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Concession On Sale Price Question

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runner52

Sophomore Member
Joined
Mar 15, 2010
Professional Status
Certified General Appraiser
State
Washington
I should know this but I'm questioning the concession. The sale price is $249,500 for my subject. There is an $8,700 concession by the seller for roof repairs that will be released upon closing to the buyer. The sale price is $249,500 but my analysis price that I will DISCUSS should reflect the concession....$240,800, correct? Because effectively the seller is getting less in the end. Sorry...sounds simple but need to make sure. Thanks.
 
I believe you are to determine the value from your comparable sales. If you have concessions on your comparable sales, you may adjust them for that condition. You don't adjust for the subject concessions. Since the subject's concession is for repairs, you can reflect that in the property condition rating and you adjust the comparable sales condition relative to being inferior or superior to the subject's condition.
 
I should know this but I'm questioning the concession. The sale price is $249,500 for my subject. There is an $8,700 concession by the seller for roof repairs that will be released upon closing to the buyer. The sale price is $249,500 but my analysis price that I will DISCUSS should reflect the concession....$240,800, correct? Because effectively the seller is getting less in the end. Sorry...sounds simple but need to make sure. Thanks.
 
Yes I know that. I am not adjusting my subject sale and I am making adjustments for effective age and condition. However, I do need to discuss my subject's pending sale and I am assuming the "analysis" sale price reflects the concession because effectively, the seller is giving that money up at closing. I also need to discuss the "pending sale" of my subject and conclude if the pending sale price is reasonable. So....do I use $249,500; actual sale price or $240,800; sale price - concession. Thanks.
 
The total consideration being received by the seller is $240,800. That is the sales price.
 
All you have to do is report the sale price as 249, 900 and then report the seller concession as 8, 700 on page 1 of the 1004. You are appraising the subject, not the contract.
 
There have been some inconsistencies in educating this side. I was taught that we adjust sales concessions to market. So if every seller pays ~1% in concessions, then the gross selling price is the sale price, and that we shouldn't deduct this amount from each of our sales.
Ted Whitmer listed in his MAI prep book that market value is no concessions, so there does not appear to be an industry-wide conclusion.
Regardless, roof replacement at 4% of the selling price is most likely abnormal.
 
I'm surprised a lender would allow a shot roof to go through. What if the buyer puts the $8700 in his pocket and not repair the roof?
 
In my opinion, the SP is $249,500 with a condition adjustment made to the comps (where warranted) for the roof. That is how the contract is written. If you make the SP $240,800 and also adjust the comps for condition, you've "double dipped".
 
Do you have an estimate for the deferred maintenance? Will the roof repair only cost $8,700 or will it cost $15,000?

I would report the contract sale price is $249,500 but due to a concession for roof repair, the effective sale price is only $240,800.

Your as is value may be higher or lower. You could provide an as complete value for your subject assuming the roof has been repaired/replaced which would make it easier to compare to your sale comps, most of which probably have good roof. You conclude an as complete value of say $250,000 but then make a line item deduction of $10,000 (or whatever you determine) for deferred maintenance to replace the roof, giving you an as is value of $240,000. I appraised an old building where the roof was totally shot and there was extensive water damage and mold. As complete assuming the roof was replaced, mold remediated, and drywall/flooring fixed it was around $180,000. Once I deducted all of the deferred maintenance the as is value was about $50,000 or around $10/SF. I actually had pretty decent support for the as is value since there were quite a few older buildings in this small city that had sold in similar poor condition.
 
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