Auction Sale - Question on Concessions & Fees

[TruJa]

The subject is an estate sale via an auction, it was listed on the MLS for a typical amount of time by a listing agent, and is being auctioned. The company doing the auction requires a 5% fee to be paid by the buyer. The buyer is a realtor purchasing the home himself. He is applying his buyer side 3% commission toward the purchase - it has been described to me as a concession.

Question 1: Is the 3% really a concession? If it were a realtor acting as an agent for a different buyer and they gave this to them, I would consider it a concession, but what about when the buyer is the realtor? Is it just a "method of payment" equivalent to cash for this buyer?

Question 2: Is the 5% auction fee considered the same as a closing cost, or should it be reflected as part of the overall sales price? It isn't "typical" for the market, although may be typical for this type of transaction. (The buyer is still financing this using a conventional loan, which I assume will have typical closing costs).

 

[Terrel L. Shields]

Is the 3% really a concession?

No.

Is it just a "method of payment" equivalent to cash for this buyer?

Yes

Is the 5% auction fee considered the same as a closing cost, or should it be reflected as part of the overall sales price?

The premium goes to the auction company not the seller then it's not part of the sale price. If it goes to the seller or is split, then that part goes to the sale price.
Depends upon the agreement aka "listing". In my handling of the estate of a cousin, I hired an auctioneer who is also a sales agent - which the state requires in my case - and his broker and he charged $1,000 for advertising (printing some sale bills and advertised on a local Hispanic radio station for one) and 10% commission. We didn't have a buyer's premium (which I hate) but most farm and firearms auctions now add that - It's a premium for the auctioneering firm over what the seller pays them.

 

[TerryRohrer]

Why does it matter, since those are contractual issues that have no impact whatsoever on market value (I assume your task is to opine as to the market value of the subject). I wouldn't waste much of my time fighting my head over these issues. Just relay them, note they are not typical market terms and conditions, and move on. Then avoid use of this sale as a comp, knowing what you know!

 

[J Grant]

The subject is an estate sale via an auction, it was listed on the MLS for a typical amount of time by a listing agent, and is being auctioned. The company doing the auction requires a 5% fee to be paid by the buyer. The buyer is a realtor purchasing the home himself. He is applying his buyer side 3% commission toward the purchase - it has been described to me as a concession.

Question 1: Is the 3% really a concession? If it were a realtor acting as an agent for a different buyer and they gave this to them, I would consider it a concession, but what about when the buyer is the realtor? Is it just a "method of payment" equivalent to cash for this buyer?

Question 2: Is the 5% auction fee considered the same as a closing cost, or should it be reflected as part of the overall sales price? It isn't "typical" for the market, although may be typical for this type of transaction. (The buyer is still financing this using a conventional loan, which I assume will have typical closing costs).

Being that this is the subject, the terms of the auction, other than disclosure, do not affect your MV analysis.

Just disclose it was sold at auction, buyer to pay a %5 fee, etc

The 3% is not a concession. Why are you getting all involved with closing costs etc. I could see asking these questions for a comp, but for subject the MV definition assumes the terms of sale for the hypothetical appraisal transaction stated in the MV definition, despite any alternate terms a subject transaction actually has.

 

[Bartow]

The subject is an estate sale via an auction, it was listed on the MLS for a typical amount of time by a listing agent, and is being auctioned. The company doing the auction requires a 5% fee to be paid by the buyer. The buyer is a realtor purchasing the home himself. He is applying his buyer side 3% commission toward the purchase - it has been described to me as a concession.

Question 1: Is the 3% really a concession? If it were a realtor acting as an agent for a different buyer and they gave this to them, I would consider it a concession, but what about when the buyer is the realtor? Is it just a "method of payment" equivalent to cash for this buyer?

Question 2: Is the 5% auction fee considered the same as a closing cost, or should it be reflected as part of the overall sales price? It isn't "typical" for the market, although may be typical for this type of transaction. (The buyer is still financing this using a conventional loan, which I assume will have typical closing costs).

Add the buyer premium but take off commission as concession.

 

[J Grant]

Add the buyer premium but take off commission as concession.

We don't adjust for concessions in a subject.

We are supposed to disclose concession if they exist, but I fail to see how a 3% commission that normally would have gone to the RE agent, since they are buying on own behalf is a concession. The RE agent is simply opting to put their 3% comision toward the down payment .

 

[glenn walker]

Add the buyer premium but take off commission as concession.

It make no difference as we don't adjust the subject for concessions anyway- Also we adjust for seller paid concessions not buyers paying a commission or a cost . SO NO You have no issues .

 

[TerryRohrer]

Add the buyer premium but take off commission as concession.

Add to what? Take off of what? Those terms are in the contract involving the subject and do not warrant any treatment whatsoever in the development of the market value of the subject.

 

[J Grant]

The only way oddball subject terms/transaction type has relevance is if they affected the SC price, and we can't gauge that until we finish the appraisal

For example , subject sold by auction, or short sale, etc. If the SC price is the Market value, then the oddball terms did not affect the price. But if it turns out that our opinion of market value is below or above the SC price, at that point we comment on it as analysis.

"The subject SC price is ( higher or lower ) than the opinion of market value. The SC price appears to have been affected by the auction terms of sale. "

 

[TruJa]

Being that this is the subject, the terms of the auction, other than disclosure, do not affect your MV analysis.

Just disclose it was sold at auction, buyer to pay a %5 fee, etc

The 3% is not a concession. Why are you getting all involved with closing costs etc. I could see asking these questions for a comp, but for subject the MV definition assumes the terms of sale for the hypothetical appraisal transaction stated in the MV definition, despite any alternate terms a subject transaction actually has.

Correct, these don't weigh upon market value for the subject. I am asking so that I put the contract analysis into the proper UAD fields where possible. My opinion of concessions (similar to yours) is going to counter what the documents I've been given call them.