Adjustments for buyer motivation?

[Mark K]

If their were 10 competing offers for a subject and the winner is the highest price, then 9 other buyers thought it was worth less. Is it worth the highest price?

Similar to using auction sale comps. Is the real estate worth what one, highest bidder paid? One buyer doesn't make a market.

OTOH, I'll often use the auction sale comp but I'll find out where the other bidders dropped out. If two other bidders dropped out around $500K and the "winner" bid $525K, its a safe bet that its worth $500.

If there are multiple offers and you can find out what the 2nd and 3rd highest offers were, you might be able to determine a credible value knowing that there are other willing buyers at a slightly lower price.

 

[residentialguy]

You can try. Here... the agents call you back 3 days after the appraisal report was due to the client.

You're not asking correctly. " Hi Mr Re Agent. My name is Sputnam. I have a couple questions on one of your properties. Could you please give a quick call back at 555-$$$-$$$$

 

[Mike Ault]

You're not asking correctly. " Hi Mr Re Agent. My name is Sputnam. I have a couple questions on one of your properties. Could you please give a quick call back at 555-$$$-$$$$

So. You have found and gridded the best comparable, you have all the data that you need to do so clearly disclosed in the MLS and public records, and nobody personally involved in the transaction will call you back. The value indicated by that comparable is consistent with all the other market value indications in your report. The buyers closed on their other home, moved out with all their possessions in a moving truck, and they are stuck staying at the only hotel in town. Said hotel is dilapidated, has no air-conditioning, the whole family has come down with lice, is being eaten up at night by bedbugs, and the 90-year-old extended family member mother waiting to move in with them is suffering heart palpitations from the heat. The only thing keeping the family from moving out of that hellhole and into their new home is "verification of your best comparable". The report was due three days ago. Would you go ahead and submit the appraisal with that comparable, even though you have not personally verified details of the transaction with someone on the phone? Or, would you exclude that comparable, because it did not meet your verification standards? What happens if there is a crooked appraiser, and they use that reasoning to exclude "the best comparable" in favor of much higher comparables, because they like the freedom which "unable to personally verify the comparable with a participant to the transaction" gives them?

 

[PushinValue]

An outlier is commonly a one off. I'm saying if you have multiple "had to haves", that starts to look more like the market, even if the market is only comprised of relativity few people

Especially if they are the only two in the neighborhood…

 

[sputnam]

Anyways.. I have to agree with J Grant... appraisers too often get sucked down rabbit holes of minutiae. Our usual job is market value. That's typical buyer, typical seller. Not a particular buyer or seller.

 

[jay trotta]

Good morning all,

I hope this is the right forum to post this in as I've been a big reader of the discussions on this website but have never posted a question before. This is something that has been on my mind and I've flip-flopped so I was hoping to see what others in the profession think.

Is there ever a time it makes sense to make a line-item adjustment for extreme buyer motivation?

Without getting too specific, the market I am studying is a high-end luxury market near the greater Denver area. The properties within this market area vary substantially in lot size, home size, quality, desirability, locational influences, etc. so comps can be sparce. For example, there is a portion of the city under review that is relatively unique so it would be preferred to have at least a couple of comps from this area but the sales are limited. In one case, a property was listed for $1,850,000 and based on the property and comps around there, that seemed reasonable but it eventually closed at $2,500,000. Another home was listed at $2,375,000 (again reasonable) but closed at $3,500,000. Further research on these sales has shown the buyers were extremely motivated and just doing a quick comparison of these homes/properties in relation to other sales nearby, they don't fall in line with the immediate area or the surrounding areas.

In most markets, I would focus on other sales but due to the limited amount of sales and the desirability of this specific market, it's hard to look at other comps that can be vastly different than my subject properties. I have done a quick analysis of close to original list price ratios and using the $2.5 million sale for example, the average close to original list price for the same timeframe was from 100-104%, whereas this closed 35% over the original list price.

Any thoughts on an adjustment on buyer motivation?

IMO-you are looking at potential buyers who can afford to spend that kind of loot, they will pick & choose what they want. The driving force will be what they choose to spend, not the % over an asking price.

 

[Tom D]

the bigger agents here don't talk to you. you can talk to one of their team members. so, what is an appraisal mv. the AMC fee paid to the appraiser, or the diect lender fee. what is the definition of appraiser market value. guess it depends on whom you talk to.

 

[The Bob]

99% of the agents I call are receptive to sharing info. Some of the younger ones seem to be bit phone shy, so I text them too. Very few never respond.
I usually ask them to share what kind of marketing they had....# of showings?, # of offers?, any over list?. Some will give you the blow by blow. I've had cases where they were a ton of offers way above list but concentrated, and then one that is just out there, way above the others. IMO that one is not about the value of the RE, it's about securing the deal. But those other offers are probably a good indicator of value.

 

[Tom D]

very interesting thoughts here. so we now have some above list price sold properties that now become the new high that all the other owners will say what their house is worth, or more than. and we as appraisers will use them as comps, many times not even paying attention to list/sale price. the end sorta mutes the normal definition of market value sometimes.

 

[Surf Cat]

very interesting thoughts here. so we now have some above list price sold properties that now become the new high that all the other owners will say what their house is worth, or more than. and we as appraisers will use them as comps, many times not even paying attention to list/sale price. the end sorta mutes the normal definition of market value sometimes.

This is many of the AMC fast and cheap appraisers. They won't do the due diligence and uncover and report on as Bob stated, the "secure the deal" sales price that throws the other 4 - 5 comps in the report out of whack.

The "good appraiser" whom conducts and reports their investigative analysis on what the most probable price should be, becomes the bad guy... the low baller, the biased appraiser.