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Contracts For Deed As Comps?

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geoffreymonical

Freshman Member
Joined
Mar 31, 2003
I've got a broker who gave me several recently filed contracts for deeds on doublewides in a development. There are a handful of other sales that are conventional. They are on my case when I tell them I don;t want to use the Contracts for deeds. Am I right to not use them or can they be used?
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
I'd stay away from them. Contract for deed is more like "rent to own". No title is passed until.... IF.... the borrower pays it in full. Those sales have different motivations from a true market sale with cash or conventional financing.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Yep, they just love to hand the appraiser a pile of contracts for deeds.

After being pushed really hard to use them a few years ago, (handed to me by the Realtor that was working hand in hand with the developer - as in Partner!), I sat down and made a few phone calls to the 'buyers'. Two of them turned out to be the developers relatives that didn't even know they were buying a piece of property!!!! Needless to say, that lender never used me again and the Realtor was badmouthing me all over.

They couldn't pay me enough to use them! Recorded deeds only for me!!!

Please be very, very careful out there.
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
A contract for deed is not a closed sale until it CLOSES. Thus you can not use it as a SOLD comp.

When it does close (in 5-20 years) the price will be recorded as the original contract price, now some 5-20 years old. Not a good comp at any time.

You also have to think about cash equivelancy (I cant spell). If the owner is taking back the note, what would he have taken in cash?
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
You need to read FNMA's guidelines for manufactured home appraisals. These are not "arms length transactions" and are definitely not exposed to the open market sales. I have helped shoot down no less than 15 appraiser's who have used these types of sales to "make value" on manufactured home reports. Fannie and Freddie are aggressively reviewing appraisal reports on the numerous manufactured home foreclosure appraisals they now hold with these type properties. They are throwing them off their lists and turning them into the state certification boards.

Don't worry, your are just the new "victim" appraiser selected by the lender, developer and manufactured home dealer. They are trying to entice you into being their new chief appraiser until you get caught. Then they will move on to the next victim. They never get in trouble because nobody holds a gun to the head of the appraiser. Remember, lender pressure never comes back to haunt the lender, only the appraiser because they allowed the lender to influence their value opinion.

Please read the numerous posts in the manufactured home section of this forum. The education is invaluable.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Absolutely don't use these. I saw a neighborhood that was built in the late 40's where every home was sold on a contract for deed. In the late 70's the family of the developer still was reselling approximtely half of the homes. They would sell the home on a contract for deed, take the money for a few years, then buy back the home for $500-$1000 because the holder of the contract couldn't sell the home on the market - didn't have a deed. Then they'd resell it again. Talk about a cash cow!! They'd paid for those homes several times.

Roger
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Interesting!

In my market a Contract for Deed Sale is not a preferred sale, but IS typically recorded at both the County Clerks Office AND the County Appraiser's office as a PUC (Purchase Under Contract). It is not uncommmon for these contracts to be at or near market rate for very marginal properties, OR at a rate which may be only slightly less than or a tad more than less than market for individuals with very poor credit. MLS records indicate the sale, but not the terms of contract.

While the new 'owner' does not have a deed title, they do have a legally defined "Equitable Interest" which increases as they pay down or full-fill the note terms, and precludes the 'real' owner from selling the purchasers interest out from under them, and the recordation precludes refiguring the price after the fact if the market appreciates. IF and when the buyer acquires sufficient equity to get financing through a traditional lender, the county records that date as a PUC Payoff (Purchase Under Contract).

In other words there are often several sources of verification, it is a recorded sale the full terms of which may or may not be available to the appraiser. In some sub-markets they may BE the prevailing form of sale. I am a LOT more likely to use these on below prime market condition site built homes than manufactured's ...

I believe that this may become the preferred method of sale for pre-76 factory built's... Mobiles as we now call 'em.

I prefer to find fully arm's length transactions... but if the MARKET is indicating certain sale terms or format to be the norm... and they are the best sales you have to work with... Well it takes some 'splainin' but I'll use them! BUT never NEVER from the same owner, even if it IS recorded <_< as I am not a trustin soul :huh:
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
It all depends on the laws of your state. Arizona is very similar to what Lee Ann describes for Kansas. Here it is called an Agreement of Sale. Typically, the seller is carrying back a second mortgage or the full amount. Both the seller and the buyer are owner's of records, with the buyer responsible for taxes, assessments, maintenance, can sell or rent the property, etc (the full bundle of ownership rights).

Now a sale contract from a dealer is a completely different story. A sale contract from a dealer added to the purchase price of the site is the "created sale" or land/home package that would NOT be a comparable sale. That would be an "assembled sale" and the total costs of putting a package together does not represent what the total package would sell for on the open market, etc. Dealers sometimes will put a total package together and then carry the mortgage for the full amount, again those would not be usable sales because the total package didn't have market exposure.

So your answer would depend on the laws of your state and what the exact situation is--whether it is a created sale or a whole property exposed to the market sale.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Oh yes, I meant to add that Agreement of Sales are what have been used for years in Arizona for mobile homes and the earlier models of HUD code homes or for manufactured homes where no one wants to go to the expense of putting in a decent looking perimeter enclosure. It is occasionally used for site built homes and if the existing mortgage is assumable, the buyer doesn't or can't arrange for new financing, then the bonafide sale has an agreement of sale or cash to mortgage is another term.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
I got off on the topic of CFD in general, and forgot to add: I have to agree that a CFD from a dealer is highly suspect....

And I will also put forth this warning... subdivisions of Manufactured Homes on owned lots with CFD's can be pretty tricky and result in all the worst sort of horror stories. Beware, beware...be a wary appraiser:

We have a local PUD which was formed on a main drag with plenty of billboards... in which the original sales were (reasonably) compared with the only available sales of record, inside or outside city limits... First time concept for this area BTW.

However in recent months no fewer than three of these have come back on the market... and the subdivision is a far piece from being sold out. It is what those resales ultimately go for, less condition (and I intend to walk my feetses right through them to see exactly what condition they are in :twisted: ) and a REASONABLE hit for 'preowned versus new' that should determine the 'real' value for the area.
 
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