More bad signs about Real Estate markets

This time some ideas of how Realtors can skew the markets by relisting and other tricks. This article from Columbas is by Kenneth Harney.

In cooling real-estate markets, the hottest question is: How do you value a piece of property when home sales are down 20 percent to 40 percent from last year, inventories of unsold homes have ballooned by 200 percent or more, and all the trend lines are negative?

It can be tough. Traditionally, real-estate appraisers focused heavily on sales of similar properties — "comparables" that closed in recent months — to make their valuations. But that doesn’t work well in markets that were superheated — prices rising at 1 percent to 2 percent a month — but are stalled-out or falling. It also doesn’t work well in markets where recent closed sales prices often were inflated by incentives provided by sellers to buyers — contributions to closing costs, buydowns of mortgage interest rates and other sweeteners not always on the public record.

"It’s getting pretty dicey out there," said John D. Bredemeyer, a residential appraiser and spokesman for Appraisal Institute, the industry’s largest professional group.

"Just looking at historical data can be perilous. You’ve got to open up the window and see what’s really happening now."

Some mortgage lenders and relocation companies expect appraisers to examine a range of data that they never emphasized during the boom years. Gary Crabtree, owner of Affiliated Appraisers, said that besides the traditional "recent comps," he factors in at least eight other types of data in reaching the value of a house:

• Pending sales under contract.
• Current listing prices of houses in the area.
• Market supply and demand.
• Length of time unsold on the market for current listings.
• Price reductions or increases on current listings.
• Notices of defaults and notices of trustees sales.
• Known concessions provided to buyers to facilitate sales.
• Personal interviews with real-estate agents on what they’re experiencing with sellers and buyers.

Even some of these factors can be tricky, however.

Crabtree said some realestate agents increasingly are playing what he calls "the relist game." Because multiple-listing-system data reveal how long each property has been on the market, agents with unsold houses sometimes cancel the listing — take the property off the market for a short period — and then list it again with a different price and multiplelisting code.

"Now the house no longer looks like it’s been sitting dead in the water for months on end," Crabtree said. "It looks like a new listing," and it’s reported in that misleading way in the data that appraisers use to gauge the overall market.

Crabtree said one house he tracked was first listed last October at $299,900. It sat unsold for 122 days. Then the listing agent pulled it out of the system briefly and brought it back as a new listing at $269,000. When it didn’t sell in 30 days, the agent again yanked the listing and reported it as a new one at $259,000. Now the house is on the market for $229,000 and still not selling.

Kenneth R. Harney covers housing issues on Capitol Hill for the Washington Post Writers Group. You can write to him at P.O. Box 15281, Chevy Chase, Md. 20815