MARKET REPORT
Market conditions are ever-changing.
Today’s news is tomorrow’s history.
It has been said that with hindsight, we are all geniuses!
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.
Please note that movement in Median and/or Average Sold Prices cannot be applied to a specific property in order to approximate the price movement from one period to another! The average and median prices are affected by WHAT is selling and, also, by numbers of bank-owned (REO) and Short Sale transactions.
As general observations, sales volume (numbers of sales) remained fairly constant between 2009 and 2008…but far less than the volume for 2007. Further, median and average sold prices continued their decline during 2009 versus the prior years.
Cook County
Year # Sold $Median Price $Average Price
2009 40,490 199,000 257,842
2008 40,050 253,000 330,326
2007 54,266 266,000 340,242
DuPage County
2009 7941 231,000 295,530
2008 7921 264,500 335,731
2007 10,575 272,000 347,035
Kane County
Year # Sold $Median Price $Average Price
2009 4027 187,450 217,263
2008 4078 215,000 253,360
2007 5672 230,000 274,303
Lake County
2009 6004 196,500 280,509
2008 6016 240,000 341,311
2007 8178 260,000 380,887
McHenry County
2009 2773 181,000 201,621
2008 2786 200,000 237,427
2007 3817 226,500 258,004
Will County
2009 6137 180,000 210,315
2008 5964 210,700 246,576
2007 8070 224,900 262,451
If you would like to have similar data for a more refined area, or, community, please contact Lee Lansford, IFA.
Concessions to the Buyer
By Lee Lansford, IFA
Revised from the original as published by the IL Coalition of Appraisal Professionals
12/17/2007
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.
The intent of this article is to bring some clarity to this topic, whether you’re appraising the property as a purchase transaction or using it as a comparable sale after it has closed.
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.
This is the reason why the “sales or financing concession” field for the subject property on a Fannie Mae form is “shaded out” in the sales comparison analysis section.
That is, any concession found in your subject’s transaction is NOT relevant in your analysis of the sales comparisons!
The sales comparisons will reflect an adjusted sales price range for the subject property regardless of what the buyer and seller of the subject have negotiated in the contract. That’s the easy part!
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.
Quoting from a current (March 2005) Fannie Mae form (words in BOLD are my emphasis):
“*Adjustments to the comparables MUST be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are NORMALLY paid by sellers as a result of TRADITION or LAW in a market area; these costs are readily identifiable since the seller pays these costs in VIRTUALLY ALL sales transactions.
Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third party institutional lender that is not involved in the property or transaction.
Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s reaction to the financing or concession based on the appraiser’s judgment.”
So, then, what would NOT constitute a seller paid item that would be understood as a “concession” (and thus NOT requiring adjustment)?
Consider this:
In some market areas, it is customary for sellers to pay for, and provide to the buyer at closing, a current plat of survey.
This seller paid item is present in the market as a “result of TRADITION or LAW” and is found in “VIRTUALLY ALL sales transactions”: yesterday, today, and, most likely, tomorrow.
The seller paying for the plat of survey and giving it to the buyer at the closing is typical in a “seller’s market” and a “buyer’s market” (ALL the time!).
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:
#1: “The sold comparison had a concession to the buyer in the amount of $7500, but many—or even most—sales transactions today have a seller concession! Thus, such concessions are ‘typical’ of today’s market and there is no need to consider an adjustment for the concession—even though such a concession was NOT typical a few short years ago!” Oh, no! Wrong answer!
#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:
- Any concession to the buyer in the sales contract for the subject of your appraisal is IRRELEVANT when it comes to the analysis in the Sales Comparison Approach. You are appraising the Subject for its Market Value—you are not “appraising” its contract of sale.
- Any “pay-back” (concession) to the buyer—“granted by anyone associated with the sale”—or cost paid on the buyer’s behalf MUST be considered as a concession unless such is found in the market as a “result of tradition or law” in “virtually all sales transactions” (“virtually all” as in “yesterday, today, and, likely tomorrow” and under ALL market conditions).
- Don’t confuse what is “typical” TODAY with what is “typical” ALL of the time!
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:
“I have long believed that concessions simply reduce the effective net to the seller so all ought to be discounted to find the true MV. While it (concessions) may be ‘prevalent’ in a specific market, I’ve never ever seen a market in which they virtually all get the concession.” (My note: the comment is specific to the concessions as found 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):
“Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s reaction to the financing or concessions based on the appraiser’s judgment.”
Market Report
2008 vs. 2007
Chicago & Suburban Areas
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:
Cook (includes the City of Chicago), DuPage, Kane, Kendall, Lake, McHenry and Will.
The data which are reported are specific to all single-family—both detached (“houses”) and attached (individual condo units, townhouses etc.)—dwellings.
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
Sold Properties
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.
The percentage decline for each county for these two years:
Cook, -4.9%; DuPage, -2.6%; Kane, -6.5%; Kendall, -1.1%; Lake, -7.7%; McHenry, -11.7%; Will, -6.2%.
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:
Cook, -2.7%; DuPage, -3.2%; Kane, -6.5%; Kendall, -4.1%; Lake, -10.3%; McHenry, -8%; Will, -6%.
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.
DuPage: 8066 for sale vs. 7890 sold in 2008; average DOM = 247 days.
Kane: 4699 for sale vs. 4059 sold in 2008; average DOM = 237 days.
Kendall: 1551 for sale vs. 1305 sold in 2008; average DOM = 245 days.
Lake: 7111 for sale vs. 5987 sold in 2008; average DOM = 250 days.
McHenry: 3397 for sale vs. 2781 sold in 2008; average DOM = 254 days.
Will: 5869 for sale vs. 5945 sold in 2008; average DOM = 221 days.
DATA PRESENTATION
Sold Properties: 2007 & 2008
(per compassMLS)
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