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The use of Listings in estimating value O A question has been brought up several times about the use of listings to determine market value. I know from my teaching, writing and everyday practice that this procedure can lead to very inaccurate work results and conclusions. The act of putting a certain asking price on a property does not mean that you're likely to actually get that price, no matter how long you wait. The old belief "if you wait long enough, someone will meet your asking price" is pure myth. The longer a property is on the market, the less desirable it is perceived as being by most buyers, because what buyers really think is "It's been on the market for sixty days and everybody else passed on it. What could be wrong with it?" The longer a property is on the market, the more you are likely to have to reduce the price in order to actually sell, The numeric relationship between asking price and sales price is quite complex, and governed by numerous variables. The ones that seem most profound include the economic target market, the ease of qualifying for a loan, interest rates on loans (Comment-The mortgage market controls the real estate market), sales prices of similar properties under prevailing conditions, and most importantly, general economic supply and demand. In other words, the numbers of people wanting to buy versus how many people want or need to sell. If the first number is higher than the second, expect prices to rise. If the second number is higher, expect them to fall, at least in terms of affordability if not absolute numbers. One should consider how fast real estate market conditions change when a relative ly,small number of people drop off one side of the equation at the same time that a few more jump onto the other side. In the FNMA Guidelines it States the following regarding using listings in the valuation process: • Insure that active listings and pending sales are market tested and have reasonable market O exposure to avoid the use of overpriced properties as comparables. Reasonable market exposure is reflected by typical marketing times for the neighborhood. The comparable listings should be truly comparable and the appraiser should bracket the listings using both dwelling size and sales price whenever possible. • Adjust active listings to reflect list to sale price ratios for the market. This is the simplified process. However, it is more important to analyze each listing to see if it is anywhere near a realistic value level or any form of statistical analysis could easily add to distorted conclusion. Tax assessment is all about equality. Listings do offer an upper limit to value most of the time but individually can be miss-used and contrary to the fairness of the assessment. It is far more preferable to seek actual sales even if it means going further back in time or outside the immediate market area. Applied to residential sites in this instance, there are an abundant number of listings in the West Hawaii market area and few buyers so prices are very soft and values most likely declining. Provided by Robert Lawrence, CGA 194, HI Summer 2009 11 gp_pp bobb(@live.co,