MARKET REPORT Market conditions are ever-changing. Please visit here frequently as this section will contain periodic updates. This market report contains historical sold data (source: “connectMLS”) for all single-family detached (“houses”) and detached (townhouses, condo units) in the various counties in and around Chicago. 2009 7941 231,000 295,530 2008 7921 264,500 335,731 2007 10,575 272,000 347,035 Year # Sold $Median Price $Average Price 2009 4027 187,450 217,263 2008 4078 215,000 253,360 2007 5672 230,000 274,303 2009 6004 196,500 280,509 2008 6016 240,000 341,311 2007 8178 260,000 380,887 2009 2773 181,000 201,621 2008 2786 200,000 237,427 2007 3817 226,500 258,004 2009 6137 180,000 210,315 2008 5964 210,700 246,576 2007 8070 224,900 262,451 Concessions to the Buyer By Lee Lansford, IFA There is a lack of consensus or understanding among appraisers regarding concessions paid to a buyer in a sales transaction for a 1-4 unit family property. First, in your appraisal due to purchase, a concession to the buyer of the subject of your appraisal must be reported in the CONTRACT SECTION of the appraisal report. However, you MUST remember this concession is NOT relevant in the sales comparison analysis. Now, let’s discuss what appears to be the area of disagreement, or misunderstanding, among many appraisers. In what follows, we assume that the appraisal is being communicated using one of the current Fannie Mae forms.
An integral part of these forms is Fannie’s definition of Market Value.
In one part of the definition, Fannie provides a directive to the appraiser as to how “sales concessions* granted by anyone associated with the sale” are to be considered and analyzed.
It’s the asterisk (see “sales concessions*” above) section that requires our attention when concessions are present in the sales comparisons. So, then, what would NOT constitute a seller paid item that would be understood as a “concession” (and thus NOT requiring adjustment)? Consider this: The fact that this seller-paid item is present under ALL market conditions (and in virtually ALL transactions) is very important! It is obvious that such a seller paid (as found in the sold comparisons) item is NOT something that is considered as a “seller concession” requiring adjustment in the sales comparison analysis. From the above, it is apparent that many, or most, concessions to buyers present in a “buyer’s markets” do NOT meet the test of having been present in “VIRTUALLY ALL sales transactions” as a “result of TRADITION or LAW” (under ALL market conditions!). Thus, “adjustments must be made…”! ! ! The above is where many appraisers make an error in judgment in analyzing sales comparisons! Some appraisers believe that because “many” (or, even “most”) recent and current sales have concessions to the buyer, such is “common” or “typical” of “the market” and that no adjustment for the concession need be considered. Such thinking is erroneous! ! ! Now let’s take a peek at a couple of illustrations of how some appraisers today—in market’s characterized as a “buyer’s market”—INCORRECTLY consider concessions to the buyer: #2: “The subject has a seller concession of $10,000 and the sold comparison has a seller concession of $10,000. Hey, no adjustment is necessary because the concessions are equal!” Yikes! Wrong! No! The approaches by these two appraisers indicate that they DO NOT understand the previously cited directive from Fannie Mae! Keep in mind:
Others have offered their thoughts on the topic of concessions to the buyer: A chief appraiser with a major national bank offered this regarding concessions in the sold comparisons: And, a former chief appraiser with a large national investor: “It is my belief that discount points (paid by the seller on behalf of the buyer) should be adjusted for.” (My note: the comment is specific to the concessions as found in the sold comparisons!) Also, a prominent HUD employee, posting in a discussion on this topic at the “AppraisersForum” website: “We are finding appraisers who are failing to adjust/report concessions in the range of $10K-$100K, new automobiles etc. Their reasoning is currently ‘typical for the market.’ Wrong! Typical/customary fees (seller-paid items) are found in either a seller or buyer market.” (My note: the comment is specific to the concessions as found in the sold comparisons!) Finally, “how much to adjust” when a seller concession is present in a sales comparison?” From Fannie Mae (definition of MV—the asterisk section): Market Report INTRODUCTION This is a report of certain (Sold Properties: average days-on-market for sold properties; median sold price; average sold price. For Sale: supply & average days-on-market, aka: DOM) market data for the counties located in northeastern Illinois: The tables below present certain data (per the “compassMLS”; effective as of 1-1-09) for each county. Data is by county with 2008 data presented first and followed by 2007 data. Data for the “Sold Properties” are contained in these tables. Data specific to “For Sale” (effective as of 1-1-2009) are contained within the “Summary” section (below) of this report and are not contained in any of the tables. Please be aware that this broad overview of market activity should not—and, cannot—be used, or interpreted to apply, to any one specific property or neighborhood or community in any of these counties. As an example, a decline in either the median or average sold price from one period to another includes (during 2008) increasing numbers of REO and/or Short Sale transactions. Market conditions affect sales activity and prices and the results will vary widely from location to location and sub-markets within a larger market. As a generalization, market conditions are best characterized as a “buyers’ market”. Clients may request a “market report” tailored to a specific need and location by contacting me via e-mail at Lee@AppraisalQA.com SUMMARY Sales Activity (“# Units” in the tables below): Sales activity throughout the 7 counties during 2008 saw a notable decline in comparison to 2007. What follows is the percentage decline in sales volume (# sold) for each county between these two years: Cook, -26.7%..........DuPage, -25.4%..........Kane, -28.4%..........Kendall, -25.5%..........Lake, -26.8% …......McHenry, -27.1%.........Will, -26.3%. Average Marketing Time (“Avg. MT” in the tables below) for each of the counties in 2008 was between 5 and 6 months. During 2007, you will observe that the average was approximately 4 (or, for certain counties, slightly in excess of 4 full months) months. Lengthening marketing time is an indicator of slowing market activity. Median Sold Price: For each county, the 2008 median sold price is less than the 2007 median sold price. Average Sold Price: For each county, the 2008 average sold price is less than the 2007 average sold price. The percentage decline for each county for these two years: For Sale Properties Assuming (and, this is no small assumption)—for the purpose of analysis—that the number of sales during 2008 represents the sales volume for 2009, and comparing these numbers to the number currently (as of 1-1-2009) “For Sale”, indicates markets in over-supply with each (exception: Will) county having a supply of housing that may take more than one full year to absorb. In very general thinking, a supply that is projected (or, estimated) to be absorbed in, say, approximately a 6-month period might indicate a market that is characterized as being “in-balance”. Note that this is a generalization and not an absolute. Still, the differences are significant. Further, for the combined 7 counties, current average days-on-market (DOM) is approximately 8 months. Within these counties, such a relatively large average DOM would not be expected to be present in markets characterized as being either “in balance” or having “under-supply” status. For each county, supply (for sale) status as of 1-1-2009: Cook: 41,445 for sale vs. 39,768 sold in 2008; average days-on-market = 233 days. DATA PRESENTATION
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