Appraised Value Below Contract Price

[J Grant]

You are to analyze the SC--analyze means to look at the constituent parts of that contract. Agreed upon sales price is the most significant aspect of a SC. So you figure it out. Why didn't USPAP just state that the appraiser is to regurgitate the content of the sales contract? If one is clueless it is impossible to be confused.

One can reference the SC price of a contract in analysis regarding how concessions or terms etc impact price. Most appraisers have been doing this on an ongoing level.

But, relating a later developed MVO to a pre existing SC price to a MV opinion is not part of "contract analysis", it is a sep request by a client....


Since this is asked on as an additional comment only AFTER the report has been developed, it does not appear to be a contract analysis issue . The MVO number does not exist as part of the SC, so how can one analyize it as part of the contract?

IF a client or user of appraisal brings a complaint, and an appraiser stepped over bounds and felt they should be analyzing MVO as part of a contract, a smart RE attorney could see the mis application and use it against the appraiser.

The specific MVO number was not part of the contract or contract negotiatios, the parties had no knoweldge of what the MVO would be weeks later. Thus, "analyzing" a contract relating MV and a SC price is backdating something into the SC that was not there. A good RE atty would have a field day with it.

There is a reason clients ask for this comment AFTER a report is developed. Some appraisers are volunteering a statement before client request, as part of report. Nothing wrong with that, but be careful about relating MVO back to a pre dated contract, or the language you use in explaining why a MVO and SC price varies.

 

[Calvin the Airedale]

Why doesn't USPAP just state that the appraiser must comment or explain whenever there is a difference between price and value?

It's the appraiser's obligation to comment on the reasonableness of the sale price in every contract analysis, whether the price differs from value or not, or at least it's been explained to me that way by folks who had to the power to bounce me out of my career by virtue of their authority to regulate.

Lenders are concerned with several things: is the sale arm's length; are its terms and conditions (the most important of which are price) reasonable. Does the contract make sense according to the definition of value used to underwrite the collateral?

Every so often on AF, a thread (like this one) raises the issue: the lender asked me to explain why the value is different from the contract price. And then the whining starts: scope creep; how dare they attempt to influence us; why don't they read the report; et cetera, etc.

The lender is merely asking for a more detailed analysis of the sale agreement. If your value is higher or lower (let's assume by a lot) than the contract what other basis do you have for analyzing the contract, to comment on its reasonableness? If your MV are good enough to underwrite the loan, don't you think they're good enough to draw conclusions about the sale contract?

Everyone in this business already knows that reports with values much different than contract prices get much closer scrutiny. Somehow so many are blindsided by the client's request to give this more explanation and narrative. Criminy! Some of you must leave a trail of bread crumbs when you leave in the morning just to be able to find your way home.

 

[Michigan CG]

................ The MVO does not appear in the SC, so how can one analyize it as part of the contract?

Imo, a smart RE attorney, if a client or user of appraisal feels they were harmed by it, if an appraiser stepped over their bounds and felt they should be analyzing MVO as part of a contract, a smart RE attorney could see the mis application and use it against the appraiser.

The specific MVO number was not part of the contract or contract negotiatios, the parties had no knoweldge of what the MVO would be weeks later. Thus, "analyzing" a contract relating MV and a SC price is backdating something into the SC that was not there. A good RE atty would have a field day with it...............

What ever it is you are smoking, drinking, inhaling or injecting, you need to share it with the rest of us.

 

[mark hurlock]

You are to analyze the SC--analyze means to look at the constituent parts of that contract. Agreed upon sales price is the most significant aspect of a SC. .

You are required to analyze comparable sales too.

Do you determine if sale prices are reasonable before selecting them? NO, because sale price is a not a factor in comparable sale selection. You determine if they are arms length and reasonably similar to the subject.

You are required to analyze prior sales too. Do you analyze the price of the prior sale? NO. because the price is not relevant. You determine if the prior sale was arms length to determine if the prior sale may be relevant to current value.

Your definition of analyze is not supported when applied to similar use of the term.

 

[CANative]

This is why I entered the debate...

It's the appraiser's obligation to comment on the reasonableness of the sale price in every contract analysis, whether the price differs from value or not, or at least it's been explained to me that way by folks who had to the power to bounce me out of my career by virtue of their authority to regulate.

 

[Pittsburgh Pete]

What am I when I stand up by myself in front of a court composed of three appointed assessment appeals board members and argue my clients case versus the County Assessor's case?

It's kind of the same as being a litigator ("To contest in legal proceedings.") In fact it IS the same except I'm not an attorney (nor an appraiser for these purposes.)

An advocate? Just as an attorney is; attornies are litigators.

But you are not functioning as an appraiser in such proceedings, are you? I don't contest anything when I appear in court or in assessment appeal hearings. I present my appraisal and argue for its validity. I do not litigate, I do not advocate. Certainly you know the difference?

 

[CANative]

An advocate? Just as an attorney is; attornies are litigators.

But you are not functioning as an appraiser in such proceedings, are you? I don't contest anything when I appear in court or in assessment appeal hearings. I present my appraisal and argue for its validity. I do not litigate, I do not advocate. Certainly you know the difference?

Of course I do or I wouldn't be able to do what I do. I advocate. It is astonishingly similar to litigating. I even have to put up with county counsel making objections, know when to object, presenting, rebutting, summarizing, etc., etc. In front of a room full of people in the galleries. I feel like Perry Mason some times. lol

 

[J Grant]

What ever it is you are smoking, drinking, inhaling or injecting, you need to share it with the rest of us.

Really? Explain to me where a MVO that was not developed yet appears on a sales contract.

Since it is not in fact on a contract, how can an appraiser inlcude a MVO as part of a SC contract analysis? The SC analysis is asked for in the BEGINNING of a report, BEFORE the MVO is opined. There is a reason for that.

An appraiser can reference a SC price in the analysis, as it pertains to motivation, or DOM, or conecessions (known facts that existed at SC date)

But, to backdate an unknown MVO into a SC analysis is another matter entirely.

When a client asks for an explanation about why MVO diverges from a SC price, they are no longer concerned with SC analysis, they are asking a new question, such as how the comps or data in report support a MVO and why it differs from a price.

 

[Michigan CG]

...........Do you analyze the price of the prior sale? NO. because the price is not relevant. You determine if the prior sale was arms length to determine if the prior sale may be relevant to current value. ............

If you have a neighborhood where everything is selling for $250,000 and there is one sale for $200,000 you don't "analyze" the price, i.e. do some research? Find out why?

The sales contract and the meeting of the minds is a piece of market action and it should be looked at including the price. If you opine to a significantly different number than you would owe it to the client to explain the discrepancy. That is just common appraisal practice.

 

[Pittsburgh Pete]

You are required to analyze comparable sales too.

Do you determine if sale prices are reasonable before selecting them? NO, because sale price is a not a factor in comparable sale selection. You determine if they are arms length and reasonably similar to the subject.

You are required to analyze prior sales too. Do you analyze the price of the prior sale? NO. because the price is not relevant. You determine if the prior sale was arms length to determine if the prior sale may be relevant to current value.

Your definition of analyze is not supported when applied to similar use of the term.

I try to do substantially more than this. Under your approach, the property that you may have appraised for $300,000 but was under agreement for $400,000 and subsequently closed at that amount, is fair game for use as a comparable sale without any analysis? If it's similar to the subject and arm's length then you are good to go?

So as you can see, analysis runs throughout the report from the comp selection, explanation, and analysis of the comparable sales to the description and analysis of the site and improvements. Do less, and you're not doing your job.