USPAP: Are Listings Important? – TAA Podcast 091

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You ask USPAP: “Are listings important?”  This is a question that comes frequently from appraisers – especially inexperienced appraisers.  It even comes in from well-seasoned appraisers, too.  But the question is valid, especially in a changing market.  We all understand the market in the last half of 2022 is different from the market in the first half.  How so?  Details are not all that important here, since  you are familiar with them.  But as we see the volume of sales dropping, the volume of listings increasing, and first mortgage interest rates increasing, listings become more important, too.  For that matter, so do pending contracts (see the next paragraph).  Listings become more important since they reflect what is happening now in any given market.  In a hot market, the sales give you this information.  But as markets cool, understanding the current competition in the market is a trend the appraiser must analyze.  Currently, the market is cooling.  Our clients and state appraisal boards expect us to stay on top of these trends and report them clearly and non-misleadingly.  So in a cooling market, listings tend to represent the top of that market.  Therefore, yes, we analyze listings and show them as the subject’s competition on the SCA grid.

So, you ask USPAP, “Are listings important?”.  That answer is clearly yes.  But how about the question, “USPAP, are  current purchase and sale agreements important, too?”  Yes!  Why?  Assume you are appraising a property currently under contract of $450,000.  Assume, too, this contract meets the definitions of Market Value, was an arm’s-length transaction, and so forth.  Yes, this contract is another data point to collect, verify, and then analyze as you would any comparable sale.

So, you ask USPAP, “Are listings important?”  “Are contracts for sale and purchase important?  Now, answer those questions yourself.