residentialguy
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Sorry, Cash is not a valid reason to adjust. They are getting the same green cash when the buyer finances.
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Confused About Stupid Seller Paid Concessions
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D
Deleted member 134708
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Talk that one out with all the ppl that buy cash and get the house with a lower bid than a loan.
Cash is King for a reason.
residentialguy
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Verification is a requirement, though. A very good one, imo.
residentialguy
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Agreed. Cash sales are not typical, though... and every market has a natural sway. Conventional finance is the main equivalent. The sellers are getting cash at closing. Ok, so you have one cash sale that is $5k lower. Take 100 different buyers and sellers with that same house, it would have sold with at least 5% variance from one another even using cash. I suggest you stop adjusting for cash and start adjusting for concessions.
D
Deleted member 134708
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I'm too lazy to brush up with the status quo so I either don't adjust or don't use cash sales a lot of the time.
Reason: many times cash sells way above or way below MV. If appraisers were truly independent, they would adjust cash sales up or down a lot of the time -- or let's agree -- more than 0% of the time now.
Side Bar: If took MV words by actually definition, you would really have to adjust all loaned money down say 20% (making up a figure) to its true cash equivalency. Leveraged money is not truly cash equivalent.
If you have $30k in bank, and all to your name, you probably don't pay $30k cash for that Honda. But when it's loaned/leveraged money, you pay $30k all day long.
Not gonna argue the side bar as I get what an appraisal trying to do, but just saying...if wanted to be true to economics, definitions and most importantly, behavior.
Reason: many times cash sells way above or way below MV. If appraisers were truly independent, they would adjust cash sales up or down a lot of the time -- or let's agree -- more than 0% of the time now.
Side Bar: If took MV words by actually definition, you would really have to adjust all loaned money down say 20% (making up a figure) to its true cash equivalency. Leveraged money is not truly cash equivalent.
If you have $30k in bank, and all to your name, you probably don't pay $30k cash for that Honda. But when it's loaned/leveraged money, you pay $30k all day long.
Not gonna argue the side bar as I get what an appraisal trying to do, but just saying...if wanted to be true to economics, definitions and most importantly, behavior.
residentialguy
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I strongly disagree. It's not the cash that is causing the variance, it's a atypical motivation somewhere. The seller gets the same cash whether the buyer finances or not. Cash can be a red flag that there might be something atypical going on and an investor is "bailing the seller out"
D
Deleted member 134708
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Cash sales make up something like 40%. Probably 50%+ in CA.
lot of atypical motivation going on. Do you comment on the rampant atypical (your word) motivation going on in Real Estate market or just ignore it.
lot of atypical motivation going on. Do you comment on the rampant atypical (your word) motivation going on in Real Estate market or just ignore it.
residentialguy
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If atypical motivations affected value on a comp, then I adjust...or at consider within my reconciliation. And yes, I comment on the rampant atypical motivation going on in Real Estate market
J Grant
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If a cash sale has impacted price, then weight that sale less (or adjust for that impact ) accordingly. As you would any other terms of sale that is seen to impact price beyond normal market variance.
It's the same cash to seller whether cash or financing, but the all cash sale (actually it's a contract with no financing contingency) has several advantages: fast closing if that is important to seller, almost certainty to close vs possible rejection in a financed purchase, and ability to purchase troubled properties such that might not get approved (or approved easily) for financing..
Many sellers will not discount for cash esp in a hot market, it's always individual to what the data shows on each assignment.
The MV definition is not about cash equivalency, it states, cash or terms or financial arrangements comparable thereto. Cash is comparable to financing since the seller ends up with cash whether the buyer used financing or not. If a buyer tries to get a discount for not using financing, and seller agrees, the seller traded a sure thing or faster closing in exchange for less money.
It's the same cash to seller whether cash or financing, but the all cash sale (actually it's a contract with no financing contingency) has several advantages: fast closing if that is important to seller, almost certainty to close vs possible rejection in a financed purchase, and ability to purchase troubled properties such that might not get approved (or approved easily) for financing..
Many sellers will not discount for cash esp in a hot market, it's always individual to what the data shows on each assignment.
The MV definition is not about cash equivalency, it states, cash or terms or financial arrangements comparable thereto. Cash is comparable to financing since the seller ends up with cash whether the buyer used financing or not. If a buyer tries to get a discount for not using financing, and seller agrees, the seller traded a sure thing or faster closing in exchange for less money.
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Elliott
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Sean,
Well, the right thing is to negative the concessions, $4$ (about 50% of polled appraisers agree). Don't worry about the terms of the subject's "concessions" as it is not a comparable. I appreciate that you are struggling. This subject has been discussed ad nauseam.
The best solution I've found came from an appraiser who suggested that it wasn't really a "seller paid concession" and it was really the purchaser adding the closing costs to the purchase price and they would be paying them back for the life of the loan.
Well, the right thing is to negative the concessions, $4$ (about 50% of polled appraisers agree). Don't worry about the terms of the subject's "concessions" as it is not a comparable. I appreciate that you are struggling. This subject has been discussed ad nauseam.
The best solution I've found came from an appraiser who suggested that it wasn't really a "seller paid concession" and it was really the purchaser adding the closing costs to the purchase price and they would be paying them back for the life of the loan.
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