I got a call the other day, and it was interesting. It was from an attorney. The issue came up on market conditions. We all know the prices are being bid up due to a lack of supply. I just had a friend look at a home in Lawerence, NJ. It was nearly a fixer-upper. He said he saw at least 40 business cards while waiting to go into the home. Before he could even make an offer, it was under contract. It happened in two days. It most likely sold at a higher price than the list price. He has been in the real estate business for years and can't believe what is happening, back to the call. The attorney's office couldn't understand why I wouldn't put market conditions that were 20% or higher. I went on to explain that if I had the facts, that would be different. I would still be very cautious.
I went through 2008 and remember what happened in the market. I have never adjusted for double-digit market conditions if you are using much older sales over a period of time. Maybe. The appraiser will be blamed again unless you have absolute proof of that. It is hard to show if there is a lack of data to support that adjustment. Even then, I would have an explanation and be cautious with it. I went on to explain no bank would accept extreme market conditions adjustment, nor most likely would my peers. Also, there is a test of reasonableness that we must look at., Our total adjustment process must make sense to anyone who reads, including regulatory agencies, judges, the public, and especially the IRS for estates. We are still in the middle of winter. l hope my next blog we will be closer to spring. Thank you for reading.