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Art Of The Deal

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uncle sam

Junior Member
Joined
Aug 24, 2003
Professional Status
Certified Residential Appraiser
State
New Jersey
COS has addendum that shows buyer had made a private mortgage of 50,000.00, to current owner 1 day before contract was signed for enough money to completely renovate property, amount of COS price was 500,000.00, there is no mention of how or why is it considered arms length, the 50,000.00 is expressed as an attachment. I've asked for clarification client is not able, or does not care to elaborate, and asked if I was the appraisal police for wanting an addendum to the COS. Your thoughts?
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
COS has addendum that shows buyer had made a private mortgage of 50,000.00, to current owner 1 day before contract was signed for enough money to completely renovate property, amount of COS price was 500,000.00, there is no mention of how or why is it considered arms length, the 50,000.00 is expressed as an attachment. I've asked for clarification client is not able, or does not care to elaborate, and asked if I was the appraisal police for wanting an addendum to the COS. Your thoughts?

Buyer made the 50k private mortgage, or the seller is granting a 50k private mortgage to the borrower? ( your post says buyer made it to current owner??)

If parties had no relation /relationship prior to this transaction, it is an arms length transaction...albeit one with 50k private financing on top of the conventional mortgage. Is it financing or a giant concession to induce a buyer to pay a higher price for a property needing repair? It is a 50k loan that will be paid back...? If so at what terms and time frame to repay

Report the 50k correctly ( above is confusing), analyze it if impacted the sales contract price, then appraise the house as is (if assignment is an as is appraisal )

If client wants subject to renovation, then subject would need to be renovated at a future appraisal final inspection date)
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
COS has addendum that shows buyer had made a private mortgage of 50,000.00, to current owner 1 day before contract was signed for enough money to completely renovate property, amount of COS price was 500,000.00, there is no mention of how or why is it considered arms length, the 50,000.00 is expressed as an attachment. I've asked for clarification client is not able, or does not care to elaborate, and asked if I was the appraisal police for wanting an addendum to the COS. Your thoughts?

Your client is an idiot. Asking for an addendum you know exists ( how did you know?) does not make you the "appraisal police", it is part of your fulfillment of USPAP requirement to analyze any offers or contracts.
 

Mark K

Elite Member
Joined
Jan 27, 2004
Professional Status
Certified Residential Appraiser
State
Indiana
You asked for it, they won't provide it. You analyze the contract, if available.

Discuss your analysis of what you have and state what you were not provided and complete the report.

Mortgages and their amounts have no effect on value. Do YOUR job (valuation) and let the lender do theirs. If they want to lend 50% or 200% of appraised value or if they allow the borrower to have additional mortgages is their business.
 
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