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Evidence of market decline?

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CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
I'm working on an appraisal in XX subdivision. Not very many sales in this city and very, very few in this neighborhood.

My comp 3 is a dated sale but I appraised it for it's sale last October so a comp from appraiser files is good. I made a 5% downward adjustment for changing market conditions.

For some reason I didn't spot this property when I ran sales the first time around. While putting the report together I spot it as an active listing. I then rerun the MLS# to get a full copy of the listing and it's actually a contract sale (as of yesterday). The list price is $319,000. The sales price last October was $320,000. At the time it had a real funky interior paint job (i mean really bad). Now the agent comments state remodeled with "warm interior paint colors and new carpet." Yes, some of the paint looks great but the carpet looks the same (I assume they replaced the "kids" room carpet which was bad.

On the market 103 days in a 130-180 day market.

Does this calculation hold water:

List price $319,000
Sales commision 6% - $19,000
Money in (paint/carpet) -$5,000

Net to seller $295,000

Oct Purchase price $320,000
June sale net $295,000

295/320 = 0.92 or 8% decline

Should I change my older sale comp adjustments to 8%.

The listing agents assistant just called while I was typing this post. He says the sales price is to be $325,000 and it's a sort of lease option with a 12 month escrow.

Now what?
 

c w d

Senior Member
Joined
Oct 2, 2006
Professional Status
General Public
State
Florida
I'm working on an appraisal in XX subdivision. Not very many sales in this city and very, very few in this neighborhood.

My comp 3 is a dated sale but I appraised it for it's sale last October so a comp from appraiser files is good. I made a 5% downward adjustment for changing market conditions.

For some reason I didn't spot this property when I ran sales the first time around. While putting the report together I spot it as an active listing. I then rerun the MLS# to get a full copy of the listing and it's actually a contract sale (as of yesterday). The list price is $319,000. The sales price last October was $320,000. At the time it had a real funky interior paint job (i mean really bad). Now the agent comments state remodeled with "warm interior paint colors and new carpet." Yes, some of the paint looks great but the carpet looks the same (I assume they replaced the "kids" room carpet which was bad.

On the market 103 days in a 130-180 day market.

Does this calculation hold water:

List price $319,000
Sales commision 6% - $19,000
Money in (paint/carpet) -$5,000

Net to seller $295,000

Oct Purchase price $320,000
June sale net $295,000

295/320 = 0.92 or 8% decline

Should I change my older sale comp adjustments to 8%.

The listing agents assistant just called while I was typing this post. He says the sales price is to be $325,000 and it's a sort of lease option with a 12 month escrow.

Now what?

Why are you treating the commission as a concession?
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
I hadn't treated anything yet. I was thinking. Paid 320 will to take 300 less another give grand.

But all sales have the commission and I'm glad you posted that. I'm dealing with 4 grandkids today by myself, try to get organized for a 9 hour drive down to So. Cal. tomorrow, getting the pop up trailer/tent ready and doing two appraisal reports. My mind locked up. LOL.... but now I've had a subway and a few laughs with the kids and your post to set me back in order.
 

Blueprint

Senior Member
Joined
Aug 25, 2005
Professional Status
Certified Residential Appraiser
State
Oregon
Yea, you got some work to do. Enjoy the 9 hour ride you are on, for now anyways.
 

Wendy

Senior Member
Joined
Feb 23, 2004
Professional Status
Certified Residential Appraiser
State
Florida
....The listing agents assistant just called while I was typing this post. He says the sales price is to be $325,000 and it's a sort of lease option with a 12 month escrow....

Using sales with funky lease option stuff as a comparable is scary to me. I don't think I'd hinge an adjustment on the data from just this one re-sale.
 

Lawrence R.

Senior Member
Joined
Mar 27, 2007
Professional Status
Certified General Appraiser
State
South Carolina
hmmm

Lost me abit in the middle, but I wouldn't adjust the realtor's commission out. it is typical and customary and happens to all of your comps, as well.

Now, the lease option may have some cash equivalency somewhere in it to be factored out.

For instance, are they using the 12 months to show credit on behalf of the buyer so he can qualify for financing(is his credit bad)? You may never know. Are they applying some of his payments toward a down payment so to speak? What is the payment he is paying now? would it be commensurate with market rates on a mortgage?

There are a ton of factors that could be in fact lowering the overall "price" when you consider what advantages this lease may be giving the buyer.

But, Greg, I know you know all of this...so what are you really getting at?
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
12 month lease option with a price bump....in a declining market? What kind of mushrooms are they tasting? This sounds like a deal that won't fly.
 

Ariba

Senior Member
Joined
Feb 8, 2004
Professional Status
Certified Residential Appraiser
State
Colorado
The listing agents assistant just called while I was typing this post. He says the sales price is to be $325,000 and it's a sort of lease option with a 12 month escrow.

Since when is a lease option to buy considered a closed sale?
 
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