Appraising Lakes, Beyond Front Footage

2017-08-13 20.48.44

When attempting to determine the value of lakefront property, there’s so much more to the equation than just measuring waterfront space. Here’s what appraisers and agents need to know.

As summer approaches, activity on lakes—large and small—increases. But in my experience as a REALTOR® and certified appraiser, it is apparent that many agents, brokers, and appraisers have not acquired all the knowledge, skills, and perspective needed to accurately evaluate lakefront property. In the hope of filling in some of the gaps, here are some tips on how appraisers can provide a more defensible appraisal on these complex properties as well as some of the nuances that agents who are new to lake properties should consider.

The Why of the Buy

Both appraisers and agents alike need to be aware of the motivations that result in sales. Appraisers need to be in touch with the vagaries of the different submarkets in order to adequately analyze the properties they appraise, and agents need to understand that there is much more to selling lake property than front footage.

What motivates a buyer to purchase a lake property? Is it the tranquility? The beauty of the water? The excitement of a speedboat and waterskiing, or casting a line into the water in hopes of landing a trophy catch? It is all of these things, and none of these things. The motivations are almost as numerous as the buyers looking for a lake house are, and one buyer’s paradise is another’s hell. Different types of lakes attract different buyers, and the buyer looking for tranquility is going to be very unhappy purchasing a house on a lake crowded with jet skis and powerboats. The same would be true for the avid motorist who buys on a small, quiet fishing lake.

Quality Over Quantity

While some depend on how many “front feet” the property has on the water to determine value, that is not necessarily the best course. The amount of frontage usually relates to space between neighbors and how much area is available for docking and beach toys. But consider the house sitting on the edge of a bluff, with 200 feet of frontage and 100 steep steps down to the water. What if the shoreline is also rocky and reedy? Five lots south, the topography has sloped in to a gentle, almost level lot and the frontage itself is a natural sandy beach. This lot has only 50 feet at the lakefront. Which is more valuable?

The value of a lake property could be tied not only to the ease of the access and the quality of the frontage but also to the lake itself. For a clean swimming lake, the narrower 50-foot lot might be much more valuable than the less accessible 200-foot lot. But for a lake that is picturesque but not good for swimming or boating, the 200-foot lot with the elevated views might be the more valuable site. It all depends on the lake and why buyers might be interested in that particular spot.

Present and Future Demand

I live and work in Michigan, a state surrounded by lakes of all kinds. The Great Lakes are a treasure, but not exactly the bastions of privacy and quiet you see on some of the smaller inland lakes. Many of our inland lakes are massive in size, deep, and clean. Some are shallow, reedy, and mucky, making them more of a viewing amenity than anything else. Some lakes allow all the toys and others only a kayak or canoe. Some are merely ponds in buyers’ eyes.

There are many questions that buyers, real estate agents, and appraisers should consider in addition to the present appeal of the lake itself, because these issues contribute to whether the lake remains appealing into the future. Some lakes are manmade in that they are the result of damming a river. Some municipalities are considering removing such dams—in that case, what happens to the manmade lake? Some lakes have been invaded by unwelcome species such as zebra mussels, Eurasian watermilfoil, and other nuisances. Lakes with public access sites tend to have more trouble with these invasive species, though they do also travel naturally through waterfowl and other means. Could a lake with an invasive species problem become less desirable than one without? Is there any guarantee that a pristine lake will remain so? What about the life cycle of a lake? Is it a dying lake, or is it likely to stay in similar condition for the foreseeable future? How is the management on the lake? Is there an active association that seeks to ensure the health of the lake? Are septic systems monitored? Does the association have prohibitions against fertilizers?

But just as bodies of water can change, so too can our perspectives on them. Is it possible that we are starting to see a shift, as our population ages, to the desire for quiet lakes that do not allow gas motors? It used to be that these quiet “no-wake” lakes had less appeal, but in many instances, they are now attracting buyers that would not have considered them 10 or 20 years ago. There is something to be said for the quiet of a lake without loud motors and loud reveling at all hours of the day and night. On the other hand, these lakes have limitations of use, and buyers who want to have it all might find the sportier lakes desirable, in particular if there are limited year-round residents. The lack of year-round residents could mean that the owner has quieter weekdays, with increased activity on the weekends and over holidays.

