Does a Comp Have to Go Through the MLS to Be a Valid Comp?

[Dale Floyd]

Oh hell, why not show off? This is from an appraisal several years ago:

Can’t answer for all the others out here, but I’m impressed Bert.

 

[Fernando]

Yea but $302K in your market might be less than 1% of the selling price, or less than the sales commission that can be avoided.

There aren't that many off MLS sales. If off MLS, usually non arms length sales.
And $302K is significant and not less than 1% of selling price around here.

 

[Terrel L. Shields]

If off MLS, usually non arms length sales.

I would say probably 80% are arm's length here, maybe more. Some small portion are sold to related parties. But some are sold off MLS by estate auctions or other transactions that are below market or even above market. A neighbor might make an offer for land because it is close although they know they can buy land cheaper further away. Or an elderly neighbor doesn't want the family farm sold to be subdivided and sells to a neighbor with the promise they won't subdivide, or sells to a relative (then it is not arm's length.) But many properties sell for market because sellers and buyers are more sophisticated today and they have a better grasp of the market than Realtors want anyone to believe. That's particularly true in disclosure states where they can check the prior sales and nearly sold properties for pricing information.

 

[Fernando]

I would say probably 80% are arm's length here, maybe more. Some small portion are sold to related parties. But some are sold off MLS by estate auctions or other transactions that are below market or even above market. A neighbor might make an offer for land because it is close although they know they can buy land cheaper further away. Or an elderly neighbor doesn't want the family farm sold to be subdivided and sells to a neighbor with the promise they won't subdivide, or sells to a relative (then it is not arm's length.) But many properties sell for market because sellers and buyers are more sophisticated today and they have a better grasp of the market than Realtors want anyone to believe. That's particularly true in disclosure states where they can check the prior sales and nearly sold properties for pricing information.

The problem with off MLS sales is that not enough exposure both to public and time on market. Many times I see the off MLS sales (and very few of them) and wished I had been the lucky buyer of that property.

 

[Terrel L. Shields]

he problem with off MLS sales is that not enough exposure

Really? How do we know? Is exposure necessary or just being "well advised"? How long does it take you to decide to buy or sell? When the Covid hit, people were losing bid after bid by hours, even minutes. Is that well exposed to the market, or just panic buying - FOMO... fear of missing out.

 

[ZZGAMAZZ]

1st row of the 1004 grid describes arms length or non-. Wondering how often a comp is described as Non- with a corresponding adjustment, and whether to prioritize, or weight heavily, that comp in the reconciliation???

 

[BRCJR]

The problem with off MLS sales is that not enough exposure both to public and time on market. Many times I see the off MLS sales (and very few of them) and wished I had been the lucky buyer of that property.

So how about the property that sold on the day it was listed? (typical for comp purposes only). Was it properly exposed?

 

[Fernando]

So how about the property that sold on the day it was listed? (typical for comp purposes only). Was it properly exposed?

That's different. MLS agents have their selective qualified buyers especially to keep commissions to themselves. Those sales are generally within the low market range.
With those not involving agents, you can see them being purchased by LLCs having special nonarms length below market prices.
Am I the only good appraiser noticing this.

 

[Mike Ault]

So how about the property that sold on the day it was listed? (typical for comp purposes only). Was it properly exposed?

In my non-disclosure state, those are the ones where they play their "money back at closing" kickback schemes without mentioning them.

 

[Fernando]

In my non-disclosure state, those are the ones where they play their "money back at closing" kickback schemes without mentioning them.

I take disclosures for granted. Better informed buyer.
Can't understand why a non-disclosure state?