Non-Arm's Length Transaction Adjustment

[Stone]

I tend to look at data selection as a beauty contest. Anyone can be a winner - it just depends who you're competing against.

When you start by ranking the relevance of each piece of sales data, it quickly becomes evident whether a particular sale should be included or not. A tie is usually resolved by using either both contenders or neither one, typically depending on whether you're looking to fill slots #3 & #4 or slots #10 & #11.

How is that a reply to my post?

 

[KD247]

How is that a reply to my post?

Certainly not a criticism of your hesitancy, but just trying to say that it's hard to know whether to love or hate this bit of data without looking at it next to the other choices.

Nobody would use a family transaction unless there was nothing better, but if there wasn't any better data I would definitely not hesitate to use it.

 

[Stone]

PE,

How do you get around the sale not being exposed in the open market?

In many markets (speaking geographically and also of property types), many sales do not get what most think of as typical market exposure. However, they are negotiated based on what is happening in the market including similar sales.

If you do a lot of land in my area, it is quite typical that properties are sold privately and that exposure is limited to word of mouth or a sign on the property. Sometimes it is simply from someone driving by and later asking if the property is for sale. What is necessary is to find out how the price was negotiated, who was involved, whether there were a-typical motivations, etc.

These types of properties require more background work (verification) than some. But, for many types of properties, and in many areas, it is fairly common that properties aren't exposed in the traditional manner. They do, however, frequently reflect the price of what is being sold and they certainly affect what others might sell for once word of the sale gets around. And it always does.

 

[Stone]

Certainly not a criticism of your hesitancy, but just trying to say that it's hard to know whether to love or hate this bit of data without looking at it next to the other choices.

Nobody would use a family transaction unless there was nothing better, but if there wasn't any better data I would definitely not hesitate to use it.

That is why I wrote the rest of the post, not just the part quoted.

(seriously - I'm not being a smart-aleck)

 

[KD247]

That is why I wrote the rest of the post, not just the part quoted.

I got it - but your post stressed that the decision as to whether to use this sale would be determined by investigating the details. I just wanted to emphasize your point that there might be other reasons to use this sale - and the most common justification is because it's the best data available.

(seriously - I'm not being a smart-aleck)

Ok, then what's this "Neptso Untie" business? I'm usually pretty good at figuring out wordplay, and assume it's something like Dyslexics Untie (which I think is hilarious), but can't figure Neptso out to save my life. Don't be harsh - I know it's going to be something obvious.

 

[Stone]

Ok, then what's this "Neptso Untie" business? I'm usually pretty good at figuring out wordplay, and assume it's something like Dyslexics Untie (which I think is hilarious), but can't figure Neptso out to save my life. Don't be harsh - I know it's going to be something obvious.

No, it isn't obvious - "Nepots" - you got the "Unite" part correct.

(it is a term BB used to like to throw around for those of us who were trained by relatives. :new_smile-l: )

 

[singlesource]

reply

as long as it sole purpose is to support value and the appraiser disclosed it as a non-arms length transaction i don't see anything at all wrong with this practice.

 

[The Warrior Monk]

I'm one for using all available market data to come to a value conclusion.

However, transactions between related parties can be very difficult to analyze. For example, the agreed to price doesn't necessarily have to be less than market value; it could be above value also. An obvious one would be to boost the price to obtain a loan.