PhiloFarnsworth
Member
- Joined
- Nov 2, 2006
- Professional Status
- Certified Residential Appraiser
- State
- Pennsylvania
A client just sent over some specific Fannie Mae guidelines on how to handle sales concessions. The one entry that caught my eye was:
"adjustments based on dollar-for-dollar that are equal to the cost of the concessions to the seller as a strict cash equivalency would dictate are not acceptable"
First question that come to mind is, "why?"
The second and more practical question is: What am I supposed to do when, of the best 6 or 7 comparables, two, or four or five have seller concessions of between 2% and 5% of the selling price?
I assume I must call each realtor and ask them what they think the market affect of the $5000 concessions were. I would expect either some sort of nervous evasiveness by realtors who are deathly afraid giving out too much information or a simple, I don't know.
Given that, in my area, there are no universal policies, laws, customs, etc, that concern any kind of concessions that are always expected. s far as I can tell, every seller concession I have seen is a marketing tool that tries to offer the buyer some extra cash if they are lucky enough to have the appraisal come in higher than what the seller needs to get.
So what am I to do with a $5000 seller concession on a comparable sale where there is no other information than that this is the deal that they could agree on? NOT use a dollar to dollar adjustment? If not, then what?
Does Fannie just want me to explain that the market affect of these concessions, in this particular case, most likely happened to be equal to the concession amount?
Of course, what follows this is the following advice:
"The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical" (does this mean "predominant?)"the concessions might be for a segment of the market area; large sales concession can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate"
What the hell am I supposed to do with this?
I am sure some can come up with all sorts of "interesting" scenarios where a sales concession could be determined to have an affect on a sales price that is significantly different from the concession amount. But what about the more typical sale where there is no pattern to whether concessions are offered or not? Or where no information is available other than the fact that $150,000 with $5000 seller concessions was acceptable to all parties.
I've wondered sometimes if Fannie is trying use some sort of logic of "chaining" appraisals; i.e., that $150,000 sale must have appraised for that amount by some appraiser, somewhere. Therefore, the REAL price was $150,000. Or maybe they are just trying to drive us all nuts.
"adjustments based on dollar-for-dollar that are equal to the cost of the concessions to the seller as a strict cash equivalency would dictate are not acceptable"
First question that come to mind is, "why?"
The second and more practical question is: What am I supposed to do when, of the best 6 or 7 comparables, two, or four or five have seller concessions of between 2% and 5% of the selling price?
I assume I must call each realtor and ask them what they think the market affect of the $5000 concessions were. I would expect either some sort of nervous evasiveness by realtors who are deathly afraid giving out too much information or a simple, I don't know.
Given that, in my area, there are no universal policies, laws, customs, etc, that concern any kind of concessions that are always expected. s far as I can tell, every seller concession I have seen is a marketing tool that tries to offer the buyer some extra cash if they are lucky enough to have the appraisal come in higher than what the seller needs to get.
So what am I to do with a $5000 seller concession on a comparable sale where there is no other information than that this is the deal that they could agree on? NOT use a dollar to dollar adjustment? If not, then what?
Does Fannie just want me to explain that the market affect of these concessions, in this particular case, most likely happened to be equal to the concession amount?
Of course, what follows this is the following advice:
"The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical" (does this mean "predominant?)"the concessions might be for a segment of the market area; large sales concession can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate"
What the hell am I supposed to do with this?
I am sure some can come up with all sorts of "interesting" scenarios where a sales concession could be determined to have an affect on a sales price that is significantly different from the concession amount. But what about the more typical sale where there is no pattern to whether concessions are offered or not? Or where no information is available other than the fact that $150,000 with $5000 seller concessions was acceptable to all parties.
I've wondered sometimes if Fannie is trying use some sort of logic of "chaining" appraisals; i.e., that $150,000 sale must have appraised for that amount by some appraiser, somewhere. Therefore, the REAL price was $150,000. Or maybe they are just trying to drive us all nuts.
