Contingent and Pending Sales / Effective Date

[Fee4me]

I have a comparable that was a contingent sale as of the effective date of my appraisal (current market value, not a retrospective). I verified the contract price conditions of sale, etc. with the listing agent. The property had been under contract for over a month and the listing agent was expecting it to close this week. It was to be conventionally financed and to the listing agent's knowledge there had been no issues with the appraisal. The listing agent notified me last night that the contract had fallen through as the buyer had failed to come up with the remaining cash to close, and the property is now back on the market at the previous list price. My appraisal is due today.

The subject property is somewhat unique and this particular comparable is one of the most similar and contributes to the analysis.

Here's how I plan on handling it... The sale to list price was 95%, which is in line with market data, and the contract was generally in line with the other comparables, yet slightly above the closed sale range. Because it was a contingent sale as of the effective date and the contract details were known I plan to leave it in the SCA grid as a contract. However, in the SCA narrative I am going to disclose that the contract fell through after the effective date and that the property is now back on the market further stating that had it been an active listing as of the effective date a 5% adjustment to the asking price would likely have been applied in consideration DOM at the asking price, etc. I was already reconciling within the range of the adjusted closed sales.

I feel that changing it to a listing in the SCA grid would be misleading, as it was under contract as of the effective date of the appraisal. Furthermore, the contract does show a meeting of the minds so to speak. Thoughts?

Made some edits - the property was contingent so it was still active

 

[J Grant]

I have a comparable that was a pending sale as of the effective date of my appraisal (current market value, not a retrospective). I verified the contract price conditions of sale, etc. with the listing agent. The property had been under contract for over a month and the listing agent was expecting it to close this week. It was to be conventionally financed and to the listing agent's knowledge there had been no issues with the appraisal. The listing agent notified me last night that the contract had fallen through as the buyer had failed to come up with the remaining cash to close, and the property is now back on the market at the previous list price. My appraisal is due today.

The subject property is somewhat unique and this particular comparable is one of the most similar and contributes to the analysis.

Here's how I plan on handling it... The sale to list price was 95%, which is in line with market data, and the contract was generally in line with the other comparables, yet slightly above the closed sale range. Because it was a pending sale as of the effective date and the contract details were known I plan to leave it in the SCA grid as a pending. However, in the SCA narrative I am going to disclose that the contract fell through after the effective date and that the property is now back on the market further stating that had it been an active listing as of the effective date a 5% adjustment to the asking price would likely have been applied in consideration DOM at the asking price, etc. I was already reconciling within the range of the adjusted closed sales.

I feel that changing it to a listing in the SCA grid would be misleading, as it was pending a pending sale as of the effective date of the appraisal. Furthermore, the contract does show a meeting of the minds so to speak. Thoughts?

I would not use it. The sale fell through, the buyers were not qualified if they failed to come up with the cash - just no. You can comment on it if you like.

 

[alebrewer]

I would definitely use it. As of the effective date of appraisal, it was under contract to close - assumedly by two market participants whose actions were reflective of the broader market. I would also explain - in your narrative - why the contract fell through and the property is back on the market.

 

[The Bob]

I would handle the same way you are. I've had a few that were pending on ED and then closed before sig date. I use the data at ED and comment on sale closing after ED.

 

[Surf Cat]

The listing agent notified me last night that the contract had fallen through as the buyer had failed to come up with the remaining cash to close, and the property is now back on the market at the previous list price

Ahhh... the life as an appraiser. Of course the most similar sale falls through....why wouldn't it?

Anyways.....it's not a sale and it's back on the market. I would do as JG said and notate what transpired in the report, but not grid it "as a sale". Since you were informed what the contract price was....the meeting of the minds if you will, this can help you conclude your opinion of value with the other sales in the report. Definitely include it as a listing though.

 

[Tom4value]

When you say, "In the sales comparison grid" I assume that it is comp 4 or above. Comps 1, 2 and 3 need to be closed sales.
For all others, you can use whatever you feel is useful as support of your conclusions. From your description, I would definitely consider it helpful.

 

[Tim Hicks (Texas)]

You could include it as a listing, but the contract price would not be valid anymore and the list price would be only as listing information.

 

[sputnam]

Your assignment conditions and/or client guidelines may specify that the indication of value by Sales Comparison Analysis be supported by a minimum of three closed and verified sales. If so, that's what you have to do. In your work file, you can include any data and analysis that you deem to be relevant. The report does not have to contain everything you know. If you choose to include information about pending make sure the report can't been viewed as misleading. The indication of value should fall within the range of the adjusted, sold comparables. Your pendings and listings can influence where within that range you settle.

 

[Tom D]

comps #4,5,6 are called secondary comps by underwriters. if 1,2,3 look good, i doubt than more of a glance at 4,5,6, if that. i use secondary comps as more support for my thinking, and i do put them in. i think that you are over thinking what you need to say, as most reports aren't read that much in depth.

 

[J Grant]

In my opinion, given what happened, commenting on it in the narrative is a safer choice rather than putting it on the grid. The deal fell apart and it is back on the market. If it does not sell soon, it very likely will be reduced in price. What if it closes lower than your opinion of value? Even though it was in contract for a pending price of X as of the effective date, before the signature date, you were aware the deal fell apart and chose to use it on the grid anyway, knowing by that time the reliability of it was shaky.