The Tools at Your Disposal

The Department of Natural Resources maintains lake maps in most areas. These maps show the topography and composition of the lake bottom. DNR maps will also show public access points, existing housing, and other features. Appraisers and agents alike should become familiar with these maps. Plat maps are also available in many areas, and these can be used to examine other features, such as ownership issues where a third party may control the frontage in between a property and the lake shore. Another concern that can impact value is keyholing or funneling, where backlot owners have rights to a parcel on the water. Just being aware of some of these issues can help you be a better advocate for your client and know when to direct them toward legal counsel to help determine whether they have water rights.

Not All Sales Are Comparable

If possible, it’s best to find comparables on the same lake, but remember, lakes also have varied topography, both on shore and to the lake bottoms, and just because the potential comparable property is on the same lake might not mean that the properties are actually comparable.

Appraisers need to understand the lake itself and which lakes are reasonable alternates if nothing is available on the lake upon which we are doing our appraisal. Know your market and write about what is important to the target audience. How large is the lake? How deep is it? What types of activities are allowed on the lake? What are the other lakes that the buyer for our property would reasonably consider and why? Fully describe the topography, frontage, and access to the water at the subject site. Write about whether the beach is sandy, mucky, rocky, reedy, and so forth. Document sunrise and sunset views, parking, and docking. Agents don’t have the same communication requirements as appraisers do here, but they should be aware of what appraisers are considering and what they are reporting, because such factors affect the pricing conversation as well.

Determining logical comparable search criteria is incredibly important in lakefront homes because buyers may consider properties on lakes that are 20 or 30 miles apart, something that might scare some of the most experienced underwriters if not properly explained. A smart appraiser will set the stage ahead of time through the narrative in the report, which will help the underwriter and reviewers understand the thought process for the choice of comparables. Once the appraisers have spelled out the reasons that have drawn a buyer to the subject lake, discussion follows about the lakes that are competitive and why they are competitive. This can justify the use of sometimes very distant comparables.

Agents can help by providing appraisers with information about the lakes that the buyer considered and why they considered them as competitive. If your buyer would only consider one lake, explain why. While it might not be possible for the appraiser to stay on that lake due to lack of recent sales data, the buyer’s motivations to that lake over others can still be helpful.

Summer is coming and lake buyers will be out in force again soon. Be prepared to have a lake appraisal take longer and be costlier than a regular subdivision job. Take the extra time necessary for these lake deals to research the lake and the site, in addition to the improvements on the site. Hopefully the extra effort will pay off and you’ll be better able to enjoy your next lakeside sunset or cool dip in the water.


Reprinted from REALTOR® Magazine Online, March 2018, with permission of the National Association of REALTORS®. Copyright 2018. All rights reserved.

beyond front footage







It certainly would be ideal to have a magic pill that would allow one to stay in shape, at the same time as staying productive at work. The advent of the treadmill desk and its increasing popularity is making this magic pill seem a real possibility. Imagine being able to work, talk, research and type, all while walking. Sounds great doesn’t it? It is, but there are limitations. The set up can be awkward, and if you are vertically, or space challenged, there can be limitations with the workspace. If you are a bit of an overachiever, like I have a tendency to be, there can be real limitations to the physicality of the system.

I purchased my first treadmill desk in 2011 in an effort to get up off my seat and ease my aching back. Sitting was causing a whole host of physical issues, not the least of which was an increasingly widening girth and backside. I already owned a good solid treadmill from the days when I was a runner, and trained on this workhorse of a machine. The desk itself was something that could go on top of any treadmill and that was very appealing because it made the set up much less expensive than buying one of the combination treadmill desks that have gained popularity in the marketplace.

