New idea of CMA

Cody C. · 2013-03-29T13:53:05-07:00

Just listened to a neat presentation by a guy named Kerry D Bodily. He runs a company called "XpertCMA" and they have a very interesting idea on pulling comps when you go to sell/buy/price a property. Now, please keep in mind that he is gearing towards mostly home buyers to live in, or a normal seller. The bottom line of his principle is that if you are taking comps from sold properties in an area, you are doing it wrong. The buyers don't see those sold properties, and they are no longer on the market, meaning they are not really what you should be pricing value against. Another good point he makes is that if appraisers are only pricing against what other properties have sold for, then why do markets increase or decrease? hmm... I'm not sure if I'm fully onboard with his philosophy, but he makes a lot of good points. He gave his CMA software to everyone who attended the course, and the course was free. In any event, his book is called "how the real estate market really works." by Kerry D Bodily, when he did a second printing, he changed the name, but I don't have the new name handy. What do ya'll think?

Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

13y

A load of garbage if you ask me. If you dont base the value off of the sold comps because they are "no longer on the market" then what are you suppose to use, actives? If so, then all I have to do is have two houses in the same area where the market is worth about $300k and simply list one of them for $1,000,000. By that process, the other home is now worth $1,000,000 right!

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Joffrey Long

Lender · Los Angeles, CA · Member since 2012 · 147 posts · 76 votes

13y

Cody C.

That's really interesting, what you shared about the author's theory.

Here's what I've observed over the years:

In a rising market, closed comps only show you what prices were negotiated between buyers and sellers in negotiations that occured between 30 and about 220 days ago. You're right, in that those properties are not part of today's buyer's selection of homes to choose from, and therefore, aren't really impacting the negotiations of today's buyers and sellers.

Except, that appraisals may be a problem if you negotiate a price higher than the comps.

I've always felt that in a rising market, closed comps tend to bracket the lower end of what value might be, while available/unsold listings certainly set the higher end of the value range.

In a declining market, different story: Here, the closed comps set the higher end of the market value range, while the lowest priced listings indicate a price you can't go above, but those listings might have to sell for even less.

Listings, in any market are a challenge, in that you can't always properly estimate what they will sell for. Sometimes, the auction-style listings of today, where they price it a little low, then let everyone bid up the price, may be the clearest indicator of the exact value as of 1pm today.

Heavy subject. I've been a real estate / mortgage broker for 37 years, own a bunch of houses and have watched the value / comps / property price issue forever and I'm still humbled and have more questions than answers about this very tricky part of the market.

Great thread you started - hope we hear more from others.

Joffrey

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David NilesBusiness Member

Property Manager · DeLand FL · Member since 2012 · 860 posts · 243 votes

13y

I think I completely agree with Will. I have done thousands of BPOs for banks etc and see overpriced listings all the time. Just because Mr Noob agent decides to tell Mr and Mrs X that their house is worth WAY more then it is to get the listing, doesnt make it so. Reality is, what the public pays is what their worth.

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Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

13y

I agree with some of what Joffrey stated, specifically necessary adjustments for different market conditions, however, I still hold the opinion that in either rising or declining markets, sold comps are the ones used to base values, not active listings. This is not to say that some actives and pendings do not factor in.

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Cody C.

OP

Central Point, OR · Member since 2013 · 58 posts · 8 votes

13y

I agree that appraisals will justify a property using solds, but the problem with that mentality is that in the end, value is established by the seller and the buyer coming to an agreement (tempered by the appraisal in the case that there is an appraisal... i s'pose), not between the buyer, seller, and a bunch of other sellers.

That said, if you are pricing your property to sell, figure out what other active properties are on the market, and price just under the lowest priced property that is similar to yours (try to take subjective factors(E.g. View, location, design, etc.) into account as well as objective ones.) If you price based only on sold listings, then you aren't putting yourself in a competitive position, unless you initially price based on solds/pendings/appraisal/objective factors, and then adjust based on the competition in the market.

If we look at it in another context, how do car manufacturers price cars? Certainly not on what the last 10 similar cars sold for. They price them based on what similar cars are selling for on the market. Gold works the same way, as do Tshirts. Why would the housing market be different?

As far as appraisals go, can't you challenge them? If you can justify your price based on objective/subjective factors in a CMA, who says you couldn't challenge the lower appraisal with your CMA?

I'm sort of just rambling here, but I feel that this guy actually has a good point, that most people don't acknowledge.

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J ScottPro Member

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Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

13y

The determination of value by a seller serves two distinct purposes:

1. Figuring out what a buyer will pay for a property;

2. Figuring out what a property will appraise for.

I agree that Solds alone are not the best way to determine #1. And this guy may have some valid and accurate ideas on how to improve on that process.

But when it comes to #2, I don't know any appraiser who is going to throw the existing methodology out the window in favor of something created by some random guy, regardless of whether the methodology makes sense or not. We can certainly discuss whether another methodology makes more sense or not, but when it comes to selling houses in the real world today, the way it is is the way it is.

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Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

13y

Well I'll disagree, but really anyone can have an opinion, but such opinions are not reality nor will the valuing process change. The market is defined by sold properties, not what people are asking. Up or down markets may be indicated by asking prices going up or down but it's not a market until they sell. An asking price means absolutely nothing. I'll just suggest you learn the conventional and accepted method which is the basis for RE, since it's what you have to live and work under. Selling other systems....for what? A greater insight (LOL) Why not spend some money on a good appraisal class instead.... :)

You need to go through properties and see what's out there, get familiar with your market and if you can see what they sell for.

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James Hiddle

Altus, OK · Member since 2008 · 2k+ posts · 690 votes

13y

If it isn't broke why fix it? Why change something that has been the standard bearer since day 1? Why change what many have used with success for the longest time?

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Bob C.

Chandler, AZ · Member since 2013 · 6 posts · 0 votes

13y

Comps give a buyer a good thumbnail in my opinion. Obviously older comps in a fast rising market aren't as helpful, but if you index them against an average rise in market prices it can help a bit more.

Basing price on asking prices seems awful risky. I have seen a few houses way overpriced -sellers fishing for a sucker.

Comps seem to cause the market to rise more slowly, at least it seems that way to me. That part can be annoying for both sellers and buyers.

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Cody C.

OP

Central Point, OR · Member since 2013 · 58 posts · 8 votes

13y

J Scott, I think your point # 2 makes total sense, and after thinking about it and what you and the rest of these guys have said, it does makes sense that a seller has to price a home for those two purposes.

His class wasn't by the way, about "how to challenge appraisals and price how you think it should be priced regardless of the current standard"

Rather, it was "how to competitively price real estate." He also uses the term "comp" when talking to sellers to refer to competition, rather than comparables (which is for the most part the same idea, just a different connotation).

James Hiddle, I have been taught that I can't stand out as unique and great if I do what every other person is doing. While this particular situation may not be a successful example of "challenging the system," I believe that I will better myself by constantly testing the standard(whichever we are talking about) against new theories and unorthodox practices. I don't mean to sound rude, I'm just trying to explain why I would mess with something that already works =)

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James Hiddle

Altus, OK · Member since 2008 · 2k+ posts · 690 votes

13y

Cody C. there is nothing wrong with thinking outside of the box so as long as it doesn't bite you in the a$$ in the end.

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New idea of CMA

New idea of CMA

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