Date of Sale: Contract date or Closing date?

[mitrich2001]

Many (or may be all) lenders require the "time adjustment" to be based on the date of contract acceptance not the closing one. Should we then consider the date of contract acceptance to be the date of sale? Or is it the closing when a sale takes place?

 

[Joyce Potts]

No, you consider the date of contract on which to base any time/market condition adjustment. The contract date reflects the market conditions at the time the meeting of the minds took place. The closing date reflects when the money changed hands and the deal was funded or consummated. Think of it as an engagement date and the mindset of the parties and the wedding date to finalize the legalities.

 

[mitrich2001]

Ok. Here is a real life situation:
- effective date August 14, 2012;
- Comp's contract date - May 28, 2012;
- Comp's closing date - August 17, 2012.
The lender says, the appraiser cannot use this comparable in the report as a sale, since it was closed AFTER the effective date of the appraisal and as of the effective date it was an active listing.
Would you agree with the lender?

 

[William K]

Ok. Here is a real life situation:
- effective date August 14, 2012;
- Comp's contract date - May 28, 2012;
- Comp's closing date - August 17, 2012.
The lender says, the appraiser cannot use this comparable in the report as a sale, since it was closed AFTER the effective date of the appraisal and as of the effective date it was an active listing.
Would you agree with the lender?[/quote]

No.

I can use it, I just won't be able to use it as Comps 1,2 or 3. I could even give it most "consideration".

Its the EXPLAIN, EXPLAIN, EXPLAIN that typically does not follow.

 

[Tony V]

Ok. Here is a real life situation:
- effective date August 14, 2012;
- Comp's contract date - May 28, 2012;
- Comp's closing date - August 17, 2012.
The lender says, the appraiser cannot use this comparable in the report as a sale, since it was closed AFTER the effective date of the appraisal and as of the effective date it was an active listing.
Would you agree with the lender?

The comp is a pending sale as of the effective date of the report and should be used as sale #4,.....within the sales comparison comments it would be prudent to state that it closed on 8/17/2012 which is 3 days afetr the effective date of this report.

I do see your point about the contract date vs sale date on the time adjustments and where they start from.

 

[Michigan CG]

Effective date of is contract date of last revision to the contract, not the closing date.

 

[Lee Lansford]

Well, that takes care of that.

Back to the White Sox game.

 

[Sid Holderly]

UAD only requires month and year for both contract date and closing date giving some latitude in the spread. A real estate attorney has stated he would not question anything within 30 days. I wish he quoted a source.

 

[mitrich2001]

Let me go back to the initial question: what date is the date of sale? Let's say, you need to find comparables for the year before the effective date of your appraisal, which parameter are you going to use - the contract date or the closing date. My guess, the vast majority of appraisers is searching by the closing date, but - if the date of sale is the contract date - then this is wrong.

 

[Pat Butler]

You need to intially search for the closing date to confirm that the transaction closed. Then, you can use the contract date of that closed sale to make your adjustments. It's a major concept with ERC appraising.

Anyway, lenders want to make sure that the closing date of a comp is not AFTER that of the effective date of the appraisal.

I'd have to look it up, but I think USPAP addresses this too and states that data like that can be used so long as it is a confirmation of trends. Obviously, your client's requirements may nix this. But I've used data after the effective date for retro appraisals so long as it is a 'confirmation of the trends' that I can identify.