This brings me to the first limitation: space! If you have a large scale treadmill then it is not going to have a small footprint. If you are going to be using one of these beasts upwards of four or five hours (or more) per day, then it darn well better be a workhorse or the motor and/or deck and/or belt are going to wear out very quickly.  So the big treadmill takes up space, and the desk itself can take up a lot of space as well.  The area that contains my treadmill desk takes up eight by seven feet and this doesn’t include any of the office peripherals such as bookshelves, printers, cabinets and so forth. While you may be able to get by with a smaller workspace and treadmill, most people want to have at least two monitors at their disposal, and therefore the larger workspace may be imperative.

Another limitation to the setup is the treadmill itself. Treadmills that are for runners and exercise are not designed to do long hours at slow speeds and the motors can burn out quickly, in particular if you have something like an orthopedic belt to soften your tread. If the treadmill deck is too narrow, or two short, drift may cause you to step on the rails and crash, not a pleasant experience. A good wide deck that is long enough to have your body close to half way back, in order to accommodate the desk, and a treadmill that can take hours of use every day at a low speed, is going to cost a pretty penny. At the same time, if you buy one that is not robust enough to handle the stress, it will burn out far sooner than desired and the expense of purchasing a new one is often cost prohibitive. There are some brands that have both treadmill and desk combined, with a treadmill that is built specifically for the long hours of use at a slow speed, and these, while expensive, are often the best solution.

Limitation number three, at least for me, is height. At 5’2” I am a bit vertically challenged, and my treadmill desk does not go low enough for me to work at a good ergonomic height. As such, I had to purchase a laptop that had a wide and comfortable keyboard that included the integrated touchpad in the center of the computer so I didn’t end up with carpel tunnel from repetitive motions, i.e., no mouse. That and sometimes my shoulders are touching my ears, not a good thing for ergonomic design. The large laptop and a smaller monitor next to it work well though, without me having to look down.

The final, but most limiting of limitations for me was repetitive use and the development of tendinitis in one of my feet.  Because I have a tendency to overdo things, I thought that if walking four hours a day felt so good, walking six hours a day would feel even better. At first it did. I lost weight, I felt great, my energy was superb, but within a year of having upped my walking to six, and sometimes seven hours a day, I developed a roaring case of tendinitis that sidelined me from walking for months. Now over a year after taking a couple months off, I cannot walk the way I used to without aggravating my tendinitis, and am happy walking only two or three hours a day, and nowhere near the speed I used to walk. Unfortunately the weight has come back, and with it, the feeling of sluggishness. That said, when I walk, I feel great, and my mind is clearer and I am able to concentrate better.

The limitations that I described above are all just cautionary for those who are thinking of a treadmill desk setup. Four years into using one, I cannot imagine returning to sitting for more than a couple of hours at a time, and hope to be able to use one of these desks until I decide to turn in the keyboard. Limitations that arise are nothing compared to the benefits that are gained in my opinion.

The treadmill desk is a magic pill to a stationary office worker, as long as moderation is used and forethought is exercised in setting up your workstation. Remember a good solid treadmill with a wide and long deck is key, and no orthopedic belts because they will burn out the motor faster. Think how you will use the desk, and make sure you have a place to sit in between periods on the treadmill because most of us cannot spend a full working day walking, without consequences.


Originally published with AppraiserNews in 2015

What does the SRA mean to me?

black belt


  • What does being a designated member of the Appraisal Institute mean to me?
  • Does my designation matter to my clients?
  • Do I get more business because of having earned a designation?
  • Is it worth the time, effort and cost?

These are questions I often hear from people contemplating this path. For me, there is no one answer, because it means different things at different times and in different situations. What I can answer, with certainty, is that I would do it all over again. I never once regretted going through the designation process.

The process is designed to help one become a better appraiser. It is designed to provide a solid foundation, from which to grow, and designed to provide the tools to become a lifelong learner. Working through the process of becoming designated made me a better appraiser. That said, it is a continual process. It is a start, not an end. The goal is to continue to improve as opposed to reaching a point and stopping. I see earning the designation very much the same as earning a black belt in a martial art. There are many excellent martial artists who never test for a belt. Likewise, there are many excellent appraisers who have no desire to work on a designation. But, working towards a goal such as a designation or a blackbelt, provides a focus of intense learning and growth. Having a blackbelt does not mean that one is an expert, all it means is that a level of proficiency has been reached, and the martial artist is a serious beginner. Earning a designation means that a level of proficiency has been reached, and the designee is a serious beginner.  For me, it provided the structure and a goal, as it does and did for countless others.

