Are properties really selling over market value?

[residentialguy]

OK, I'll be "that guy".
I hear things from appraisers like "there were 8 pending offers to buy the property at $50k over market value". Hmmmm... All these buyers are lining up to pay X amount of dollars and it's "above market value" ... What is the definition of market value?
Seems to be the most probable price of the typical buyer/seller in the open market to me. Supply and Demand strutting it's stuff. It seems like many appraisers think their job is to control the market rather than to report it.

Prove me wrong.

 

[Fernando]

I look at the data. Last year, market was not that strong.
I been indicating stable market until several months ago because I wasn't convince the increasing price trend.
Now I indicate increasing market and doing time adjustments. The data is there now.

 

[Meandering]

OK, I'll be "that guy".
I hear things from appraisers like "there were 8 pending offers to buy the property at $50k over market value". Hmmmm... All these buyers are lining up to pay X amount of dollars and it's "above market value" ... What is the definition of market value?
Seems to be the most probable price of the typical buyer/seller in the open market to me. Supply and Demand strutting it's stuff. It seems like many appraisers think their job is to control the market rather than to report it.

Prove me wrong.

By Federal Law,
it is much more than just what someone will pay.

Definitions of different types of values are the sticking point, and they are definitions appraisers are responsible for citing.



12 CFR 34.42

(h) Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

12 CFR 34.42 - Definitions.

Provides the text of the 12 CFR 34.42 - Definitions. (CFR).

www.govregs.com

 

[residentialguy]

I look at the data. Last year, market was not that strong.
I been indicating stable market until several months ago because I wasn't convince the increasing price trend.
Now I indicate increasing market and doing time adjustments. The data is there now.

The prices that buyers & sellers are agreeing to are in plain sight.

 

[residentialguy]

By Federal Law,
it is much more than just what someone will pay.

Definitions of different types of values are the sticking point, and they are definitions appraisers are responsible for citing.



12 CFR 34.42

(h) Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

12 CFR 34.42 - Definitions.

Provides the text of the 12 CFR 34.42 - Definitions. (CFR).

www.govregs.com

The only highlight that you could argue might be reasonable market time. Do you think the price would be different if the seller holds out a bit? If anything, it would be higher!
Sounds like a fair sale when you could turn around and sell it and not lose money... in fact make money, which is prudent.
You still adjust for creative finance & concessions.

 

[Meandering]

The only highlight that you could argue might be reasonable market time.
Sounds like a fair sale when you could turn around and sell it and not lose money.
You still adjust for creative finance & concessions.

Artificially suppressed interest rates are creative financing.

The pandemic has not allowed the market to be "open" which then limits the "competition".
Case in point, during the 1980s run up, many foreigners bought real estate here, especially in NY.
Now, nope, look at the travel restrictions which are keeping foreign buyers out of the real estate market.

COVID-19 and Your Health

Symptoms, testing, what to do if sick, daily activities, and more.

www.cdc.gov

 

[Fernando]

Each market is still different.
I find homes with large lots are in high demand and prices go up.
Condos in dense complexes are less desirable and prices not going up as much.

I live in a big house with big yard and I took it for granted that life was fine living at home. It was wonderful being with the family & dog and getting things online.
I didn't realize others living in smaller and denser quarters had it rough during the pandemic.
Maybe that's why more people wish to live in larger updated homes and there is a greater demand.

 

[Meandering]

And,

What makes Buyers typically motivated;

each acting prudently

when they pay over list price? Not a "typical" motivation.

.

 

[residentialguy]

Artificially suppressed interest rates are creative financing.

The pandemic has not allowed the market to be "open" which then limits the "competition".
Case in point, during the 1980s run up, many foreigners bought real estate here, especially in NY.
Now, nope, look at the travel restrictions which are keeping foreign buyers out of the real estate market.

COVID-19 and Your Health

Symptoms, testing, what to do if sick, daily activities, and more.

www.cdc.gov

Interest rates have been low for the past couple years

 

[residentialguy]

And,

What makes Buyers typically motivated;

each acting prudently

when they pay over list price? Not a "typical" motivation.

.

They want to buy a house. The supply is low. It's nothing but supply & demand.
Again, those buyers can turn around and sell that house and make money. Sounds like a prudent decision to me. It's an investment. Often the motivation to buy a property.