Incomplete purchase contract provided

[residentialguy]

"The subject falling within that range is as good an indicator as you are going to get afs far as narrowing down a point"...fine, but we still have to narrow down a point. You are saying that anything within that range would be as supported as another? Really? Does that hold true in a refi appraisal, or only in a purchase appraisal?

Holds true for a refi. You just are lacking a piece of market evidence. You don't have the market participants actually buying the identicle house requiring no other adjustment.

You have an adjusted range of value, from 400 k to 450k. So now you are telling me that a value of 405k is just as credible as a value of 445k for the same property? That amount of spread would be a big amount for a buyer to come up with, agreed? Might make a big difference whether or not a seller would accept an offer.

When no purchase price is present, and your range is 400-450 k on a refi, where do you derive your point value from?

We were talking about a 5% range and you pop to 12%????? Nice try.

Let's stick to 5%. So you have a range of $400,000 to $420,000. That is reasonable. The market will flux in that area and so will you in your adjustments.

 

[J Grant]

RG, yes a tight range of 400-420k is much more apt to yield a credible MV because is is so narrow, but most adjusted ranges are not so tight relative to their price range.

The 5% figure came from the discussion Denis and I were having, where we both referenced 5% as a spread from CS price to a MVO....he was comfortable with that wide a gap and I was not (for purposes of discusssion). Typical to wider ranges of adjusted value were the reference in the discussion...a value range of 400-420k is atypically tight and would indicate great comps all similar to the subject with few adustments ...wish our job was that easy...( most of the time it's not)

I did mention the greater validity of a point value falling between a tight narrow range of adjusted value in one of the posts on this thread.

 

[CANative]

After making all the adjustments you can think of and you're left with three or four MV indications, none being any more or less strong than the other, a sales price contract with a similar amount should be the deciding factor.

This is simple, logical, elegant stuff because it is so utterly consistent with the definition of value we're working with.

Give it a rest Grant.

 

[residentialguy]

The 5% figure came from the discussion Denis and I were having, where we both referenced 5% as a spread from CS price to a MVO.

5% came from you and Denis talking? Guess again

5% has been the ongoing percentage talked about...which was brought up by me in post 16 and 22 and continued throughout the thread.


[url]http://appraisersforum.com/showpost.php?p=2294283&postcount=16[/URL]

[url]http://appraisersforum.com/showpost.php?p=2294335&postcount=22[/URL]

 

[J Grant]

After making all the adjustments you can think of and you're left with three or four MV indications, none being any more or less strong than the other, a sales price contract with a similar amount should be the deciding factor.

This is simple, logical, elegant stuff because it is so utterly consistent with the definition of value we're working with.

Give it a rest Grant.

That's not the issue,. I agreed on many prior posts,, when the market indicators line up , and line up in an equivalent or close amount to SC price, the SC is the deciding indicator...and you know why? Because that is what our peers are doing.

The def of market value refers to a PRESUMED SALE, a theoretical, not an actual sale. The SC price is an actual pending sale between named parties, and no more or less "Consistent " with the MV definition than the other comps and pendings on the report.

 

[hastalavista]

Our difference: I do not use the CS price to set MV.
I develop my own MVO, and then vet it against the CS price. If only a small
variance separates them, and the variance is tolerable within market
conditions, then I will opine to the SC price, using it in consideration ,
at times a siginficant consideration, of data . But, if too much of a gap
exists between my MVO and the SC price, and the gap represents market
conditions and indicators from the other comps that supports my MVO more
credibly then the SC price, I will consider my MVO better supported by the
research and comps, and that the CS price is a weaker data evidence of MV,
and go with the MVO as the best credible and supported point value.

You don't have to make that decision, because as long as it is within the
range, you rely on the SC price to set the point value of MV.

So, once the sales contract is within the adjusted range, I automatically
default to the sales contract?

The problem as I see it, is that in a purchase appraisal, you
don't actually develop your own MVO, when the SC price is within a range of
value. You figure that anywhere within that range is an acceptable point of
MV, since the market is imperfect.

Ok, you repeat the accusation: If the SC is within the range, I default to it
as my MV. I figure "anywhere within that range is an acceptable point
because the market is imperfect."
So I think I understand you clearly. I don't analyze anything after the range; the sales contract price is the market value. It is automatic.

