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adjusting my comps because they have seller paid concessions

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TexasRed

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!! Before you read my question understand I have searched and read all old threads on the subject so there is no need to get upset if you have seen it before!!

My question is about adjusting my comps because they have seller paid concessions.
- I have read do dollar for dollar and I have read only adjust for those concessions that are above normal for the market (and everything in between).
So how do I know what is typical for the market if out of say 40 sales in this new subdivision they range from 10% to 0% concessions with no clear cut “typical” amount?
 

ZZGAMAZZ

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I've read the various threads recently and still don't understand from a practical perspective how anything but dollar-for-dollar adjustments for all concessions could be applied.

Buyer pays $100K and gets $5K of his or her closing costs paid; how can that do anything but reduce the actually selling price? During the up market that's a distant memory, concessions were critical because few buyers entered into the deals with $$$ for a dp.
 

Tim Hicks (Texas)

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Did you read the mortgagee letter on this subject?
 

Caterina Platt

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Hi Michael,

As with anything in our sales comparison grid, what you are adjusting for is the market response to the comparison.

The proper adjustment may be viewed as a percentage basis, or it may be a dollar amount from a paired sales set. It's all going to depend on the quanity and similarity of your sales data.

If you're working in a cookie cutter development where a 1500 SF 3/2 with a 2 car garage sells for $130,000 more or less, then your comparable sale at $140,000 with the seller concessions was apparently affected by a $10,000 contract increase assuming all other things were equal or adjusted.

Or, say you have a situation where you're analizing cash or equivalent terms sales vs. owner carried terms (say manufactured housing or vacant land sales). In that case, I'd probably be inclined to measure the percentage increase obtained by the owner carried terms.

In the case of the seller gift programs, I often found it was indeed a dollar for dollar. Pretty easy to quanitfy when the typical list to sell ratios were 98% to 100% and the places sold for exactly the 6% gift plus funding fee over the asking.

The list to sell ratio is another way you can look at your adjustment. If in Shabby Heights, the typical list to sell ratio is 95% for those without concessions, you have a starting point. Then take a look at the concessions and what really was 'given'. If your typical concession is closing costs, and you have one that sold with 6 months mortgage free and a big screen TV, I'd obviously try to separate that one out from the analysis.

Hope this helps clarify.
 

Tim Hicks (Texas)

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From Mortgagee letter 2005-02:

The appraiser is required to make market-based adjustments to the comparable sales for any sales or financing concessions that may have affected the sales price. The adjustment for each comparable sale must reflect the difference between the sales price with the sales concessions and what the property would have sold for without the concessions. In the Sales Comparison Analysis, Sales or Financing Concessions Section, the appraiser must report the adjustment applicable to each comparable sale listed.
 

TexasRed

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Well then since I can’t be in the head of each buyer/seller when they are crunching the numbers the only logical thing I can think of is a straight dollar for dollar adjustment, or if you can figure out what exactly is typical for the seller to pay in the area adjust dollar for dollar for the amount over that?

The adjustment for each comparable sale must reflect the difference between the sales price with the sales concessions and what the property would have sold for without the concessions.

There are too many variables with this statement. Maybe the buyer has a good steady job with no savings so he/she needs help with the closing costs or he/she has lots of money in the bank and not a lot coming in so they would like a lower payment…… ???
 

Farm Gal

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Michael:

On FHAs I pretty much take the stance that anything over asking IS a dollar for dollar creating the minimum concession adjustment I would place in the grid...

If the contract stated concession/seller paids are some amount less than 100% over asking, I have sometimes inquired if there had been previous offers on the property, establishing another 'what it would have sold for' but at the maximum...

Not saying I use that I use eaither as an absolute, I also look at what the comprables concessions (if any) are running... and then sigh. reconcile.

Despite the wording in that mortgagee letter, I think we ares till stuck reporting on and adhering to Fannie regs. With the FHA 'no less than' in my opinion defined by whatever the lowest/last recorded list price! That gets loopy when concessions are built into the list though:Eyecrazy: .

opinion. value. my. opinion of value - yeah that's the ticket!
 

Charles Witt

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Dec 13, 2002
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Delaware
dollar for dollar

I use $ for $ adjustments on comparables on all types of appraisals, FHA , VA or Conventional. Dollar for Dollar...............the only accurate way in my book!
 

TXCBoy36

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Colorado
Personally, with the market the way it is, I would have to say that dollar for dollar is expected, at least until the market starts to balance out and even then market demands may still require a dollar for dollar adjustment.

I know that it is typical to see a 3% sales concession paid, but it is clear that this is usually utilized to encourage the buyer to commit and buy the property, so with that taken into effect. I would have to say that a dollar for dollar adjustment is required.

JC
 

TexasRed

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Texas
If the subject is getting 4% paid by the seller/builder and all the comps also had 4% paid by the seller is there an adjustment need on the comps for the 4%?
 
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