Contract Price Change After Effective Date - Client Wants It In The Contract Section

[djd09]

i do not find after the fact sale contract changes relevant. What changes in a sales contract will change my opinion of value?

 

[residentialguy]

No one is "dart boarding it", JG. The reality is that the same property - your subject, is just as probable to sell for another price given another buyer and seller, for no other reason but value differences between people. The market is not precise point. It's not a grocery store that sells all like items at the same price. There is at least a 5% variance that is equally as probable to sell.

Look at the Q7 above. FNMA says that you should consider any changes to the sales contract and their effect on value. Hmmmm.... Even THEY believe it can have an impact on value!!!

 

[residentialguy]

No one is "dart boarding it", JG. The reality is that the same property - your subject, is just as probable to sell for another price given another buyer and seller, for no other reason but value differences between people. The market is not precise point. It's not a grocery store that sells all like items at the same price. There is at least a 5% variance on that same property from Joe to Mike to Jane to Henry that is equally as probable to sell.

Look at the Q7 above. FNMA says that you should consider any changes to the sales contract and their effect on value. Hmmmm.... Even THEY believe it can have an impact on value!!!

 

[J Grant]

Look at the Q7 above. FNMA says that you should consider any changes to the sales contract and their effect on value. Hmmmm.... Even THEY believe it can have an impact on value!!!

It does not say consider any changes to price for a price change effect on value. It says any changes to the contract. Changes to contract can include altering a property such as no longer including appliances, adding addendum with a repair condition, revised options in new construction etc.

The phrase "any changes to contract" can include a price change, but I'd be hard pressed to find a credible reason to change my OMV to match a change in price only.

 

[J Grant]

"No one is "dart boarding it", JG. The reality is that the same property - your subject, is just as probable to sell for another price given another buyer and seller, for no other reason but value differences between people. The market is not precise point. It's not a grocery store that sells all like items at the same price. There is at least a 5% variance on that same property from Joe to Mike to Jane to Henry that is equally as probable to sell. "

While above is true, an appraisal is not a live action camera of actual market where various individuals might negotiate any number of probable prices on a subject property. An appraisal is OUR development of the SOW in a report that results in on ONE presumed transaction of subject as of an effective date. This presumed transaction is framed by terms per the MV definition of a typically motivated/ well informed buyer and seller as of X effective date.

The above theoretical buyer and seller pay ONE agreed on price and that price is the point value; our opinion MV as developed by the research of the SOW and reported in the appraisal. This is what the purpose of assignment states and what client engaged us for.

The client did not engage us to make a highly educated guess dartboard style to predict a specific number from the range of probable prices a buyer and seller might decide on.

In best circumstances, our OMV in a market exposure time would be close to a probable price an actual buyer and sell transact under same conditions. On this basis we can use a SC price as a market indicator to reconcile point value at, however the rest of the appraisal development and comps used should strongly support our OMV independent of the contract price itself.

 

[J Grant]

There is at least a 5% variance on that same property from Joe to Mike to Jane to Henry that is equally as probable to sell.

True. However we are not hired guess a price within a 5% variance of what Joe or Mike or Jane or Harry might pay. We are engaged to create an appraisal containing within it a presumed sale as of an effective date of a transaction between the typically motivated buyer/seller per the terms in the MV definition. From this presumed sale (supported by other SOW development such as cost approach) we provide our opinion of market value (expressed as point value numerical $ amount)

 

[J Grant]

"The purpose of this summary appraisal report is to provide the lender/client with an accurate, and adequately supported, opinion of the market value of the subject property."

The above, or similar verbiage is stated of purpose of appraisal on report. The below statement is not the stated purpose of appraisal.

"The purpose of this summary appraisal report is to provide the lender/client with an accurate and adequately supported predictive price guess of what an actual buyer and seller would pay in market for the subject property."

 

[CANative]

"all relevant aspects of the transaction."

 

[Mike Kennedy]

"The purpose of this summary appraisal report is to provide the lender/client with an accurate, and adequately supported, opinion of the market value of the subject property."

The above, or similar verbiage is stated of purpose of appraisal on report. The below statement is not the stated purpose of appraisal.

"The purpose of this summary appraisal report is to provide the lender/client with an accurate and adequately supported predictive price guess of what an actual buyer and seller would pay in market for the subject property."

Notice the verbiage does not say - what THE REPORTED CURRENT buyer and seller on page one.......would pay in market.

"an" & "in market" = OTHER buyers and sellers of OTHER directly competitive properties ( the comparables used in the sales comparison approach) which would serve as substitutes for a subject's property (based on the Principle of Substitution).

 

[residentialguy]

There is at least a 5% variance on that same property from Joe to Mike to Jane to Henry that is equally as probable to sell.

True. However we are not hired guess a price within a 5% variance of what Joe or Mike or Jane or Harry might pay. We are engaged to create an appraisal containing within it a presumed sale as of an effective date of a transaction between the typically motivated buyer/seller per the terms in the MV definition. From this presumed sale (supported by other SOW development such as cost approach) we provide our opinion of market value (expressed as point value numerical $ amount)

I'm not talking about a guess. We aren't hired to "guess". I know that you aren't seriously trying to think that my work is just a guess, since the time and research of my report far exceeds your time and research to submit a strongly supported opinion.

The range of sale price from every one is much wider than 5% with all other factors that affect the sale. That ~5% are the most equally probable prices as of an effective date of a transaction between the typically motivated buyer/seller per the terms in the MV definition. Any point you pick within that range is equally supported. Now add in all the factors that come in from choosing other properties that aren't identical that need to be factored. You think that you pick the best point because you like one aspect from something...but that's because you're putting your blinders on to the other aspects and ignoring that even on the same house, as well as every other sale, there would be a naturally occurring variance of most probable price, not to mention the 1000's variances between the subject an other properties of which you are doing quite a bit of guessing on.