Appraised Value Below Contract Price

[mark hurlock]

So you consider the contract relevant...and you explain your rationale for your opinion of value being at, above or below the contract?

Rex, who said my appraised value needs to be the exact contract price or else the contract is irrelevant and I have to explain. You are so misinterpreting what I am saying.

Example:

Buyer signs contract for builder sample house but leases the house to the builder for $50k upon settlement.

This contract can be irrelevant as an arms length transaction having been influenced by the lease agreement. And maybe the builder gave away extras and furniture to make the deal and so on and so forth.

The contract “price” is no more relevant than the price of a comparable. Price is NOT a consideration for comparable sale selection any more than the contract being relevant.

It is the motivations of the buyer and seller and any concession that may influence the deal.



Furthermore,

that section of USPAP also considers previous sales, Why?

Because you are to determine if a prior sale was arms length, not if the price it sold for was relevant.

A prior sale is acceptable as a forth comp if it was arms length. But if a father sold his house to his son and you appraised it six months latter, you would not consider the previous sale relevant, not because of the price but the circumstances.

Are you getting this now?

 

[CANative]

So you consider the contract relevant...and you explain your rationale for your opinion of value being at, above or below the contract?

What's that got to do with the price of tea in China? You have a clean, 8 page contract with no unusual terms or conditions. It reflects the agreed upon price between A buyer and A seller. It doesn't reflect your opinion of market value. What is there to explain or further analyze?

If this was a hard requirement (regulations) then it would have become an issue and been resolved 10 or 20 years ago.

 

[Mr Rex]

I don't make the rules, I'm just saying, read it and decide for yourself. I think analyzing the contract doesn't stop at reguritating the terms near the top of page 1, particularly in light of the USPAP passage I quoted. With all the recent back and forth about values above and below the contract, I think that USPAP does expect some analyzation of the contract in contex of the appraisers opinion of value. Read the lines I quoted a few times and thumb back to 1-5 & 1-6 a few times.

 

[CANative]

This................

Calvin ... I have to disagree with you here. I see no requirement for an appraiser to make any comment comparing the opinion of market value against the sales contract ... I would think that done during the normal course of underwriting.

There is certainly no requirement for an appraiser to do so. In fact, Im not sure an appraiser should. An appraiser is (or should be) an expert in market valuation of property rights ... I dont think we have the obligation to put on legal, Realtor and underwriter hats as well.

USPAP is interesting .. it says what it says and it doesnt say what it doesnt say. I personally think there is a reason for that and our obligation is to only do what it says ... not what others wish it said.

 

[Pittsburgh Pete]

it says what it says and it doesnt say what it doesnt say.

And it says to "analyze"--clearly your dictionary has a different definition than mine. Your can see my earlier post where I give the dictionary definition--it talks about "separate(ing) into its parts" I can't think of a more relevant "part" of a SC than the agreed upon sales price.

 

[CANative]

If you have a clean, simple 8 page contract with no unusual terms or conditions, just an offer and acceptance of a mutually agreed upon price and it so happens that there is a variance in that price and your opinion of market value what is there to explain?

Nevermind. There is no rule or requirement for explaining differences between price and value. The appraisal report does that.

 

[Mr Rex]

If you have a clean, simple 8 page contract with no unusual terms or conditions, just an offer and acceptance of a mutually agreed upon price and it so happens that there is a variance in that price and your opinion of market value what is there to explain?

How does the intended user understand your rationale if you don't explain?

 

[CANative]

You provide them with three reconciled approaches to value. If there is something in the contract that needs explaining then explain it. If there isn't then there isn't.

This is a silly argument.

 

[mark hurlock]

it says what it says and it doesnt say what it doesnt say.

And it says to "analyze"--clearly your dictionary has a different definition than mine. Your can see my earlier post where I give the dictionary definition--it talks about "separate(ing) into its parts" I can't think of a more relevant "part" of a SC than the agreed upon sales price.

And my client has also established what the analysis of the contract is to determine, “for the particular USE”

NOT for every conceivable use. Not every assignment condition is the same. That is why there is no follow by numbers rule book for appraising.

That is why USPAP is written the way it is.

You say you are a litigator?

 

[J Grant]

Let's review: appraisal comes in at a value that diverges from the SC (possibly higher, possibly lower). Client asks for explanation of this divergence. Therefore, users of our services expect such analysis. Gee, my approach must be wrong!

The entire 30 page +- report supports the MVO, how and why it was arrived at, why is "further explanation necessary"?

If it's a customer service request, which it appears to be, that is a reason, to provide such an explanation. The request seems about appeasing borrowers or realtors, the client should read the report to see how MVO was derived.

Many realtors and individuals think the purpose of an appraisal is to support a SC price, and are preplexed when it doesn't appraise to price. If a client wants this explanation as part of customer service, so be it, but that has nothing to do with a regulatory requirement, or an issue of more extensive contract analysis.

Nobody seems to care how much a contract was "analyzed", as long as the SC price matches the MVO.

As for those who think over analyzing a contract is a neat party trick, if you get it wrong, esp with legal content, you could be sued later. We are not RE attorneys and playing one in contract analysis is not a wise idea.

Attorneys are smarter , or at least more cautious than appraisers, and know better than to start offering opinions about areas outside their expertise.