Arm's Length vs Non-Arm's Length Sales

[TerryRohrer]

Most adjacent property sales are offered between parties and are not listed in the MLS, which means they were not exposed to the open market.

This is completely fabricated. When using MLS sales, particularly vacant site sales in areas with limited markets, I check surrounding owners in case they were the buyer. Often they were. How does an MLS listing, offerred to anyone interested, become "not exposed to the open market" based on the eventual buyer? This is a nonsense argument.

 

[J Grant]

DEFINITION OF MARKET VALUE: 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, 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 each acting in what he or she considers his or her own best interest; (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.

Like a broken record here - the appraiser, can not invent with each assignment what their idea of market value is. The above is a commonly used definition of it - auction sales and special niche weird assemblages both are not usually also offered on the open market, the buyers or seller may not be typically motivated and both typically lack a reasonable time for exposure

If an appraiser is going to use any sale without vetting it for those terms, on the basis that the sale was "part of the market, "then don't say your appraisal is market value- and in order not to be misleading, you would need an alternate definition of value on the appraisal.

 

[J Grant]

This is completely fabricated. When using MLS sales, particularly vacant site sales in areas with limited markets, I check surrounding owners in case they were the buyer. Often they were. How does an MLS listing, offerred to anyone interested, become "not exposed to the open market" based on the eventual buyer? This is a nonsense argument.

I just addressed that before -of course, there are exceptions, and we are not speaking in person, so sometimes they get omitted from a post.

If a property that is bought by the adjacent owner was also offered on the open market, and it had reasonable exposure time, then a sale, even to the adjacent owner, might be MV - assuming the particular movitae of the adjacent owner did not affect th price substantially.

 

[TerryRohrer]

Like a broken record here - the appraiser, can not invent with each assignment what their idea of market value is. The above is a commonly used definition of it - auction sales and special niche weird assemblages both are not usually also offered on the open market, the buyers or seller may not be typically motivated and both typically lack a reasonable time for exposure

Like a broken record, you are always defective in your reasoning. Have you ever heard of an auction that no buyers were notified about? You are blabbering nonsense and won't pause long enough to think. There are markets, particularly for farm land, where public auctions are the primary means of selling. In order to have an auction, you have to have buyers willing and able to buy. You don't get those by not telling anyone you are having an auction. Auctioneers have websites and Facebook pages and social media presence. Most around here also also licensed real estate agents (they have to be in order to sell real estate in the areas I am familiar with).

 

[J Grant]

Like a broken record, you are always defective in your reasoning. Have you ever heard of an auction that no buyers were notified about? You are blabbering nonsense and won't pause long enough to think. There are markets, particularly for farm land, where public auctions are the primary means of selling. In order to have an auction, you have to have buyers willing and able to buy. You don't get those by not telling anyone you are having an auction. Auctioneers have websites and Facebook pages and social media presence. Most around here also also licensed real estate agents (they have to be in order to sell real estate in the areas I am familiar with).

My reasoning is not defective; the MV definition says what it says.

Take any appraisal course and they explain why auction sales are not sued because they typically do not meet the MV definition. Your insulting me does not change that.

Auctioneers might advertise, but the TERMS of auction sales are usually NOT MV terms - most auction items are sold all cash or bring cash within 3 days, as opposed to open market RE sales that can be financed with a mortgage. The market exposure, even in an advertised auction, can be short, and the type of buyers to attend and buy at auctions are often investors or speculators and are not looking to be owner-occupied. Among other differences.

 

[TerryRohrer]

My reasoning is not defective; the MV definition says what it says.

Take any appraisal course and they explain why auction sales are not sued because they typically do not meet the MV definition. Your insulting me does not change that.

Auctioneers might advertise, but the TERMS of auction sales are usually NOT MV terms - most auction items are sold all cash or bring cash within 3 days, as opposed to open market RE sales that can be financed with a mortgage. The market exposure, even in an advertised auction, can be short, and the type of buyers to attend and buy at auctions are often investors or speculators and are not looking to be owner-occupied. Among other differences.

Wow, the more you try to justify your completely false statements, the less sense you make. List one source that says auction sales cannot be used (or sued). You can't and won't, you will deflect and repeat the same false statement, or say look it up. You should not be involved in a conversation where you keep displaying without fail your lack of understanding of real estate markets outside your own little area. And now you claim that all cash sales can't be used to develop an opinion of market value that includes, as you posted, "payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto."

 

[J Grant]

Wow, the more you try to justify your completely false statements, the less sense you make. List one source that says auction sales cannot be used (or sued). You can't and won't, you will deflect and repeat the same false statement, or say look it up. You should not be involved in a conversation where you keep displaying without fail your lack of understanding of real estate markets outside your own little area. And now you claim that all cash sales can't be used to develop an opinion of market value that includes, as you posted, "payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto."

I never said that all cash sales can not be used for MV appraisals- stop falsely representing what I said.

I Said that auction terms are all cash, which is different than open maker sales which can be cash or financed

 

[J Grant]

When a formal written appraisal is required, the next determination is to the purpose and use of that appraisal. Insurance appraisals have different requirements and can represent different values than estate tax or charitable donation appraisals. Appraisals that will be used for tax purposes require the use of fair market values. The IRS defines fair market value as "the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts." IRS Regulation §20.2031-1 While fair market value can be determined using the prices realized at auction --- one must take into account any fees associated with the auction sale, such as buyer's premium (as high as 25% at some auction houses --- 15% or 19.5% at Heritage). These additional fees must be considered as part of the sale price --- and thus fair market value.

The IRS also stipulates that "The fair market value of a particular item of property ... is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. Thus, in the case of an item of property ...which is generally obtained by the public in the retail market, the fair market value of such an item of property is the price at which the item or a comparable item would be sold at retail." 26 C.F.R. §20.2031-1(b) A qualified appraiser should look at the proper and true market for a piece of property to determine how best to establish the fair market value --- whether that be at auction or in a retail environment.

 

[TerryRohrer]

I never said that all cash sales can not be used for MV appraisals- stop falsely representing what I said.

I Said that auction terms are all cash, which is different than open maker sales which can be cash or financed

So in auctions where to register to bid you have to prove to the auctioneer that you have the funds or credit to close the transaction, before you can bid, are different how? Your making crap up faster than I can type because you simply don't understand auctions and how prevalent they are in some markets. But, it is what you do!

 

[TerryRohrer]

When a formal written appraisal is required, the next determination is to the purpose and use of that appraisal. Insurance appraisals have different requirements and can represent different values than estate tax or charitable donation appraisals. Appraisals that will be used for tax purposes require the use of fair market values. The IRS defines fair market value as "the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts." IRS Regulation §20.2031-1 While fair market value can be determined using the prices realized at auction --- one must take into account any fees associated with the auction sale, such as buyer's premium (as high as 25% at some auction houses --- 15% or 19.5% at Heritage). These additional fees must be considered as part of the sale price --- and thus fair market value.

The IRS also stipulates that "The fair market value of a particular item of property ... is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. Thus, in the case of an item of property ...which is generally obtained by the public in the retail market, the fair market value of such an item of property is the price at which the item or a comparable item would be sold at retail." 26 C.F.R. §20.2031-1(b) A qualified appraiser should look at the proper and true market for a piece of property to determine how best to establish the fair market value --- whether that be at auction or in a retail environment.

All of which supports what others have been saying and refutes what you have been saying. Read the last sentence over and over and over until you understand its content.