"Active and Pending Listings Don’t Matter in Appraisals"? If I Hear This One More Time...
Let me set the record straight. The next time you hear an appraiser claim that listings don’t matter, hit them with this: If they don’t matter, why do lenders require active and pending listings in a declining market?
Here’s the truth:
- Pendings are today’s value.
- Actives are tomorrow’s value.
- Solds? They reflect yesterday’s trends.
Sure, you can’t hang an entire appraisal on a listing that hasn’t closed, but that doesn’t mean we should ignore active and pending listings. Here’s why they matter and how you can leverage them in your pricing strategy.
Understanding Actives, Pendings, and Solds
Let’s break it down:
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Pendings: These represent the current snapshot of market value. They show where the market is right now, even though the deal hasn’t closed yet.
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Actives: These are forward-looking indicators. They give you a glimpse of where the market is headed, especially when conditions are shifting.
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Solds: These are the backbone of appraisals, providing solid data points—but keep in mind, they’re based on yesterday’s trends.
How to Use This Information
You can’t base your entire value on a listing, but that doesn’t mean you should ignore the signals. The key is in analyzing the list price to sales price ratios and applying that to active listings. Here’s how:
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List Price to Sales Price Ratio: Let’s say the last seven homes in the neighborhood sold for an average of 7% over the list price. That’s crucial information.
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Apply to Listings: Use that 7% as a guide for active listings. This gives you a better idea of today’s value, integrating both sold and active data.
Why This Matters
In a shifting market, active and pending listings are essential. When the market is declining, lenders will ask for them to confirm market direction. If today’s value is higher than what closed sales are showing, but listings don’t support that price, adjustments need to be made.
It’s all about aligning today’s value with where the market is heading, rather than relying solely on yesterday’s data. By analyzing the list price to sales price ratio and time-adjusting comps, you can achieve a clearer view of the market’s real-time value.
Key Takeaway
Yes, listings do matter—but they’re just one piece of the puzzle. They’re not closed deals yet, but they provide valuable clues about where the market is going. Use this info to your advantage when evaluating a property and dealing with appraisers.
Here's the video I posted on IG about this topic: https://www.instagram.com/p/C95C2rGv_ti/
Want more insights like this? Follow me on Instagram at @Anthony_young_appraiser and visit ValuedAudit.com. Have questions? Feel free to call me at 925-999-0144. My team serves the Greater San Francisco Bay Area and surrounding counties. If you’re finding this valuable, please don't keep it a secret.
Pro Tip: Don’t just rely on sold comps. Analyze the list price to sales price ratios and apply them to active listings for a more accurate reflection of where the market is today and where it’s heading.
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