Analysis of sales contract

[KD247]

Here's a bucket-of-cold-water-in-the-face sale that closed yesterday:

Fairly large older condominium complex with much indirect, but no direct, competition. Units vary somewhat but the market views them as generally similar. Sales at the height of the boom approached $440k. The most recent sales were at $327k (8/07), $331k (9/07), and $370k (8/07) but there is no clear value trend and the surrounding neighborhood's values have been declining at a lower rate than in the rest of the city. There are currently two listings, one 165 DOM at $323k (was $330k) and another 3 DOM at $400k. There are six recently canceled listings ranging from $329k to $415k.

After 162 DOM with little interest, even with the price gradually reduced from $345k to $309k, a friend-of-a-friend offered $240k and settled slightly higher. Closed yesterday at $248,500. There's absolutely no support for a price that low except for the single market action involving the subject.

I'm relatively confident that any appraiser could have been drawing vectors and establishing trends and relationships for a month and still would have come up with an opinion of value of about $310k. The problem is, even with an active market and ample opportunity, the market didn't agree and, until yesterday, the sales contract was the only tangible evidence of that.

 

[Mike Kennedy]

so what was the $6k variance?

 

[Mike Kennedy]

see......post #4 >>>

http://appraisersforum.com/showthread.php?t=141095



a person called "point of contact". This person in the case of appraised value not reaching at least the sales price is to be contacted and given 48 hours to provide Sales Price Comparison in grids on suggested other helpful and qualified comps for consideration.


These requests normally are returned as copies from MLS with some "helpful" prose. If the Panel appraiser does not consider them complementary or supportive of any changes, they are not considered and the reasons are submitted with the FINAL transmitted report

 

[Mark to market]

Mike

While I will agree that much of the sales contract analysis we do does not relate to value, some of it does.
Items that might change value include statements such as “mineral and water rights do not convey”, certain contingencies, fractional interest, disclosure statements and conveyance of easements for a few. In addition I for one look much closer at appraisals when they are not arms length transactions.

Much of your argument lies in discarding the notion that the subject contract is another market example of a pending sale. I would suggest that after we calculate the cash equivalency it is an excellent example and one that one would be remiss not to have this in the appraisal.

 

[Carnivore]

Much of your argument lies in discarding the notion that the subject contract is another market example of a pending sale. I would suggest that after we calculate the cash equivalency it is an excellent example and one that one would be remiss not to have this in the appraisal.

In my state real estate agents use a pre-printed contract the has a kick out provision regarding appraised value. In other words the "market example"(your words) meeting of the minds is dependent upon a disinterested party; the appraiser! Without that knowledge you would be using information that had not passed a reasonble test nor performance.


Party 1 "I want to!"

Party 2 "So do I"

but alas one of us cant

 

[JSmith43]

In my state real estate agents use a pre-printed contract the has a kick out provision regarding appraised value. In other words the "market example"(your words) meeting of the minds is dependent upon a disinterested party; the appraiser! Without that knowledge you would be using information that had not passed a reasonble test nor performance.


Party 1 "I want to!"

Party 2 "So do I"

but alas one of us cant

If party #1 is Carnivore Jr & Party #2 is Carnivore Sr, it would be a sufficient clue to check for a relationship, short of a DNA analysis. A few calls might do the trick in the case of a residential appraisal assignment for lending purposes.

Why is it that UW standards tighten up so much if it is a non-arms length transaction? Why do purchase transactions decision more easily than refinances (conditioned for submission & review of PA, of course)? Could it be that the gauntlet of requiring a legally binding contract between a buyer and seller, one that typically has to declare affinity/relationship, is a predictor of MV in the eyes of the client and based upon their loss statistics?

If it were for certain court purposes, then, perhaps condition for DNA or make and prominently disclose an EA.

Did you see where another TX conviction got overturned lately on DNA evidence? It is a fine example of an expanded SOW leading to a different conclusion:icon_mrgreen:

 

[Mike Kennedy]

"Fairly large older condominium complex with much indirect, but no direct, competition."

Characteristics of the "indirect" competition? If no "direct" competition, then units in the same "older" condo would be the primary value indicators.

"Units vary somewhat but the market views them as generally similar. Sales at the height of the boom approached $440k. The most recent sales were at $327k (8/07), $331k (9/07), and $370k (8/07) but there is no clear value trend"

2006, earlier 2007 closed sales in same condo???? what DOM for the 3 2007 sales above? Analysis 2005, 2006, and all of 2007 plus actives 2008 would indeed serve to illustrate the "value trend" and DOM (if adequately marketed) ....to indicate demand.....levels for each year.

"and the surrounding neighborhood's values have been declining at a lower rate than in the rest of the city."

Which may have NOTHING to do with the subjects "market" i.e. the subjects' condo itself. Overall, generalized, non-specific, value trends often have ZERO impact on a subject as described.

"There are currently two listings, one 165 DOM at $323k (was $330k) and another 3 DOM at $400k."

Without knowing the DOM on the Closed Sales noted above, nor the DOM on the 3 at $400, no way of knowing what DOM for the subject would be market indicated.

"There are six recently canceled listings ranging from $329k to $415k."

Inquiries made to determine what the DOM for those listings were, and why cancelled?

Any recent adverse Site or Maintenance Conditions surfaced? problems with HOA or Mgmt Co?

Simply reaction to hyper-inflated 2004-2005 values????

After 162 DOM with little interest, even with the price gradually reduced from $345k to $309k, a friend-of-a-friend offered $240k and settled slightly higher. Closed yesterday at $248,500. There's absolutely no support for a price that low except for the single market action involving the subject.

Demonstrating a dramatically discounted accepted sale price evidencing the probable "quick sale" motivations of a single seller.

"I'm relatively confident that any appraiser could have been drawing vectors and establishing trends and relationships for a month and still would have come up with an opinion of value of about $310k."

"The problem is, even with an active market and ample opportunity, the market didn't agree and, until yesterday, the sales contract was the only tangible evidence of that."

The sale contract appears to have demonstrated ONLY the actions of 1 seller and 1 buyer. "such a deal".....appears to indicate additional information regarding either the Condition of the unit OR the "quick sale" motivations of a single seller would require additional investigation.

If, as you opined.....$310 appeared to be supported by the Market .....the reported sale price (absent the additional info above) ......IMO, has nothing to do with Market Value but a single Transaction.

In either case, the Contract Price (unless the "blanks" above indicate valid reasons) had nothing to do with Market Value.

 

[Mike Kennedy]

Mike

While I will agree that much of the sales contract analysis we do does not relate to value, some of it does.
Items that might change value include statements such as “mineral and water rights do not convey”, certain contingencies, fractional interest, disclosure statements and conveyance of easements for a few. In addition I for one look much closer at appraisals when they are not arms length transactions.

Much of your argument lies in discarding the notion that the subject contract is another market example of a pending sale. I would suggest that after we calculate the cash equivalency it is an excellent example and one that one would be remiss not to have this in the appraisal.

Mark - The examples above a. should be info provided TO the Appraiser by the Client b. can and should be verified by obtaining the legal description and/or survey c. fractional interest or contingencies such as H&BU/Zoning Compliance, are SOW elements included in the Assignment Conditions as is the relationships of the parties involved. d. none of which require consideration of a Stated/Provided, Advance $Contract Price. :icon_idea: