Comp Sale appears to be below market value?

[Michigan CG]

.....Trust your research,not a realtor's opinion.....

Getting Realtor opinions is part of the research.

 

[J Grant]

Talking to realtors is part of research, but trust the DATA. The appraiser can pull data, and see the marketing times of the comps. If 28 days is within a range of predominant marketing times, it is not a distress or above typical short dom time and does not deserve a condition of sale adjustment based on data.

If typ marketing times are 130 -200 days and this is the only sale to sell below 30 days, that might merit it as a lower price in order to secure a shorter than typical marketing time, (short enough to affect price)

 

[CANative]

I agree. :new_multi:

I don't. It sold at the price it sold for.

 

[J Grant]

I don't. It sold at the price it sold for.

Good point, CANative, and more technically correct that saying market price...

 

[DMZwerg]

Imagine that you are the family of a deceased retiree and you have to fly in from Omaha or somewhere just to settle the estate.

That would be an estate sale and thus would not be indicative of a "typically motivated" seller ... and thus not meet at least one of the conditions of the FIRREA Def of MV (also, it is an example of "undue stimulus").

My husband actually buys homes like this - cash - because they are anxious to tie up all the loose ends and go home.

And a "flipper" would be and example of a "typically motivated" buyer exactly how?


Sounds like it would be a "proxy" for a comparable property at best.

 

[DMZwerg]

Your training sounds reasonable BUT in the REAL WORLD any positive adjustments for "Conditions of Sale" or "Time" are not well received at all by lenders. Unless, you can justify the adjustment, don't make it, period.

Just explain why this sale was so much lower than the other comps and put less weight on it if you feel that is appropriate.

But the property is NOT a comparable sale, now is it?

Look at USPAP, Scope of Work, and Definition of Market Value used in the report (for lenders, thus the FIRREA definition) before answering.

 

[Metamorphic]

But the property is NOT a comparable sale, now is it?

Well, technically its is a comparable sale, its just that the terms of the sale are not precisely arms length or do not meet the complete definition of market value.

 

[Lee Lansford]

What is the correct approach to take when you believe a Comp Sale is below the actual market value for that property? Is it appropriate to make a positive value adjustment to a Comp that appears to have been sold below fair market value?


I am working on an appraisal assignment in older residential development with only 14 homesites and therefore limited recent market data. There is only 1 closed sale within 12 months and 1 active listing. My problem is that based on the active listing price and prior sales from the preceeding 2-3 years, the most recent sale appears to have been about 10% ($40,000) below the actual market value of the property. This property sold in only 28 days and the MLS listing itself says the hone is "priced low for quick sale". I also spoke to the listing agent and this was not a distressed sale. but the owner had long ago paid off the property and had other financial assets, and was more interested in a quick sale than getting the best price for her property.

There are not good nearby comparable sales from other neighborhoods, so my approach is to use the recent sale & active listings + olders sales within the neighborhood (plus 1-2 recent dales from outside the neighborhood).

I'll leave the analysis and weighting to you as I can't make an informed decision from where I sit.

That stated, not every "sale" is a (good) "comp".

 

[Mike Kennedy]

sure, motivated seller...
easy...i vet my sales before I use them. Don't you?
exactly. There is a huge downside to holding property after it needs to go whether estate or an older person moving back to be with children or need to move for whatever personal reason.
...happens all the time and to not make an adjustment for fear of the underwriters is wrong wrong wrong...on many levels. Are you tailoring the report for the UWs or are you appraising the property? ...

...........Seconded.

"This property sold in only 28 days and the MLS listing itself says the hone is "priced low for quick sale". I also spoke to the listing agent and this was not a distressed sale. but the owner had long ago paid off the property and had other financial assets, and was more interested in a quick sale than getting the best price for her property."

"I thought it was acceptable appraisal practive to make adjustments for "Conditions of Sale" in which the seller is acting under duress and hence sells a property below normal market price."

It is when indicated by the market. In this case there was no "duress", the quick sale at a discounted price was VOLUNTARY and would require upward adjustment fully supported by the reported facts. Your Sales Comparison Analysis should include the most recent and proximate closed sales adjusted for market conditions/time AND 1-2 most recent closed sales including those most similar from competing neighborhoods (due to scarcity of more recent sales in the immediate neighborhood). It is also entirely appropriate to grid 1-3 year old dated sales in the subject's immediate neighborhood to prove market conditions trending in B/W in your report further supported by actives and/or contracted sales.

 

[J Grant]

...........Seconded.

"This property sold in only 28 days and the MLS listing itself says the hone is "priced low for quick sale". I also spoke to the listing agent and this was not a distressed sale. but the owner had long ago paid off the property and had other financial assets, and was more interested in a quick sale than getting the best price for her property."

"I thought it was acceptable appraisal practive to make adjustments for "Conditions of Sale" in which the seller is acting under duress and hence sells a property below normal market price."

It is when indicated by the market. In this case there was no "duress", the quick sale at a discounted price was VOLUNTARY and would require upward adjustment fully supported by the reported facts. Your Sales Comparison Analysis should include the most recent and proximate closed sales adjusted for market conditions/time AND 1-2 most recent closed sales including those most similar from competing neighborhoods (due to scarcity of more recent sales in the immediate neighborhood). It is also entirely appropriate to grid 1-3 year old dated sales in the subject's immediate neighborhood to prove market conditions trending in B/W in your report further supported by actives and/or contracted sales.

I 100% agree with above. No sales in a year in subdivision, how do you know this price is "below" market. Realtors are so bad at pricing listings they can say "priced low for quick sale " and the price is still high. 28 days is not exactly a fire sale snapped up in 5 days outlier. Get recent sold sales from competing subdivisions, get a range of marketing times, see where 28 days fits in the range of marketing times, etc. It seems some people take everything a realtor says as gospel and if a realtor says it sold below market , that is the way the appraiser thinks and shapes the report around this statement from a realtor.