OK....

Then you ask...

If I mis stated something or mis intrepreted it the process,
am open to suggestions.

Let's see, mis-stated, mis-interpreted, or misrepresented?

From post #79

What I read (explicit and implicit) was: The market is
analyzed, comparables that are the best substitutes are considered and
selected for the SCA, and that the significant elements of comparison are
adjusted; the result is an adjusted range. Presumably, the opinion of market
value falls within this range.
Then, one considers the contract price as a data point.
If the contract price falls within the adjusted range, I would consider
that a very good indicator of market value. More so if the process used
to negotiate the price was consistent with the elements of the definition of
value (market exposure, both parties acting in their best interests, well
informed, etc.).

That's where "common sense" comes in.

If you (me, or another) were to do all of that, find that the contract
price falls within the adjusted range, but determine that it isn't a
reliable data point and conclude another point-value, I'm fine with
that. But, I would make (and expect others to make) a very persuasive
argument why, if the contract fits within the analysis, my opinion of value
is a better indicator than the data point the contract represents. If I can
do that, my value is credible. If I cannot do that, I think the credibility
of my value is questionable. You may not.

Well, in this section I say what I've constantly said: The SC, within the
adjusted range, is likely a good indicator of value. I also say that if I
determine it not to be a reliable data point, then I'd conclude another
point.
Not automatic there...

What about post #82?

You continue to argue something that everyone has agreed to
(consider it being stipulated to): A credible opinion of market value may
not be the contract price, even when the contract price is within the
adjusted range.
....
Are we reconciling to the contract price just because it is the contract
price? No.
Are we (or, at least some of us) reconciling to the contract price
because it is the final data point we consider, and it is consistent with
all the other analysis? Yes (or, at least I am).
The SCA analysis of the comparables is independent; it has nothing to do
with the contract price; a range of value is concluded. The opinion of
market value is (presumably) in that range.
Then and only then is the sales contract price-point considered. It is
considered in the context of all the prior analysis. It is a data point,
nothing more, nothing less. A data point just like all the data considered.
The reconciliation is independent. Whether the appraiser concludes at the
contract price or some other point, it is the appraiser's analysis which
supports that point-value placement.

And, to the last bolded part, you agree that you do the same thing.

So far, no automatic default to the contract yet... what else?

From post# 85

As I said, the SC may fall within the adjusted range, and
may not be my opinion of value.
But if it does fall within my range, I then consider it as a data point to
use in the final value reconciliation. I'll re-emphasize this point:
Outside of the range, its consideration is little if any. Inside the range,
it is considered; sometimes with significant emphasis, but never just as a
matter of "its in, that's it".
In the absence of any compelling reason not to consider it as the logical
and best indicator of the point-value given everything else, I give it
significant consideration.

Gee, not only do I state the SC may not be the opinion of value, but I even
(for fear of you misunderstanding) re-emphasize the point.

What else?
From post#88

I simply consider the sales contract for what I think it is; a
data point, when I am reconciling my opinion of value. I am not comparing it
afterward, I'm considering it as part of my reconciliation.

My bad. I didn't add (since I have done so numerous times in the discussion
previously) that "... and although I'm considering it as part of my
reconciliation, it may be different from my final value." I didn't think I
had to, but shame on me.

From post# 99

What many posters have said is that they consider the sales
contract as a data point, and what I said is barring any significant reason
to the contrary, it can (and many times does) establish my point value.
Your implication that sales contract = OMV is an automatic outcome
because it is in the adjusted range is disingenuous (and that is the
kindest way I can put it).

Well, there I specifically state that your implication that I'm arguing that
sales contract = OMV as an automatic function is wrong. What part of that
did you not understand?

From post #108

I think that your concern/passion/focus on the above has given
you a bit of a jaundiced eye on evaluating the appraisal process.
This entire discussion of where the sales contract price-point is, is based
upon the assumption that it falls within the adjusted range. We are (you,
me, and everyone else) in agreement that up to this part of the valuation
analysis, the process has worked.

