Yet Another Seller Concession Question

[residentialguy]

@J Grant ...Seller paid concessions are typically 3%, so it's probably safe to assume that's what Terrel is talking about

 

[Terrel L. Shields]

Net to seller. So I just sold a $1,200 coon dog. But I had to take in 11 $100 barn cats....same issue.

knowing what percentage "cash sales" are in your markets?

Maybe 30%. I am working on an estate and the house is about 4000 SF. Large homes like this are found in the area, and I found six rural comps with 5 acres or more. Two were financed. The other four have no mortgage so they were bought either "cash", or they financed something else to make the transaction. In starter homes, likely 90% of them are financed although we still have some investor types buying houses. The speculators are back on land, too. I just saw a transaction of 90 plus acres in the $5000/acre range and no mortgage and that was agri land. I've seen several large land tracts between Bentonville and the Regional Airport selling and when you drive by the houses and barns are gone.

I keep thinking that Realist is not accurate regarding the mortgages but every time I've went to the courthouse to check, there is no mortgage in that persons name. We have a lot of wealth around and a lot of people coming in from areas who sold their homes there for far more than real estate costs here. Many are VPs or management from companies that sell to WalMart. Walmart requires vendors to have a local presence. They don't send lightweights down to sell to Wally. So they come down having sold their home for $700,000 with equity of $400,000, buy a house twice the size they had in Chicago for $350,000 and suddenly they like being "sent to the sticks" just fine. I can see in a military town where VA would be the dominant loan method. And here the local economy is in sharp contrast to that of Ft. Smith only 70 miles away. They are dead in the water, lack jobs and the closing of the Whirlpool plant caused a ripple effect in suppliers and laid off thousands overall.

You can see the kind of development aka sprawl that exists in the 10 miles around WalMart Hdq... video file from my car cam
https://www.dropbox.com/s/wxlddlfc6msf2xh/TooMuchCity.mp4?dl=0

 

[Peter LeQuire]

Comparable sale analysis -
Actual case study:
List price $165,000,
Offer SP -$165,000, seller to pay 6% of sales price toward buyer's closing costs and prepaid items. Seller's gross proceeds $155,100. Offer countered
Counter offer 1 SP -$165,000, seller to pay 3% of sales price toward buyer's closing costs and prepaid items Sellers gross proceeds $160,500 Offer countered
Counter offer 2: SP- $170,000, seller to pay 3% of sales price toward buyer's closing costs and prepaid items. Seller's gross proceeds $164,900 Offer accepted.

Questions: What is the effect on the recorded sales price of the concessions in this transaction?
Would it or would it not be appropriate to adjust the sales price of this transaction (as a comparable) for the 3% concessions paid?

 

[residentialguy]

Comparable sale analysis -
Actual case study:
List price $165,000,
Offer (by buyer) SP -$165,000, seller to pay 6% of sales price toward buyer's closing costs and prepaid items. Seller's gross proceeds $155,100. Offer countered
Counter offer 1 (by seller) SP -$165,000, seller to pay 3% of sales price toward buyer's closing costs and prepaid items Sellers gross proceeds $160,500 Offer countered
Counter offer 2: (by buyer) SP- $170,000, seller to pay 3% of sales price toward buyer's closing costs and prepaid items. Seller's gross proceeds $164,900 Offer accepted.

Questions: What is the effect on the recorded sales price of the concessions in this transaction?
Would it or would it not be appropriate to adjust the sales price of this transaction (as a comparable) for the 3% concessions paid?

LOL...what idiot buyer would counter offer with a higher price with no additional concession from the seller?

I'd have to rule this out of the mix...buyer is an idiot!

 

[J Grant]

Measuring impact on sales price is not just about net to seller, ( in fact net to seller is not the question asked in adjusting for concessions), the impact on price has to be looked at compared to other prices of similar properties, (unadujsted prices and then to check effects of other factors, adjusted prices for everything but the concession)

A net to seller can be factored in on seller motivation side, but the ultimate result of seller motivation, and buyer motivation ( buyer is short on cash, or using a sluggish market to press for advantage etc), whatever the combination of buyer and seller motivations are, the sale price is the result

If final sales price this property with a seller concession of 3% is 170k, what are the prices of other similar properties sold without concessions? Sometimes affect of a concession on sale price is too marginal to adjust for ...other times it is quite clear. The smaller the concession amount, theoretically the less impact it would have on prices

 

[residentialguy]

the impact on price has to be looked at compared to other prices of similar properties

Absolutely WRONG! It is house specific as to what that house would have sold to the buyer if the concessions were not given. Otherwise just adjust every house price to other similar properties.

 

[residentialguy]

 

[J Grant]

Absolutely WRONG! It is house specific as to what that house would have sold to the buyer if the concessions were not given. Otherwise just adjust every house price to other similar properties.

The adjustment is house specific for THAT house, but it is not instructed to be specifically based on net to seller. The directive is about adjusting for price, and on the URAR it says per the appraiser's judgment...our judgement encompasses many factors, including interviews, net to seller if we learn it, buyer motivation AND comparisons to other property sales and their prices .

 

[residentialguy]

The adjustment is house specific for THAT house, but it is not instructed to be specifically based on net to seller. The directive is about adjusting for price, and on the URAR it says per the appraiser's judgment...our judgement encompasses many factors, including interviews, net to seller if we learn it, buyer motivation AND comparisons to other property sales and their prices .

If the seller would have accepted $3k less in lieu of paying $3k out of his pocket....(and every sane seller would do that, unless they are profiting in something like seller finance)...then you would adjust $3k. Your statement is completely incorrect. If your "appraiser judgement" is any different, that just means you have poor judgement and you are in the wrong profession.

 

[J Grant]

You are making this all about seller acceptance and what seller would accept, when that is not the question asked...

the question asked about whether to adjust or not for concessions is what impact (if any), did the concession have on price. What impact it had on sale price varies per buyer, seller and the market...in a strong market, sellers have less need to use concessions as an incentive , for example...many factors (imo) go into determining what impact it had on price /what it would have sold for without the concession...