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High Priced Sale

Discussion in 'General Appraisal Discussion' started by Pamela Crowley (Florida), Nov 23, 2003.

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  1. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    What do the rest of you think and do when you see one new sale that is obviously 15-20% higher than everything else in that market with no justifiable reason?
     
  2. Restrain

    Restrain Elite Member

    30
    Jan 22, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    One sale does not make a market....except to Skippy. :D
     
  3. larryhaskell

    larryhaskell Senior Member

    0
    Apr 23, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Nevada
    I view those types of sales as an anomaly and avoid using them if possible. For us, about 95% of those sales involve people from my native state of California and the rest are from other areas where housing is high and we all know that there are just some stupid people in the world. If I'm absolutely forced to use one of those sales, I always mention that the sale appears to be outside of the normal market range and I typically conclude a value more in line with market trends. If I don't use the comp in the report I will mention it just so I'm prepared if a sales agent or LO brings it to my attention. I'm usually made aware of these types of sales because these are the first ones given to me by the ever helpful RE agent.
     
  4. CANative

    CANative Elite Member

    252
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    How about including as a 4th or 5th comp and deeming it an annomoly (sp?) What about one that is obviously 15% to 20% less than market? Same thing?

    I hate it when these come up!
     
  5. Rich Hahn

    Rich Hahn Senior Member

    0
    May 2, 2003
    Professional Status:
    General Public
    State:
    Colorado
    Nothing worse then having to appraise the high sale 9 months- 1 year later...
    Then skippy looks like the hero again..
     
  6. Tim Hicks (Texas)

    Tim Hicks (Texas) Elite Member
    Gold Supporting Member

    61
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Isn't it funny how everybody in the neighborhood knows about that high priced sale! But, if you ask them about that low priced sale next door, it is no comparison to their home. Then, you walk around the home with pet stains, crayon marks on the walls, ruined appliances and then you have to remember to hold your tongue.
     
  7. Chris Colston

    Chris Colston Elite Member

    0
    Jul 24, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    If it's just one sale, I ignore it but keep it in my work file. Same if the sale was low. Unless you can find out that the seller "contributed" a boat or a car or the winning lottery ticket to the sale. :D That you can adjust for. I'd probably mention it in an addendum but would try very hard to keep any emphasis away from it. The low sale can be just as much as a problem, might not be arms length, or a distress sale, etc.
     
  8. Richard Carlsen

    Richard Carlsen Elite Member

    0
    Jan 15, 2002
    Professional Status:
    Licensed Appraiser
    State:
    Michigan
    Cash buyer from California with more money than sense and 6 kids in the van with no place to stay.

    But, it is a valid comp and may be the forerunner of things to come, so I watch it. If there is another, we may be seeing a very rapid rise in the market.
     
  9. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    OK. All good replies and make good sense.

    Now, add the fact that ALL the Realtors and ALL the skippys ALWAYS use this sale as an indicator of a nice huge rise in values. Add the fact that the cost approach is now well below that one sale price, sometimes even for replacement NEW instead of used, and ALL the Realtors are using that one sale to price all the new listings. Add a market full of out of state buyers that tend to believe the Realtors and the skippys that make the inflated prices.

    What happens when the market starts to get skewed like this? It appears that the honest, ethical and experienced appraisers are the only ones not jumping for joy and ignoring the cost approach - replacement - factor. Certainly, NO ONE else wants to hear that that sale was inflated and MUST have had a fraudulent appraisal to make the mortgage happen.

    I had an interesting conversation with a Realtor yesterday afternoon about this situation. She is an experienced agent. She could not / would not comprehend what I was saying.

    To everyone else, the definition of Market Value is 'Whatever you can get on the contract."

    Personally, I call this MISLEADING. Misleading the sellers and the buyers by the Realtors and most definately by the skippys.

    Anyway, I've been thinking about this situation more and more as I see it happening here more and more. I can very easily pull up who the Realtors were involved in these deal. I can pull the mortgage and find out who the lender is. That's as far as I can go and I do often see the same names in these inflated deals. The trouble is, I can't go any further to get the names of the appraisers and the LOs. It's such a small step to get that information. A 'fraud potential' hotline, where an address, sale information including the names of the lender and the Realtors involved would make it so very easy to clean this up. I know that nobody is listening but, IT WOULD BE SO EASY TO CATCH THEM!!!

    When is NAR going to address this issue????? If they did, it would help so much! When Realtors portray themselves as the 'professionals' in real estate but have no clue that they are skewing the market due to no understanding of what they are doing or how illegal it is for the appraisers they recommend to do what they are doing ........

    I don't understand WHY NAR is doing nothing.

    :twisted: :( :huh: :twisted:

    I'm sitting there yesterday going over the details of writing an offer to purchase for my parents. NO agency disclosure was produced or talked about. This is going to be 'transaction broker' deal. The only reason I know this is because I'm an Appraiser Member of our board and already know the rules. The Realtor is both the listing and selling agent and is now representing NO ONE in this deal. She has an obligation to be honest and fair to all parties involved and IS NOT working for the seller. She either had no clue or knows full well what she is doing with those prices. She does live in this project herself.
     
  10. Steve Owen

    Steve Owen Elite Member

    0
    Jan 16, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Missouri
    Consider one other possibility. Maybe the high sale is better than the others in some way.

    For example, our home builders association does something called the Parade of Homes each year. Each builder involved builds a home in a subdivision where they are working and everyone tours them to see the different builders.

    You guessed it. The Parade of Homes houses always sell for more, sometimes as much as 10 to 15 percent more.

    They usually look just like other homes in the subdivision from the outside, but have things like crown molding, better floor covering, higer quality cabinets. The extra quality is there because they usually sell higher even several years later on resale. I've only had to appraise a few of them and it's always a little tough. Sometimes the appraisal comes in low even after you adjust for the differences.

    I would at least consider the possibility that there might be something different about the high sale.
     
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