I was designated towards the end of 2003. Completing the demonstration appraisal report was a monumental task for me, and through it, I saw how the three approaches to value fit together in the real, and very imperfect world. It was amazing to see that the sales comparison, cost and income approaches tied together on my subject property. Even more amazing being that my subject was a fifty plus year old house in a 100% built-out development. The biggest sticking point was the cost approach. In fact, my first submission passed on all but the cost approach section. I ended up attending part of Course 500 again (the cost approach day) to make sure I approached it correctly.  Second time I submitted was the charm.

The demonstration appraisal process provided me confidence in working through a problem, and communicating my results in a manner that was judged, and eventually accepted. This was, and still is, my seminal appraisal education experience. Even though in the end, it took me well over three years from start to finish, and countless hours, once I actually started writing, it taught me more than book-learning likely ever would. It gave me confidence in my ability to analyze and extract adjustments from imperfect real-world data. I had help from many mentors along the way, from the instructors in my narrative reporting writing course, to local appraisers who I leaned on for moral support and to steer me in the right direction if I thought I was going in the wrong one. Not only did the process help me become a better appraiser, but I forged relationships with more senior appraisers along the way, all of whom gave of their time willingly and freely.

After earning my designation, I thought that magically, business would fall in my lap from the heavens above. But we all know that this is not the case, and you must work for it. Never being very good at marketing, it did not magically fall in my lap, but I did have increased opportunities with some clients.  The attorneys started using me greater regularity after I received my designation. My relocation work increased, as did my estate work. Lender work declined. It declined because I had been consciously ridding myself of that business to make way for more private, attorney and ERC work since the late 1990’s.  Having earned my designation, I was able to increase this private business. Being in the Appraisal Institute directory exposed me to new potential clients better than any other marketing tool I had available.

By the middle of 2004 our market had started to shift. We were building inventory in housing, and although there were no price declines noted at that time, there was evidence that some change was coming. The contract-to-listing ratios were declining, and inventory was not absorbing at anywhere near a normal pace. Any lender work that I did take on, seemed to end up with angry borrowers and particularly angry loan officers. Other appraisers were also moving into the non-lending niche, probably noticing some of the same factors in lending. With more appraisers moving into private work, I started to lose enough of this work to worry me, designated or not. The final straw for me was a divorce appraisal that had been referred to me by both the husband’s attorney, the wife’s attorney, and the mediator facilitating the settlement. I lost the assignment to someone who charged only a fraction less. The designation helped me get the referrals, but my fees lost me the work.

Instead of fighting piecemeal for work, I decided to look for a job with a regular salary and benefits, and having my SRA opened the doors and got me hired with a large national lender. Although I left that job and moved onto another shortly after, I likely would not have been able to even have an interview if I did not have the designation behind my name. In the years that followed I have been in and out of the fee world, preferring review to field work, but always happy to take on relocation work. The designation has helped me have greater options on what I do.

So, does the SRA matter to my clients? To the clients that I care about and want to keep, it seems to matter very much. These include relocation companies, attorneys, and my current employer. Do I get more business because of having my SRA? When I have been in the field, in between my review jobs, yes. I picked up trust and estate work through the Appraisal Institute directory, and through networking and referrals from other appraisers. Does it help get me lender work? When working as a staff reviewer, I think I was hired in large part because of having the designation. For mortgage work related to private client groups, yes, I do believe that work comes through in part due to having a designation. For AMC driven mortgage work, no, I do not see it as a selling feature, but I have long tried to move away from that type of work on the origination side anyway.

