis Comparable Sale # 3: Last sale date: 08/01/2009, Last sale price: $412,000 Closing date: 10/10/2010, Sales price: $338,000 Difference: 1 year -$74,000 Calculate percentage difference: $74,000 $412,000 = 18.0% (rounded) Price change: 18.0% 1year = 18.0% per year or 1.5% per month price decline

15 Market Change Adjustment 1.5% per month price decline Market Trends Analysis

16 Market Change Adjustment Date of Value Opinion 10/15/2010 Contract Date for Comparable Sale #1: 04/10/ months at -1.5% per month = -9% X $365,000 sales price = -$33,000 (rounded) Contract Date for Comparable Sale #2: 07/20/ months at -1.5% per month = -4.5% X $348,500 sales price = -$16,000 (rounded) Contract Date for Comparable Sale #3: 09/12/ month at -1.5% per month = -1.5% X $338,000 sales price = -$5,000 (rounded) Forecasting Adjustment

17 Forecasting Overview Forecasting Adjustment

18 Forecasting Adjustment Consists of Two Components: Component One: Reflects the change in market conditions and prices anticipated between date of value opinion and end of subject property s estimated normal marketing time. Component Two: Applied to reflect any price reduction necessary to achieve sale within assignment marketing period. Forecasting Adjustment Component One Appraiser must develop the subject property s estimated normal marketing time that is presumed to being on the date of value opinion.

19 Forecasting Adjustment Component Two Applied when the subject property s estimated normal marketing time exceeds assignment marketing period and a price reduction is required to provide the incentive for a sale of the subject property within this shorter than normal marketing period. Factors to Consider When Estimating Amount of Forecasting Adjustment New construction competition Distressed property competition Interest rate trends Mood of the market Seasonal market trends Economic trends Employment Shifts Withdrawn listings Expired listings Demographic trends Buyer profile trends Subject property listing history

20 Forecasting Analysis Forecasting Analysis

21 Forecasting Analysis Forecasting Adjustment Contract Date of Comparable Sale Market Change Adjustment (Historical) >> Date of Value Opinion Forecasting Adjustment >> 180 Days (Normal Marketing Time) (Component 1) Price Reduction << (Component 2) 120 Days (Assignment Marketing Period)

22 Forecasting Adjustment Forecasting Adjustment

23 Forecasting Adjustment Adjusted Sales Price before Forecasting: $332,500 Subject Property s Competitive List Price: $304,900 Forecasting Adjustment Forecasting Adjustment: Component 1 Normal Marketing Time: 180 days (6 months) Component 2 Price Reduction: 60 days (2 months) Total Monthly Adjustment: 8 months X -1.5% per month = -12% Adjusted Sales Price before Forecasting = $332,500 $332,500 X -12% = -$40,000 (rounded)

24 Forecasting Adjustment Forecasting Adjustment

25 Forecasting Adjustment Forecasting Adjustment Adjusted Sales Price before Forecasting: $332,500 Subject Property s Competitive List Price: $304,900

26 Forecasting Adjustment Market Segment Sales Price / List Price Ratio = 96% Subject Property / Competitive List Price: $304,900 X 96% = $292, 500 (rounded) Anticipated Sales Price

27 The Relocation Appraisal Training Program Module 1 Concepts in Relocation Appraising Module 2 The Worldwide ERC Summary Appraisal Report: An Overview Module 3 Developing the Market Change and Forecasting Adjustments in a Relocation Appraisal The Relocation Appraisal Guide