Are properties really selling over market value?

[The Warrior Monk]

Just asking your opinion here, not meant to be a challenge. The former. Multiple contracts on a single property - Isn't each contract per property considered an individual transaction. When multiple bids exist could it be considered undue stimulus or pressure to win the bid. Many, but not ALL properties are going to contract on multiple bids.

In a market value assignment, we're determined the value of the property in the market under a specific definition...not appraising to a contract.

Undue stimulus to the best of my knowledge is not defined as or accepted in practice or legal decisions as buyers that have the means to purchase overpaying for a particular property.

 

[The Warrior Monk]

I disagree. Why can't the market of buyers all be desperate, highly motivated, and/or unduly stimulated, primarily due to the vast imbalance in the supply/demand curve? Its called the Madness of Crowds.

It's my understanding that legally, there is a distinction between "normal conditions" and "necessitous conditions." Undue stimulus is general associated with "necessitous conditions," and a compulsion to sell.

 

[ZZGAMAZZ]

By Federal Law,
it is much more than just what someone will pay.

Definitions of different types of values are the sticking point, and they are definitions appraisers are responsible for citing.



12 CFR 34.42

(h) Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

12 CFR 34.42 - Definitions.

Provides the text of the 12 CFR 34.42 - Definitions. (CFR).

www.govregs.com

It is hoped that "acting prudently" is not purposely emphasized, because--in retrospect, after having read the term 10,000 times without batting an eye--it is painfully obvious that it is a subjective term absolutely without merit because it cannot be defined--a factor that should lead experienced, licensed practitioners to question the validity of the definition of "market vaue."

 

[Mark K]

... "necessitous conditions," and a compulsion to sell.

Same for buying?

Personally I think the problem is in the definition that F/F forces on appraisers.

I don't do F/F work any longer and in my reports (95%) narratives, I use a very short definition cited from court cases.

 

[Evincere]

distinction between "normal conditions" and "necessitous conditions

Define, or as Jeopardys Alex would ask, what is - compulsion to buy vs necessity.

 

[residentialguy]

Thanks, but it NOT me, it was the Realtor who wrote that in the ROV. Different HOA fees, amenities? You consider 3 miles distance next door?

I never said it was. But it sounds like it may be a similar competing development. What appraisal book told you that the best comps are always next door? There is a reason you're supposed to get a comp out of the development.

 

[J Grant]

It's my understanding that legally, there is a distinction between "normal conditions" and "necessitous conditions." Undue stimulus is general associated with "necessitous conditions," and a compulsion to sell.

A good interpretation, however if not appraising for a court of law, and appraising for a MV for a client -what does undue stimulus mean in our context of analysis

the MV definition applies undue stimulus to price - a price unaffected...how can we tell... a judgment and analysis what teh price would be if not affected. Bidding wars, pressure to buy a property first hour listed and beat out others before they even see it, is undue stimulus.... the MV definition recognizes it could be present, thus asks was a price affected by the undue stimulus.

When many prices are affected by undue stimulus , it gets backed into the market and analysis of market is part of appraisal...though the MV definition ( as defined ) asks it about a single price of a single property. That could be a SC price of our subject, or a closed price of a comp.

 

[ZZGAMAZZ]

A good interpretation, however if not appraising for a court of law, and appraising for a MV for a client -what does undue stimulus mean in our context of analysis

the MV definition applies undue stimulus to price - a price unaffected...how can we tell... a judgment and analysis what teh price would be if not affected. Bidding wars, pressure to buy a property first hour listed and beat out others before they even see it, is undue stimulus.... the MV definition recognizes it could be present, thus asks was a price affected by the undue stimulus.

When many prices are affected by undue stimulus , it gets backed into the market and analysis of market is part of appraisal...though the MV definition ( as defined ) asks it about a single price of a single property. That could be a SC price of our subject, or a closed price of a comp.

J.G., please step back and study "normality" for a moment (although others have given up on the argument).

 

[ZZGAMAZZ]

I never said it was. But it sounds like it may be a similar competing development. What appraisal book told you that the best comps are always next door? There is a reason you're supposed to get a comp out of the development.

I always presumed that the purpose of comp(s) from a competing development was to determine whether the entire subject development might be over- or underpriced, although by narrowly defining the neighborhood as the subject subdivision would addess that issue.

 

[residentialguy]

A good interpretation, however if not appraising for a court of law, and appraising for a MV for a client -what does undue stimulus mean in our context of analysis

the MV definition applies undue stimulus to price - a price unaffected...how can we tell... a judgment and analysis what teh price would be if not affected. Bidding wars, pressure to buy a property first hour listed and beat out others before they even see it, is undue stimulus.... the MV definition recognizes it could be present, thus asks was a price affected by the undue stimulus.

When many prices are affected by undue stimulus , it gets backed into the market and analysis of market is part of appraisal...though the MV definition ( as defined ) asks it about a single price of a single property. That could be a SC price of our subject, or a closed price of a comp.

So Jg
When I had undo stimulus affecting a comp, I adjusted for it. So are you adjusting for undue stimulus because of supply & demand?
And when the market comes tumbling down, are you going to adjust for it again, appraising it a much higher value than the sales that are happening?