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Can an appraisal use a land contract sale as a comparable?

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Can an appraisal use a land contract sale as a comparable?

Yes
 
Around here, these are known as a Contracts for Deed. Ideally, you need to verify the terms...down-payment, rate, contract term, balloon payment, etc. These can help gauge cash equivalency.

The critical aspect is to ensure whether or not the contract terms affected the price. Often, even when the terms suggest an adjustment for cash equivalency is warranted, comparison to cash or conventionally financed sales do not support that.

These become more common when conventional financing becomes less attractive or less "available," but in some markets, are always in the mix. Like any other sale, if you put them in a grid and they say the same thing as all the other data, your fine. But when one is an outlier, the reasons causing that should be understood.
I see them as Contract for Deed.

Typically, lower prices when the seller hasn't kept the property in good condition comparable to the neighborhood.

Higher price with well kept property and the buyer does have cash but does not qualify for conventional mortgage terms.
 
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Not to be argumentative - as seller financing is not typical around my parts - but are you saying that the reason other loans are considered 'transfers' is because the rights are transferred to the mortgagee? Because, other than that, traditionally financed homes would be similar to seller financing insofar as the buyer doesn't 'receive' that bundle of rights until the terms of the loan are satisfied, right?
Need to check the motivation of the deal...determine if price paid impacted by seller holding the note. Not a slam-dunk for comparison to market...details matter.
 
Way too many unknowns in the OPs question. Client, loan type, type of value, type of appraisal... all matter. If it's market value, maybe not....but, again, it depends. The definition of market value requires reasonable exposure to the market. If a potential comparable wasn't exposed to the general market...all buyers of similar property... it's probably not a comparable. Of course, an appraiser could include comments about the land contract sale as additional support.
 
never saw a land contract, but it doesn't sound like a comp that i would consider. i remember seeing somewhere, but can't say, that fannie did not permit them as comps. but being somewhat rare, why would you use it, and then have to explain why it is a normal typical sale. at worst maybe as comp 4,5 or 6 and say it used for support. but wouldn't you have to analyse the terms to see what affect that had on the sale price, and did it have market exposure time.
 
Yes, can use a land contract if there are not enough full rights transfers for your category.

Discount depends on how seasoned the contract is, or how many years that the payments have been made, and how many years remain in the term. Less seasoned, higher discount.

One source of discount percentage is buyouts to a full rights transfer before the land contract term is finished. Many times the deed record will show these contracts, terms, interest rates, and time of buyout.
 
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