Is it worth the time, effort and cost? My answer to that is an unequivocal yes! At least for me, yes, yes, yes! It is worth it because I understand very well that getting a designation does not mean you achieve it, and then leave it, never progressing past a certain point.  It means giving back to the profession in whatever way I can. For me this is teaching, writing, participating in committees and work groups, and trying to help other appraisers.  Other appraisers help/helped me, because they too see giving back as a critical need. This is part of being a lifelong learner, because through teaching, writing, participating, and assisting others, I continue to learn. I learn in the classroom, I learn outside of the classroom, and from other appraisers. I believe that going through the designation process set me up to expect that I would need to continue to be open to learning if I remain an active appraiser.

A well-developed martial arts program will instill that same idea to the practitioner. Reaching a blackbelt level does not mean that you have arrived and are an expert, but that you have reached a level of being a very serious beginner. To continue progressing in martial arts means constantly revisiting basics, and to progress as an appraiser, the same process of revisiting the fundamentals also exists. For martial artists, teaching is a great way of learning, as it exposes weaknesses that need to be corrected. This is no different from appraisers, who find that through teaching, their weaknesses are also exposed, and through that exposure, recognition on what needs to be corrected.

The process of becoming a designated appraiser was long and sometimes arduous. Being designated does not mean that I am an expert, but that I reached a level of proficiency and need to continue building from there. Success, in terms of work has followed directly based on the amount of effort that I put into learning and improving, and ebbs and flows, as does everything in life. While I would like to be able to answer with financial statistics related to how much value the designation has had for me, I cannot. I cannot because I cannot quantify it in that manner. From the perspective of professional satisfaction, it has been an immeasurable benefit. I would encourage anyone who wants to exceed their own expectations, to pursue the path, even if you no intention of ever being designated. After all, knowledge is power.


This was first published in Appraisal Today and has been re-shared in its original form, with permission by the publisher.

I have Google Earth and I know how to use it

Originally published in Appraisal Today, thank you Ann O’Rourke for allowing me to republish

I have Google Earth and I know how to use it

Seriously though, as a reviewer, it is one of the first tools I reach for when I look up the property that is the subject of the appraisal I am reviewing. Assume all reviewers do. We use it to make sure that the property does not back up to, side against, or face some type of externality such as a major 8-lane freeway, massive shopping mall or toxic waste facility. Hopefully the appraisal that has one of these externalities addresses it. Sometimes the appraisals go to great length to discuss externalities and any effect on marketability and value. Sometimes there is a sentence or two. Sometimes crickets.

Yesterday I pulled up GE on the house that was the subject of an appraisal I was reviewing and it backed up to a bunch of buildings. Looked possibly to be a school, but the street view maps took me around the side and to the entrance of what turned out to be a large condominium complex. Absolutely no big deal, but there wasn’t one single word related to this in the appraisal. I asked a group of appraisers whether they would make a comment if their subject property backed up to a condominium complex, and the responses ran the gamut from “of course”, to “no way, it is already covered in the neighborhood check boxes”.

While the check boxes for the neighborhood include multi-family, they do not include condominium, and in this instance, there was nothing in the appraisal even hinting that there was a mixture of single-unit uses in the area. This property didn’t raise a red-flag insomuch as backing to a freeway, commercial shopping center or toxic waste facility, but it did raise a question and warranted a bit more research. This is fine as it part of my job, but as someone who actually reads the reports in front of me, I was just left confused as to why it wasn’t even mentioned. I was even more confused by why so many appraisers say that it is not worth mentioning.

Maybe it is being old fashioned, but I grew up with the understanding that an appraiser was the eyes and the ears of the client, and that anything that would likely raise a question for the client should be addressed. Of course the freeway, mall and toxic waste facility are givens, but wouldn’t anything that was literally in the backyard also be something that would get questioned? How many minutes does it take out of the process to write a few sentences about a condominium complex? Couldn’t it be as simple as saying “The subject backs up to the XYZ condominium complex and has a seasonal view of some of these buildings. There is no negative effect on marketability or value of the subject property related to its location adjacent to this residential use” or some such rot?

While it is easy to overlook potential concerns due to the amount of reporting we have to do (and remember, there is no such thing as a perfect appraisal), stepping into the mind of the client and asking yourself “what would the client be concerned about” is a very useful exercise. While the client may not care about the house backing to a condominium complex because it is a residential use like the subject, they may care about it backing to the complex if for some reason it does affect marketability and/or value. It is up to us, as appraisers, to report and analyze what it is we see, and although we can never catch every little thing, our value is partly measured by our ability to communicate and to analyze these nuances.

