Auction Fees - To Adjust or Not?

[Mountain Man]

I'm also familiar with Williams. Bought one from them last week for $55,000. Some repairs and clean up to cost about $20,000, and we'll flip it for $120,000. Hope you don't call that a market sale.

 

[Pamela Crowley (Florida)]

Good explanations. The auctions can be considered comps "depending on the subject market and the marketing history, etc...." Florida auctions are growing substantially.

Mell, The $55K was as is and is a good comp for other properties in similar condition. The $120K will be a good comp for other fixed up properties. The difference is the entrepreneurial profit for an experienced and knowledgeable investor.

 

[rcsone]

.....I guess we should start adjusting upward for a cash sale, since it is worth less than a financed activity.........and cash has now been regulated from king to princess or something....at these figures I would have thought there was no duress due to loan balance and surely this might qualify as a arm and two leg transaction........I may hafta goes back to school(s).......best to all....rs

 

[Ray Miller]

Good explanations. The auctions can be considered comps "depending on the subject market and the marketing history, etc...." Florida auctions are growing substantially.

Mell, The $55K was as is and is a good comp for other properties in similar condition. The $120K will be a good comp for other fixed up properties. The difference is the entrepreneurial profit for an experienced and knowledgeable investor.

I think Pam says it well here.

 

[Shelley4146]

I've had several cases in San Diego county where comparable sales sold by auction closed much higher than other comparables. Go figure, wonder who appraised them???

 

[JT1974]

I've had several cases in San Diego county where comparable sales sold by auction closed much higher than other comparables. Go figure, wonder who appraised them???

Just remember that not all buyers finance 100% of the purchase price. Sales like the ones you refer to could have had buyers with very large down payments where the appraisal really didn't matter that much.

 

[Shelley4146]

That's a possibility.

 

[Pamela Crowley (Florida)]

Shelley, I've seen that happen a number of times also, though I'm thinking that is about to reverse. Again, whether or not an auction sale is a valid comparable for anything depends on numerous factors.

Had an interesting one a few years ago, (I think it was around 2000?). River front newer large house taken by US Dept of Justice being auctioned. My client was a potential purchaser. I cannot remember the amounts, so will make some up: My appraised value was $1,500,000. Sold at auction for $1,800,000. Buyer couldn't get it financed as he was putting less than $300K down and I'm guessing that his bank appraisal(s) couldn't come in high enough. Anyway, it went on to auction again and the second time around it sold at close to what I had appraised it for. I think the initial 'winner' lost about $30K. ($30K+/- up front was necessary to be allowed to bid, nonrefundable if you won the bid but did not follow through with the purchase.)

Bottom line is, auction sales need to be researched and verified before they can be used as comparables, typically this takes a little more research than other sales. (Hint: ALL sales being considered to be used as comps should be researched and verified BEFORE being used as a comp in an appraisal.)

 

[rcsone]

..difference between "suggested sold price" and "closed sales price"...?..rs

 

[Farm Gal]

Nancy:

We also are seeing more and more auctions... and in many sub-markets they are pretty much defining the market... in my area moving water properties on streams and rivers are hot properties, and I do mean waaaay beyond reason!

One of the criteria I use to determine if any auction sale was 'adequately exposed' and more closely approaches a Market Sale and clearly defined as an 'arm's length transaction' is the number of potential buyers - as opposed to lookie-loo's who are showing up for amusement value, and the extent of advertizing...

No Reserve Auctions can be just plain weird, sometimes they go for way more than prior listing of the same property, sometimes way under so what was the market on sale day as direct competition, and who showed up become criteria for serious contemplation before the sale can be considered 'comparable'!

I agree with Pam, it depends.

In your case I think I'd ask about other sales in the sub-market, how many times were they shown before they sold? If you got more 'serios' potential buyers at the auction..... than looked at the other sales in the submarket methinks you have 'exposure'.

I wouldn't rely on that sale very heavily since it was 'odd' for your market and sold well below one of the prior offers, adn significantly under the prior list. But I'd sure throw it into the grid and 'splain!