What we are left with is this: A range of values and a contract price. If we
assume that the contract price has been properly analyzed, and no unusual
term/conditions exist, and it falls within the adjusted range, and there is
no compelling reason not to give it consideration, then a valid choice is:
A. Give it significant consideration for all the reasons cited above, and
the opinion of market value will probably be consistent with the sales
contract (in my case, substitute "highly likely" for
"probably").

Well I do admit, that when all the evidence fits, my value will highly
likely be the contract price, baring some compelling reason to not consider
it.
But I also state in the same post:

If there is a compelling reason not to give it consideration, then
the choice is:
B. Do not give it significant consideration, and conclude an opinion at
some other price-point.

If "B" is the action the appraiser takes, the only thing I think most users
and other appraisers will want to see is a persuasive argument of why the
appraiser's OMV is a better indication of the market value than the sales
contract. Throughout this entire discussion, everyone has acknowledged
that such situations exist, and when they do, the OMV should be based on the
best evidence which, in the case of "B", is something different from the
contract price.

Seems pretty plain to me? No "automatic" default (benchmark) to the sales
contract advocacy on my side.


So, back to your accusation:

You don't have to make that decision, because as long as it is
within the range, you rely on the SC price to set the point value of MV.

Did you misunderstand me?
I don't see how. I've written very clearly that the MV can be different
from the SC, even when it is within the adjusted range.
Did you misinterpret what I clearly wrote?
I'm hard pressed to come to that conclusion. To misinterpret such clear
language would imply a level of low-comprehension (or poor writing skills on
my part). I think you comprehend well, and I think I write well.


Did you misrepresent what I wrote?
Clearly you have.
Why would yo do that?
That's an answer I don't have, and quite frankly, have no interest in
finding out.

 

[J Grant]

Thanks for clarification and any mis interpret ion was on my part jg

 

[CANative]

That's not the issue,.

That is precisely the issue.

 

[Pittsburgh Pete]

The appraiser develops an inddependent MVO when it is a refi with no SC, so why do they not do it when a SC price is present? They develop a range of value, and then defer to the SC price to set the actual point value. That is putting a lot of faith into the negotiation between two strangers, who have littile of the training and experience you have.

and if you get four or five of these completed "negotiation(s) between two strangers" you have a market. Isn't that what we interpret in an appraisal? Your training and experience doesn't trump the market no matter how good you think you might be!

 

[J Grant]

and if you get four or five of these completed "negotiation(s) between two strangers" you have a market. Isn't that what we interpret in an appraisal? Your training and experience doesn't trump the market no matter how good you think you might be!

Pete, yes, four and five other negotiated contracts that closed are our comps...and they were supposed to have been vetted as MV by appraisers (assuming they were financed) . The rest of the neg contracts are the pendings, recent sold, and historical data. So if, the subject contract is just one more negotiated contract among the 4 or 5 that are our comps and among other considered sales/l pendings , then how does one justify the leap to endorsing the SC price as the most compelling data point?

The SC price , is, at one and the same time, a strong data point, and a vulnerable one. It can be a strong point, as it is very recent and of course our subject itself needs no adjusting for physical characteristics. And yet , it is a vulnerable data point because the purpose of the appraisal is to deliver an indpendent MVO not favoring any value direction....and yet here we have the SC price , clearly favoring a value direction.

Is our role as an appraiser to opine an independent MVO , and vet the SC price to the MVO? Is not the purpose of the report to develop an opinion of MV that is unbaised? How much consideration of the SC price makes the MVO biased? Those are the issuses around it, which some would like to dismiss, wish it were that easy for me lol!

I agree the SC price is a data point and should be considered, but market particpants expect appraisers to treat it as the holy grail of data points.

As to the comment that "my" training and experience does not trump the market, that's backward reasoning. "Our" training and experience is not supposed to "trump the market", our training and experience is to derive the most credible results from the market, weighing the fact that this one pending contract on our subject does not make up a market.

Given too much weight, the subejct contract price can end up trumping the market.

Of course when market evidence and sC price meet or are equivalent, the reconciliation lines up easily .

I believe the Subject contract deserves consideration and appraisers, including those who posted here try honestly to reconcile.....but balancing the influence of a SC price and the rest of the market data can present a dilema that I suppose will always be there in purchase appraisals (at least under the present system)