Buyer And Seller Are Typically Motivated

[Eli]

This may be one of the hardest parts of appraisals and what takes the most time to analyze. I think sometimes that many people don't realize how much of a part it is relative to market value appraisals.

Market value appraisals indicate that

"buyer and seller are typically motivated".

 

[George Hatch]

One question we've debated extensively is "Typical" compared to what? "Typical" compared to an external benchmark or "typical" within the context of a given dataset?

What's the typical level of motivation and whatever passes for "adequately informed" among the buyers of vacation timeshares out at the resorts? Is it the same as what's typical for SFRs? What's the typical motivation for buyers of bundles of REO SFRs at the investor level? Are they all operating off the same criteria or is what's typical defined by those specific groups of buyers and sellers for those properties?

 

[Walter Kirk]

Typical must be related to the specific market area. In some of the areas that I cover a typical sale is a REO!

 

[Eli]

Typical must be related to the specific market area. In some of the areas that I cover a typical sale is a REO!

Thanks, I think it relates to the buyer and seller motivations of the typical buyer and seller, which is usually discernible by a professional appraiser with experience and competence in the subject market. It takes time to discern it.

 

[Eli]

Here is from FNMA:

https://www.fanniemae.com/content/guide/selling/b4/1.1/01.html

Definition of Market Value
Market value is the most probable price that 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, 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:

• buyer and seller are typically motivated;
• both parties are well informed or well advised, and each acting in what he or she considers his/her own best interest;
  
  
• a reasonable time is allowed for exposure in the open market;
  
  
• payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
  
  
• 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.

Note: Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs that are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable because the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third-party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession, but the dollar amount of any adjustment should approximate the market’s reaction to the financing or concessions based on the appraiser’s judgment.


My bold and my underline.

 

[J Grant]

Typically motivated has to relate that the type of property being appraised, it's price point and the motivations of those likely to buy it ( and those selling it)

A typically motivated buyer for a one bedroom luxury condo unit differ from the motivations of a family buyer of a starter house but each is relative to the property type. A fair condition REO typically motivated buyer might be an investor . The typically motivated buyer is actually a composite of the most likely pool of buyers for a property and a predictor of what they want/are willing to pay for .

 

[George Hatch]

The buyer for a beat er REO may not even have any interest in a property that's been freshly remodeled.

The buyer for land often doesn't care about whether or not there's a house on it except to the extent there may be a cost to cure in removing it, meaning the site that's raw may actually be worth a little more to them than the site next door with the old SFR on it. .

And then you get into different property types - The buyer for a retail unit may not care about the view amenity or what school district the residents would attend. The buyer for an office or warehouse building often doesn't care about retail exposure. etc., etc.

 

[Terrel L. Shields]

The word "typical" is abstract and cannot be defined in concrete terms.

 

[J Grant]

A typical basketball player might be 6 feet 6 inches tall for his sport and a typical jockey might be five feet 4 inches for his sport. Typical relates to the what it represents for comparison. A typical buyer for a vacation golf condo has different priorities and price point than typical buyer for a family home near a good school district. The sellers of each also will have a set of expectations and typical behavior for their group.

We have to know what typical /typically motivated is in order to know what atypical is, when price, terms behaviour of parties is atypical (for their respective category).

There are a couple of categories of properties I don't feel comfortable with so I decline those assignments. One is manufactured houses. I don't "get" them, I can't understand in my area where there are plenty of choices including inexpensive choices why anyone would buy one. Since I can't grasp typical motivations for buying a manufactured house I decided to decline assignments for them..I'm not a golfer or a boater but I can understand why they would pay a million plus to be on a certain golf course or water way. I can understand a first time buyer looking to buy the best starter house they can get in the 150k range. Understanding the different markets and motivations of those in them is what makes it interesting..

 

[Pilgrum]

Typically Motivated; They BOTH want to.