Market Value vs Liquidation Value

[Karl Knorr]

Hi,
Wondering if someone can provide me with a general 'formula' or a 'calculation' or a 'percentage' way to determine a liquidation value for a single family real estate property?

Any other suggests would also be appreciated

 

[Elliott]

“The most probable price that a specified interest in real property is likely to bring under all of the following conditions:

1. Consummation of a sale will occur within a severely limited future marketing period specified by the client.
2. The actual market conditions currently prevailing are those to which the appraised property interest is subject.
3. The buyer is acting prudently and knowledgeably.
4. The seller is under extreme compulsion to sell.
5. The buyer is typically motivated.
6. The buyer is acting in what he or she considers his or her best interest.
7. A limited marketing effort and time will be allowed for the completion of a sale.
8. Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto.
9. 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.”

Source: Appraisal Institute, The Dictionary of Real Estate Appraisal,

 

[Terrel L. Shields]

No formulaic method. In some cases, they may ask for a "30 day liquidation" price. which means finding sales that sold in 30 days or less.

 

[Karl Knorr]

No formulaic method. In some cases, they may ask for a "30 day liquidation" price. which means finding sales that sold in 30 days or less.

This is helpful. So if the client is looking for a 30 day liquidation value, look for 3+ similar sales WITHIN 30 DAYS and then make adjustments accordingly....correct?

 

[glenn walker]

This is helpful. So if the client is looking for a 30 day liquidation value, look for 3+ similar sales WITHIN 30 DAYS and then make adjustments accordingly....correct?

Yeah except if your in Las Vegas Metro there is no such sale, its really a quick sale which may sell for almost as much as any other sale depending on its physical condition. It could be as little as a 10% discount.

 

[J Grant]

Hi,
Wondering if someone can provide me with a general 'formula' or a 'calculation' or a 'percentage' way to determine a liquidation value for a single family real estate property?

Any other suggests would also be appreciated

You seem to lack an organic understanding of what a liquidation sale is. If you don't understand it, how can you value it?

 

[J Grant]

“The most probable price that a specified interest in real property is likely to bring under all of the following conditions:

1. Consummation of a sale will occur within a severely limited future marketing period specified by the client.
2. 
   
3. The seller is under extreme compulsion to sell.
4. 
   
5. A limited marketing effort and time will be allowed for the completion of a sale.

I highlighted the most important differences in the definition of LV which would affect price.

Take a house as the subject for example, # 132 Cherry St. The client asks for an opinion of market value and for a second opinion of liquidation value. (LV) It is not always the case, but often a LV can be lower $ than an opinion of MV

132 Cherry St for the MV opinion is listed on MLS and the seller is not under compulsion to sell. The property gets adequate market exposure. The MV opinion is $300,000, based on a 3-60 day reasonable MV exposure. the comps used all had open market exposure on MLS and reasonable DOM.

132 Cherry St for the LV opinion is not listed on MLS, it has a limited marketing effort, maybe an ad in a newspaper and court announcement. The seller is under extreme compulsion to sell and the LV market exposure estimate is 2-30 days with a LV opinion of $270,000. the comps all had limited market exposure and might be courthouse steps sales or auction sales or even one MLS sale put on the listing a fire sale with super motivated owner

 

[J Grant]

A client either just asks for an opinion of liquidation value, or they might specify an opinion of LV under 30 DOM. Which seemed to have confused the OP so maybe leave it out of discussion for now

 

[Terrel L. Shields]

This is helpful. So if the client is looking for a 30 day liquidation value, look for 3+ similar sales WITHIN 30 DAYS and then make adjustments accordingly....correct?

3 says that were only on the market for 30 days or less to close

 

[J Grant]

3 says that were only on the market for 30 days or less to close
View attachment 70126

On the market less than 30 days still does not make it a LV sale ( many MV sales can sell in less than 30 days)

The other elements have to be there as well, a seller under extreme compulsion to sell and a brief, not normal marketing effort