Is the term 'price point' value a dangerous term.

[Terrel L. Shields]

It is common sense that a buyer for a farm has a different set of criteria than a buyer for a luxury condo

But do you think you know WHY the property was on the market? Do you know why the buyer wanted it?

Was it the best they could find? Was it near work? Schools? An elderly family member?

I got my lawnmower out of the shop after annual tune up and oil change. Talking to the owner who only recently returned to Arkansas. He lived here 10 years ago. His mother-in-law was ill and they sold and moved there to help care for her. After several years, they wanted back in AR and so after Mom died, they returned, and he looked for a particular kind of property to buy. Did he inform the agent why he wanted a home with a shop building and out of the city limits, so he didn't need business licenses? I doubt it. He just said, "I want a shop building with the house that my wife likes and outside of the city limits." Did the seller know he had a motivation to buy? Probably not. In fact, it is more likely that the shop didn't appeal to every would-be buyer. Had the buyer known he was motivated to buy, he had a stronger bargaining chip. I mean face it, large shop buildings on residential properties typically suffer functional obsolescence as being 'over-built'.

 

[J Grant]

No one can define a "motivated" buyer, and it implies someone with a bias towards buying. A motivated seller OTOH suggests someone urgent to sell. Yet, no one would argue that a buyer unwilling to buy nor a homeowner unwilling to sell would be "motivated" to do anything. Kind of catch 22.

Can no one define a motivated buyer? The standard is typically motivated and it is defined for appraisals- that is why we use certain MV definitions. The bloew "Model buyer and seller " is what the appraiser uses for OUR appraisal of the subject. We are not using John or Jane's individual motivations. for the hypothetical "sale" of our subject in the sale comparison approach.​

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John or Jane's individual motivations when they bought a property we use as a comp can affect the price, and we analyze that impact as part of the appraisal​

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Definition of Market Value​

Market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• buyer and seller are typically motivated;
• both parties are well informed or well advised, and each acting in what they consider to be in their own best interest;
• a reasonable time is allowed for exposure in the open market;
• payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
• the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

 

[Terrel L. Shields]

The standard is typically motivated

That's just a fairy tale the PTB tell us so we can pretend to be accurate.

 

[J Grant]

But do you think you know WHY the property was on the market? Do you know why the buyer wanted it?

Was it the best they could find? Was it near work? Schools? An elderly family member?

I got my lawnmower out of the shop after annual tune up and oil change. Talking to the owner who only recently returned to Arkansas. He lived here 10 years ago. His mother-in-law was ill and they sold and moved there to help care for her. After several years, they wanted back in AR and so after Mom died, they returned, and he looked for a particular kind of property to buy. Did he inform the agent why he wanted a home with a shop building and out of the city limits, so he didn't need business licenses? I doubt it. He just said, "I want a shop building with the house that my wife likes and outside of the city limits." Did the seller know he had a motivation to buy? Probably not. In fact, it is more likely that the shop didn't appeal to every would-be buyer. Had the buyer known he was motivated to buy, he had a stronger bargaining chip. I mean face it, large shop buildings on residential properties typically suffer functional obsolescence as being 'over-built'.

Which buyer are you talking about?

The model buyer in the MV definition for our subject:'s hypothetical "sale" in the appraisal, or an individual out in the market buying a property we might use as a comp ?

For buyers purchasing within a predominant range of prices and buying at typical terms, we don't need to know their particular motivation, though we can ask. We should be familiar with the attributes of the subject and its neighborhood, and understand that is what appeals to buyers. If a property has defects, that set of buyers is out to save money or overlook the defect for some other positive.

However, if a property sold very high or very low or sold at odd financial or other terms, either don't use that sale as a comp, or find out why and if you use it, then give it less weight - these are outlier motivations leading to prices far out of the norm. There is some natural variation of prices within the range of typical motivation at any given time

In some market cycles, such as depressed markets with a lot of REO, the motivations of buyers and sellers are different, resulting in most problems with lower prices. In a hot seller's market, however, the typical motivations change and result in higher prices.

The great thing is that no matter the market or property type, the fundamental appraisal principles and definitions apply.

 

[J Grant]

That's just a fairy tale the PTB tell us so we can pretend to be accurate.

USPAP looks pretty real to me!

If it is a fairy tale, then the tale of USPAP is the most boring story ever told and probably would put any kid to sleep if you read it to them-or send them into therapy...

 

[Terrel L. Shields]

if a property sold very high or very low or sold at odd financial or other terms, either don't use that sale as a comp,

That's because it is a statistical aberration, not because we actually know why it sold the way it did

 

[glenn walker]

Definitions are just general guidelines to keep people between the white lines. There are no absolutes and it's like traffic speed - it all depends on the weather conditions no matter what the sign says.

 

[J Grant]

That's because it is a statistical aberration, not because we actually know why it sold the way it did

How do you manage to arrive at a credible value if you refer to statistics for why a property sold at odd terms /for a very high or low price?

Gee, honey, let's overpay for this house because we want to be a statistical aberration.
There was a reason, and usually we can find out, or figure it out, and anyway, it is best not to use those sales if possible.

 

[J Grant]

Definitions are just general guidelines to keep people between the white lines. There are no absolutes and it's like traffic speed - it all depends on the weather conditions no matter what the sign says.

The definitions are specific yet conceptual as well, and therefore adaptable to any property, any price point, or any location -

That is why the same MV definition and fundamental principles are applied by appraisers for a beachfront property in Hawaii, an urban penthouse in NYC, or a rural farm, wherever Tererl lives!

 

[glenn walker]

The yenta hears me mumbling about price versus value. She asks don't you value houses based on what others sold for ? I'm like yeah we find hopefully five or six homes that sold and that are most similar to the home we're appraising.

Then she says do you use the sales prices or the value of the comparables
to arrive at a final value on the one your appraising ? I'm like we use the Sales prices on the Comparables.

Now she says you better stop the bull**** because I'm not playing any of your silly word games, so if you don't know the value of the comps and just the sales prices , how can you know the value of the home your appraising ?

Now she says you either use the sales prices or the value of each sale ! otherwise your math is convoluted with bull**** just like your sales equals value but the subject being appraised is the only one that has value and not price.

That's it I'm done and I told her I have no idea and I'm as confused as her. As she walked out she says because your stupid and your peers are stupid and no wonder everyone hates you people.

Geez La Wheeze-trying to explain value to a bitter old retired electronic engineer is like telling her how a lightbulb works.
It all seemed so easy when i took my McKinsey Online Value V Price class.