Is this a "Closed sale"?

[incognito]

I have a perfect comparable sale I would like to use on a 1004 FNMA appraisal for a refinance at a local mortgage company. I have one very good, recent comparable sale, but I am not sure it meets FNMA guidelines as a "Closed Sale". It was listed in MLS for a typical period, sold 8% below the most recent list price, in a normal marketing time, and there is no evidence of it not being a legitimate sale.

HOWEVER, it is not recorded, as it was sold as a contract for deed, with private financing. I can confirm the sale with MLS, buying and selling agent, seller, and have been offered a copy of the contract, if needed, so I feel it is an "arms length transaction" in all respects. Financing terms are fairly typical, 3% down, 8% rate, 5 year balloon, normal amortization. The buyer could not qualify for institutional financing.

Does a non-recorded contract for deed qualify as a "closed sale", capable of being used as a primary comparable, per FNMA guidelines?
Thanks!

 

[Wendy]

I'd use it as a 4th or 5th with a full explanation. Maybe citing it as support only would be a good idea.

 

[Pamela Crowley (Florida)]

IMO, in an area where these terms are often used, it would be a 'good' comp.
BUT, this is an area where these are extremely rare PLUS it's not recorded at all. I would not consider it a valid comparable sale for this area, but would enter it as additional support. Tell the Realtors that it really does need to be recorded to be able to be used.

 

[Michael Tipton]

If available, do a name search in the county's Clerk or Courts web site for any documents associated with the Agreement for Sale.

 

[Mike Kennedy]

get the contract - utilize as c4 - 5 as UC - with the remainder of the info above in Comments.

 

[Francois K. Gregoire]

Does a non-recorded contract for deed qualify as a "closed sale", capable of being used as a primary comparable, per FNMA guidelines?
Thanks!

Bill,

IMNSHO, a contract for deed (in Florida) is not an example of a "closed sale". Evidence of a closed sale is transfer of title from Grantor to Grantee. No such conveyance of the full bundle of ownership rights occurs with a contract for deed in the Sunshine State.

My test of an arm's length transaction includes passing of title from seller to buyer. Although I have not located a specific requirement in the Fannie Selling Guide, Fannie is consistent in their requirement for "closed sales" in the Sales Comparison Analysis.

 

[Mike Kennedy]

XI, 406.02: Selection of Comparable Sales (06/30/02)
We require an appraiser to research, analyze, and consider influences that may affect value based on market evidence (such as closed sales, contract sales, and properties for sale in the market area; market studies; etc.). For example, if a property is located in a neighborhood that includes (or is close to) an airport or hazardous waste site or that has relatively high property taxes or vacant or boarded-up properties, we expect the appraiser to research, analyze and use comparable sales from the same neighborhood or affected area (whenever possible) in his or her analysis. This will assure that any effect of these value-influencing characteristics is taken into consideration in the development of the opinion of value for the property.
If a property is located in an area in which there is a shortage of truly comparable sales—either because of the nature of the property improvements or the relatively low number of sales transactions in the neighborhood—the appraiser might need to use as comparable sales properties that are not truly comparable to the subject property or properties that are located in competing neighborhoods. In some situations, sales of properties that are not truly comparable or sales of properties that are located in competing neighborhoods may simply be the best comparables available and the most appropriate for the appraiser's analysis. The use of such comparables is acceptable as long as the appraiser adequately documents his or her analysis and explains why these comparable sales were used (including a discussion of how a competing neighborhood is comparable to the subject neighborhood).
The appraiser must report a minimum of three comparable sales as part of the sales comparison approach to value. The appraiser may submit more than three comparable sales to support his or her opinion of market value, as long as at least three are actual settled or closed sales. Generally, the appraiser should use comparable sales that have been settled or closed within the last 12 months. However, the appraiser may use older comparable sales if he or she believes that it is appropriate, and selects comparable sales that are the best indicators of value for the subject property. The appraiser must comment on the reasons for using any comparable sales that are more than six months old. For example, if the subject property is located in a rural area that has minimal sales activity, the appraiser may not be able to locate three truly comparable sales that sold in the last 12 months. In this case, the appraiser may use older comparable sales as long as he or she explains why they are being used.
The appraiser may use the subject property as a fourth comparable sale or as supporting data if the property previously was sold (and closed or settled).

If the appraiser believes that it is appropriate, he or she also may use contract offerings and current listings as supporting data.

However, in no instance may the appraiser create comparable sales by combining vacant land sales with the contract purchase price of a home (although this type of information may be included as additional supporting documentation).

 

[Marcia Langley]

Contracts for deed are widely used here but no transfer of ownership takes place. The recorded deed remains in the owner's (seller's) name.

All the buyer owns is the contract, the seller still owns the deed and the property.

So, it is not a closed sale until all the payments have been made and the transfer of property has been recorded.

It could be used as additional support much the same way an 'under contract' listing is used. The MLS listing helps to validate that it was arm's length.

Even if only used as additional support, I would still ask for the copy of the contract.

 

[Ariba]

HOWEVER, it is not recorded, as it was sold as a contract for deed, with private financing. I can confirm the sale with MLS, buying and selling agent, seller, and have been offered a copy of the contract, if needed, so I feel it is an "arms length transaction" in all respects. Financing terms are fairly typical, 3% down, 8% rate, 5 year balloon, normal amortization. The buyer could not qualify for institutional financing.

Does a non-recorded contract for deed qualify as a "closed sale", capable of being used as a primary comparable, per FNMA guidelines?
Thanks!

So if I understand this correctly and correct me if I am wrong, you do not use closed sales as reported in the MLS as comparables unless they are recorded? Using that methology I venture to say that most recent closed sales are not recorded in a timely fashion and could not be used.

Most of the counties are months behind in the recording of sales. How would you ever get a recorded sale that happened two days ago? The paper work from the closing usually won't be submitted for weeks to be recorded.

Am I missing something?

 

[Wayne Tomlinson]

Often in my area with a contract for deed sale,there is a recording of a document called a NOTICE OF CONTRACT FOR DEED, or some such.


This is primarily to make "notice to the world" that the contract purchaser has an interest in the property. This helps to prevent the seller from selling to some other party, it helps to keep any liens that might later be filed against the seller from coming ahead of the purchasers position.

Contracts are often not really good for the seller or the buyer but for some, there may be no other way to buy or sell.

The poster said that he/she saw the contract, the terms are near market terms. If there are no better, use what you have, and explain.

Wayne Tomlinson