Short Sale / Market Value

[J Grant]

Short sale means the lender agrees to take an offer that is less than the outstanding mortgage balance. The lender sometimes eats the loss, sometimes the homeowner pays it off, or a portion of it off over time.

Whether or not this short sale contract price amount is market value depends on comps, market conditions etc. That is for the OP to decide, at least the OP, a cert general, has the integrity to not agree with the referral MAI regarding automatically appraising to contract price.

 

[residentialguy]

I'm working with the one where mv is a sale with typical motivation and there is no undus stimulus to sell. Unlike that bank induced short sale needing 3rd party approval that has a high risk of being yanked from underneath the buyer's feet as they are carrying the sofa off of the truck.

If you think that Short sales are a good representation of MV, as defined....I'm scared.

 

[gregb]

Regarding Short Sales versus REO Sales, anyone else buying NAR koolaide that, if in the same or similar physical condition, a Short Sale property will sell higher than the REO property?

 

[J Grant]

Regarding Short Sales versus REO Sales, anyone else buying NAR koolaide that, if in the same or similar physical condition, a Short Sale property will sell higher than the REO property?

First I've heard of it...a short sale does tend to be owner occupied, and they can drag out FOREVER...whereas REO sales are vacant and tend to sell quicker. Do Short sales sell higher than REO sales? I have not seen dollar for dollar trends, but sometimes it is true. Then again, realtors will compare a run down REO house in a different market area to a good condition short sale house in a disimilar location and think nothing of it .

 

[CANative]

The MAI which I contract with typically insists we reconcile to a pending sales price. I don’t generally agree with this, unless market data also supports it – but he would absolutely never value above a contract sales price.

I stand by my stated opinion, my license level notwithstanding.

 

[PL1957]

I stand by my stated opinion, my license level notwithstanding.

I disagree with your contention that the contract means "almost nothing", my license level notwithstanding. Purchase agreements DO mean something - that's why USPAP requires us to analyze them. Dismissing a contract just because it's a short sale is not good appraisal practice.

And yes, I will tend to automatically take the MAIs side in the argument.

 

[J Grant]

And yes, I will tend to automatically take the MAIs side in the argument.

Just like you "automatically" support a contract price, whether or not the market supports it?

While I have tremendous respect for the MAI designation, we have seen that credentials means nothing when it comes to ethics. President Nixon, highest office in the land, impeached for Watergate. Bernie Madoff, seat on the NYSE, director of the NAS, head of charities, used his skills and influence and standing to commit fraud.

The lowest level to the highest level person can be corrupt, same as those with different license levels of apprasial. The difference is, the most high status individuals are in positions of power or deferred to, and thus can cause the most damage .

 

[gregb]

I'm re-appraising a mostly shell condition older mixed-use warehouse/office with an illegal apartment unit on the 2nd floor. This is a user property and market sales of similar shell properties were analyzed and a value of $320,000 was reconciled to last May (6 months ago). The comparable properties were purchased by users and readapted for other commercial or industrial uses. The lender of the subject is asking for a new appraisal as the property is under contract for $270,000 in a short sale situation. My search of new sales comparables resulted in three new sales which mostly supports the same value of $320K. There is one REO sale at the bottom of the indicators, which is attributed to the sellers (bank owned via Trustee’s Sale) motivation to reduce financial loss.
The MAI which I contract with typically insists we reconcile to a pending sales price. I don’t generally agree with this, unless market data also supports it – but he would absolutely never value above a contract sales price. He feels that this pending short sale price is reflective of market, which I do not agree with. This property has been listing numerous times over the past five years. The seller is way under water with the lender and foreclosure is eminent.
I appreciate any comments on why this sale should or shouldn’t be construed as a pending market transaction. I also appreciate comments on why lenders re-appraise just prior to a short sale or prior to a trustee’s sale at foreclosure. I believe it sets a baseline for loss write offs or what they bid at a trustee’s sale.
Many thanks.

There is a pending sale that is either an REO or a Short Sale, correct? The subject is either or soon to be a potential REO or pending Short Sale, correct? If so, when you make adjustments to the pending sale, what does that suggest about the value of the subject property?

 

[CANative]

I disagree with your contention that the contract means "almost nothing", my license level notwithstanding. Purchase agreements DO mean something - that's why USPAP requires us to analyze them. Dismissing a contract just because it's a short sale is not good appraisal practice.

And yes, I will tend to automatically take the MAIs side in the argument.

Oh, please.

but he would absolutely never value above a contract sales price.

I might use the contract as a "tie-breaker" if it's within a reasonable range of the value indications I'm coming up with. Frankly, I don't pay much attention to the contract until I'm finished.

 

[residentialguy]

Purchase agreements DO mean something

I agree. And this PA might have some indication of the most probable price of what the subject will sell for as a short sale...but not of FNMA's Market Value.