Remember, reviewers have Google Earth and other tools at their fingertips, and most use them.

Courage of your convictions

Courage of your convictions


…….Or put your money where your mouth is

As an appraiser who works a very small area, and has for many years, I am fortunate to have quite good relationships with the agents in my community. Because of this, I get a lot of calls and emails asking for help when they run into situations with appraisals on their sales. Often the situation involves an appraisal that is under sales price where the agent is adamant that the appraisal is wrong.

Yesterday I had an email from an agent who told me that she had done her CMA and had arrived at an estimate of $325,000 for a sales price and that the house went under contract for $321,000, so pretty darn close to what her estimate was. The appraisal came back at $286,000 which is quite a bit lower than sales price, and the buyers and sellers were in negotiation to have the seller come down in price and the buyer bring more money to the table. The agent was adamant that the appraisal was faulty and used old sales that she did not think were appropriate. I offered to do a review of the appraisal as well as provide an opinion of value, all for a fee of course.

In this instance the agent balked and said that she didn’t want to spend the money; that the seller didn’t want to spend the money. My question is why? If you are convinced the appraisal is wrong, why not spend the money to either show that indeed the appraisal is wrong, or to provide a second opinion that the appraisal is actually correct? If there is $35,000 difference at stake, isn’t $500 or so for a second appraisal or review a worthwhile use of money? Or, is it possible that the reason that the agent didn’t want to spend the money, is in examination, that the appraisal might be fine?

What I really want to know from agents is why they don’t take the route of getting a second opinion from a local appraiser who knows the market well? If the review indicates there is a problem with the appraisal, then the agent can share it with the lender to see if there is recourse, such as a new appraisal, or a review from one of the lender panel appraisers. If the appraisal is shown to be fine, then there is a level of comfort that the agent and seller can have to negotiate, or move forward (or not) with the transaction.


Market snapshot – Ann Arbor/Saline

Market snapshot – comparing Ann Arbor and Saline


I admit it; I am a data junkie. There is something about graphs and charts that I just get all-geeked out about. Maybe it is simply having too much time on my hands, or maybe it is a thirst for knowledge (hoping for the latter, but with understanding it may be the former).

Without further ado, I offer my recent take on the comparison of two markets, because they often compete with each other.

The data below is run as one years’ worth of data at a time, but compared month over month (so if you see a comparison from June 2012 to June 2013 each of those sets has an entire years’ worth of data leading up to the date.  In this first graph, I have compared the cumulative days on the market of sales in Ann Arbor school district, as exposed through the Ann Arbor Area Board of Realtors MLS, compared to the same in Saline. I took all sales and looked at the median. In both segments, days on market declined to a low point in May/June 2013, and have since risen and then stabilized. Saline had longer median days on market but shows as stable compared to Ann Arbor, which is slightly increased over the past couple of months.


What about price?  On the median price, Saline is ahead of Ann Arbor. On median price per square foot, Ann Arbor is ahead of Saline. Why is this? It is related to median size. The median size of a house in the Saline market is greater than the median size of a house in the Ann Arbor market. As price per square foot is normally higher as size declines, it makes sense that you would see that.

If you compare month to month, for the past five months, the closed sales in the Ann Arbor market show as flat (although that is changing now) whereas Saline has been rising. If you skip down to the price per square foot, the rising prices in Saline are at a slower rate than just by the median price.



Inventory levels as of 4/8/14: Ann Arbor had 152 active offerings in total, compared to 1,176 sales the year before, or 1.55-months’ worth of inventory (not much). Saline had 50 offerings compared to 297 sales in the year prior, or 2.02 months’ worth of supply. In both instances, supply was quite limited, and this limited supply does appear to be driving many multiple offer situations.  In both markets, the contract-to-listing ratio shows as favoring seller’s, with Ann Arbor at 40.16% and Saline at 41.18% as of the 4/8/14 run date.

