Financing vs Cash Comps

[fishbig010]

(Disclosure, I am not a trainee, I just dont know how to update my profile). I am in Florida, and nothing in the market makes any sense. Cash buyers are buying homes in my area for tens of thousands over list price, and it has created large gaps in similar properties that have sold with financing over the same time period. So I am seeing remodeled properties selling for $260k financed, and non-remodeled properties selling for $290k cash for example. Paired sales data is rare to come by, or even support. In addition, every listing is listed $20-60k over the highest sale price in the area. I have been consistently coming in under contract prices over the past 6-12 months. I've had little to no push back from AMC's or Lenders because I have a ton of data in my reports supporting my conclusions.

I was just wondering what others are doing with similar issues? This seems to be consistent with 2008 trends from what I'm hearing from others in the field. How are yall supporting adjustments when there doesn't seem to be consistent, rational data available?

I will probably not respond to many posts as I am swamped with work this week, but I will be reading to see what y'all are saying.

 

[Terrel L. Shields]

I was just wondering what others are doing with similar issues?

I guess I have to fall back on the premise that the MV definition says a Market Value sale needs to have a knowledgeable buyer and I question the sensibilities of someone who is willing to pay what they surely know is "too much" for a property. But you are correct in the markets I know best - but I try to work on the fringes in rural areas and avoid the Wally World Bentonville and Tysonville (Springdale/Fayetteville aka the 4th most livable place in America according to recent poll - I disagree but digress) corridor. You end up with a financed market and a cash market or a large portion cash over list.

I would stick to doing the best comps you can by picking the most similar houses and most recent sales....less emphasis upon the location within reason. And I would avoid condos like the plague because I see them as being the worst offenders in the price differential problem, as least here. And duplexes. The price of those has skyrocketed but in 2008 they were the first and worst to crash and burn. If all else fails ,

 

[Fernando]

Most of the time cash buyers get a better (lower) price than buyers with loans. Sometimes not but I mentioned in my comments on the transaction regarding cash sale.
My area has many cash buyers so it's competitive.

I finished an appraisal and the prices went all over the place. I decided to look at comps one year old (sometimes 2 years old as some of you know). I found one that sold half block away but over 10 months. It gave me a basis and with market condition adjustments, it gives you better idea where subject's value should be. Comparing with other comps you used, you use your experience and best judgement in reconciliating your final value. Hope that helps.

 

[Trihard]

In my market houses are appreciating 1-2% per month over the prior year, its completely nuts and buyers don't care. A lot of the time realtors do not factor in time adjustments when pricing and they just look at what the comp sold for rather than when it sold. Also, If those houses are selling for 20k to 60k over highest comps it should tell you that your market needs high market to market adjustments that you can support, as it looks like you have very low inventory in your area.

 

[fishbig010]

I guess I have to fall back on the premise that the MV definition says a Market Value sale needs to have a knowledgeable buyer and I question the sensibilities of someone who is willing to pay what they surely know is "too much" for a property. But you are correct in the markets I know best - but I try to work on the fringes in rural areas and avoid the Wally World Bentonville and Tysonville (Springdale/Fayetteville aka the 4th most livable place in America according to recent poll - I disagree but digress) corridor. You end up with a financed market and a cash market or a large portion cash over list.

I would stick to doing the best comps you can by picking the most similar houses and most recent sales....less emphasis upon the location within reason. And I would avoid condos like the plague because I see them as being the worst offenders in the price differential problem, as least here. And duplexes. The price of those has skyrocketed but in 2008 they were the first and worst to crash and burn. If all else fails ,

hahaha! I have been staying away from condos (mostly because I hate getting development information) so that shouldn't be an issue there. But I have been doing a lot of duplexes. I have noticed investors selling them off like crazy which has been a red flag for this bubble that everyone is saying is gonna burst. Did you get much push back from people who went under in 08?

 

[fishbig010]

In my market houses are appreciating 1-2% per month over the prior year, its completely nuts and buyers don't care. A lot of the time realtors do not factor in time adjustments when pricing and they just look at what the comp sold for rather than when it sold. Also, If those houses are selling for 20k to 60k over highest comps it should tell you that your market needs high market to market adjustments that you can support, as it looks like you have very low inventory in your area.

I am at about the same monthly rate this year. I wish our realtors looked at recent sales! They have been listing significantly over the highest sale, doesn't matter the QC of the property, and they are getting 20k over the already inflated "made up" listing price. I ask them how they got the listing price when I get to the property, and they just say CMA, or I thought it was a good number. So frustrating!
I have been making large adjustments for time, but going over 3 months, especially 6 months has led to massive adjustments that I have a hard time putting into a report lol. Seeing a 40k time adjustment on a 300k home makes me cringe, but we are just reporting what the numbers are reflecting. I went on TikTok today between reports and searched "property appraiser" and man are we on everyones **** list right now lol.

 

[fishbig010]

Most of the time cash buyers get a better (lower) price than buyers with loans. Sometimes not but I mentioned in my comments on the transaction regarding cash sale.
My area has many cash buyers so it's competitive.

I finished an appraisal and the prices went all over the place. I decided to look at comps one year old (sometimes 2 years old as some of you know). I found one that sold half block away but over 10 months. It gave me a basis and with market condition adjustments, it gives you better idea where subject's value should be. Comparing with other comps you used, you use your experience and best judgement in reconciliating your final value. Hope that helps.

This is what I used to do, but in my area, prices have gone up 12-25% over the past year depending where you're at. Cash getting the better deal used to make sense, but paying tens of thousands over list price isn't a rational decision. I don't know why these realtors are even considering anything other than cash offers with the abundance of them in my market. But that's Florida. When you move here they give you a real estate license and a glass of orange juice lol

 

[Carnivore]

Cash is King. Nothing is standing in the way of delaying the Closing. I have seen many offers where the buyer is actually getting financing but has not made the offer contingent on that Loan Approval. In a nutshell, the buyer is using cash because the market is very competitive. The cash offer is just that Cash. It is almost 100% certain. We have many transplants(escapees) from New England and the Left Coast. They are flush with cash.

 

[Terrel L. Shields]

Did you get much push back from people who went under in 08?

Not really. But some had bought for homes, with the other side rented out which lowered their own payment and when they suddenly had renters who couldn't pay or no renters, they were unable to make payments. And banks panicked to boot. Lots of short sales.