Closing Costs

[Lee Lansford]

...Yes, the seller is crediting the buyer $15,000 for reoccuring/non-reoccuring closing costs...


My logic was always that the concession (closing costs paid by seller) is a "discount" on the property that had to be considered if the comparables did not have a similar discount. So, yes, I was subtracting the amount of the S/P closing cost, on the grid, for each of the comparables.

1st, IGNORE (when appraising the Subject that is under contract of sale) the contract as far as arriving at the opinion of market value for the Subject property. The Subject's "seller's concessions" are totally irrelevant as to the market value of the Subject property. With the way that you are now approaching the problem, if the seller elected to give the buyer a concession an amount of $$ equal to the market value of the property, your opinion of MV would be $00...and we know that ain't right!

Suggestion:
I assume that you are communicating the appraisal using the 3/05 Fannie form.
LOOK at the definition of Market Value contained therein and read and study the section that gives you information as to exactly how the appraiser is to approach matters of concessions given to the buyer by any party associated with the transaction.
Try it...you'll like it.

 

[Deleted member 77547]

Moderators Note:
1. BE NICE...

2. Wait for a reply from the original poster.

3. This will be moved to the :new_newbie: thread, if needed.

4 and it may so be needed

Nice crowd control Lee Ann. LOL

 

[CURT VAN HOOSER]

TPeralta,

Are you by chance related to Stacy Peralta?

 

[Farm Gal]

Nice crowd control Lee Ann. LOL

Thenk yew veddy much. An ounce of prevention is worth a pound of slapping hands after the fact <grin>

T Peralta... As the above posters mention in your circumstances you appraise the subject house VALUE by adjusting the comparables to the subject house location/condition/quality... by adjusting the comparables to the subject VALUE....

The next step is to make sure you appropriately analyze the subject contract which is a separate issue from the subject property VALUE. Any jerry-mandering of the effect of the contract on the *loan* is a function of the lender, not the appraiser...

To add further comment to your analysis of the subject value: The buyer/seller may negotiate different terms to the contract after you finish your appraisal: would that change the value of the HOUSE you appraised or the 'value' of the Contract?:icon_mrgreen:

Analysis of the terms of sale (concessions) applied to the comparable sales requires some understanding of the disclosed and attempted insurance that you understand what the reported 'concessions' involved: actual closing cost assistance OR upgrades to the sales comparables: fix the roof/HVAC/New Carpets/throwing in a car/tractor/boat/appliances whatever!!!... or actual closing cost participation... It is best to get a verbal confirmation of details before you throw adjustments into the grid on those sales :icon_idea:.

Lastly, think on this a moment... IF you were somehow 'adjusting' for seller concessions on the subject WHICH YOU CANNOT- did it ever occur to you that since the SUBJECT is superior to the sales the adjustment would be POSITIVE... which it cannot be on those lines as per the Fannie Mae Guidelines!!!

Lastly, there are some excellent threads within this summary of past conversations on the subject...
See this link, peruse at your leisure... I *think* some of the older threads were better at explaining, start at closer to the end and move forward! Seller concession adjustments it's worth the read - consider it your homework on the subject <grin>

Glad we could be of some assistance, thanks for your participation!

...and yes I am moving this thread to the newbie forum

 

[ZZGAMAZZ]

TERPERALTA: Have you given thought to how one determines whether the comparables' respective selling prices do or don't incorporate concessions? As far as I am aware this data is not printed anywhere other than the purchase agreements and the appraisal reports, neither of which you will have an opportunity to review...

 

[Deleted member 77547]

TERPERALTA: Have you given thought to how one determines whether the comparables' respective selling prices do or don't incorporate concessions? As far as I am aware this data is not printed anywhere other than the purchase agreements and the appraisal reports, neither of which you will have an opportunity to review...

These days, I call the listing agents on the final comps that I selected and ask. 99% of the time the listing agents will tell me. Although when I call, I don't ask if there was a concession, I point blank ask how much the concession was. By posing the question in this manner it already seems like you know so they tend to answer. If there wasn't any concessions, then they respond in more of a surprised manner with..."well... there were no concessions."

 

[Lee Lansford]

These days, I call the listing agents on the final comps that I selected and ask. 99% of the time the listing agents will tell me. Although when I call, I don't ask if there was a concession, I point blank ask how much the concession was. By posing the question in this manner it already seems like you know so they tend to answer. If there wasn't any concessions, then they respond in more of a surprised manner with..."well... there were no concessions."

Good thinking!

 

[TPERALTA]

Thank you for all the information. I am confident I am on the right track and fully underatnd concessions. Again, thank you. And, Lee Ann, I will definitely check out the link to the past posts.

 

[Wendy]

Judy -

Good idea. I'm switching form "was there" to "how much".