When the contract-to-listing ratio and low inventory favor sellers, prices typically increase. When they favor buyers, prices typically decrease. Markets are very fluid and changeable, and what is apparent a week ago, may well change dramatically a month from now. The market is sensitive to interest rates, employment rates, income changes, and national news, among other issues.


Appraisals are “opinions” of value by educated professionals. They are opinions based on factual data, but in the end of the opinion of a professional. Not all appraisers have equal qualifications and experience, and therefore not all opinions are equal. If you are shopping for an appraiser to help provide you an independent opinion of value, base your selection on the breadth and depth of that appraiser’s knowledge and experience, not the price of the appraisal assignment. After all, it is typically your largest investment, and does it make sense to be penny-wise and pound-foolish?

Rachel Massey,

Another bifurcated market snapshot

Bifurcated Market Snapshot


In my venture to stay abreast with what is happening in Washtenaw County, I offer the latest study of differences in median sales price and number of sales for one market within the larger area.

In short, prices are up from the same time last year, but there are signs of weakness and even a possible decline in place in this market segment right now.


The analysis relates to all sales exposed through the Ann Arbor Area Board of Realtors MLS between 1/1/11 and 4/1/14 in the one area. The data is in two graphs, one related to the number of sales and the other to median sales price. These two graphs compare arm’s length transactions to REO transactions in both categories.

This data includes everything in the MLS so there are duplicate listings.  This occurs when agents have listings in both Realcomp and the A2BR MLS. Since this data is run on the median price as opposed to average price, it should be very similar on that graph, even with duplicates.  Only the Great Lakes Repository was omitted from the search results since there are not very many of those and they tend to be triplicates as opposed to duplicates.

These sales are run on a yearly basis, but one month at a time, so that each segment includes one years’ worth of data. Doing so eliminates the seasonality that is common in Michigan and should correspond with the Board statistics (if they were to go by school district or area as opposed to the entire MLS).


Total number of sales/arm’s length compared to REO

Here is a snapshot of the number of arm’s length sales compared to the number of REO sales. At first there were more REO sales and now there are far more arm’s length sales.  This means the distress sales have largely made their way through the market at this point, leaving far fewer available. This is a good thing and helps stabilize the market.


Median price comparison

The graph above is the median sales price comparison between arm’s length and REO. In the past five months, there has been stability to a slight decline in arm’s length sale prices, and stability in the REO market for the past three months. With this data, you can see the ebb and flow as to prices rising, declining, rising and then stabilizing to dipping just slightly in the past couple months. This could be related to the very difficult weather our area has experienced this winter.

Comparing the most recent year-to-year results in the arm’s length category there is an increase in median price of 9.41%. Comparing the same with REO sales, the increase is 49.88% for median price. Clearly, the largest increase in this market has been with the foreclosed properties, increasing as these numbers dwindle.

I find that tracking the contract-to-listing ratio a great predictor of activity. This is simply the total number of contracted listings compared to the total number of listings, and it relates to general activity levels. In the arm’s length category as of 4/3/14, it was 33.33%, which is reasonably robust, but certainly not off the charts. At this level, it is what I would consider “in balance” to slightly favoring sellers, due mainly to lack of inventory.

Inventory is low with 46 offerings not under contract (4/3/14) compared to 237 sales the year before. That equates to less than two and a half months inventory based on the previous year’s sales. Perhaps the price increases have put a damper on interest in some of these sales, and the lessening of the REO inventory means there are fewer good deals to swoop up (less than 1.5 months inventory of REOs).

Based on the data, my opinion is this market as a whole is stable in price, undersupplied, and may be feeling the effects of the price increases last year starting to put a damper on current price trends. This is the entire area market, and every submarket is unique. That means you could be looking at a market that is in an upward trajectory, or even one that is starting a downward track, and as such should always try to whittle down to the market in which your property actually competes. The data above is purposely broad.

As always, I hope that you have found my musings useful. Just remember it is the educated opinion of one appraiser. I am always available to help Realtors, attorneys and property owners alike.

Rachel Massey