Non-Arms Length Transaction

[spittman]

It's been a while since a non-MLS purchase has come across my desk, but I'm not sure how to proceed on this one. Buyer and seller are sisters and no agents are involved. The contract reads:

Sales Price - $100K
Conv. Loan - $69.2K
Cash Portion - $30.8K (Gift of Equity)

How do I comment on the Gift of Equity? I never seen this before, but I know it is not really "cash" and how can it be a gift if it is something that is basically going back to the seller? There is also $6000 in concessions.

Also this may be irrelevant, but I checked for comparables nearby and the sales price is within range, but should I be looking for other non-arms length transactions or making some type of adjustments in the sales comparison?

 

[ctapraser]

It's been a while since a non-MLS purchase has come across my desk, but I'm not sure how to proceed on this one. Buyer and seller are sisters and no agents are involved. The contract reads:

Sales Price - $100K
Conv. Loan - $69.2K
Cash Portion - $30.8K (Gift of Equity)

How do I comment on the Gift of Equity? I never seen this before, but I know it is not really "cash" and how can it be a gift if it is something that is basically going back to the seller? There is also $6000 in concessions.

Also this may be irrelevant, but I checked for comparables nearby and the sales price is within range, but should I be looking for other non-arms length transactions or making some type of adjustments in the sales comparison?

Contract section, Is there any financial assistance (List ALL loan charges, sale concessions, GIFT or downpayment assistance ect.) to be paid by any party on behalf of the borrowers.

List the total and explain.

 

[J Grant]

Also this may be irrelevant, but I checked for comparables nearby and the sales price is within range, but should I be looking for other non-arms length transactions or making some type of adjustments in the sales comparison?
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You do realize that the hypothetical presumed sale of subject on X effective date means the subject is "sold" at market value terms (unaffected by special financing and concessions,), ?? The presumed hypothetical sale is always separate from the "real" contract sale terms in a purchase appraisal. (just as in a refinance, there is no actual "sale", the appraiser creates a hypothetical presumed sale for subject for market value development purpose

regarding gift of equity, what Ctappraiser said, if it affected contract price because it is a non arms length siblings transaction, that is the reason you provide.

 

[Lee Lansford]

...

...but should I be looking for other non-arms length transactions or making some type of adjustments in the sales comparison?

What?

Why?

 

[CANative]

Appraise the property, not the contract.

 

[Lee Lansford]

It's been a while since a non-MLS purchase has come across my desk, but I'm not sure how to proceed on this one. Buyer and seller are sisters and no agents are involved. The contract reads:

Sales Price - $100K
Conv. Loan - $69.2K
Cash Portion - $30.8K (Gift of Equity)

How do I comment on the Gift of Equity? I never seen this before, but I know it is not really "cash" and how can it be a gift if it is something that is basically going back to the seller? There is also $6000 in concessions.

Also this may be irrelevant, but I checked for comparables nearby and the sales price is within range, but should I be looking for other non-arms length transactions or making some type of adjustments in the sales comparison?

You are appraising the subject for your opinion of Market Value.

In doing that, the Contract of Sale is irrelevant to your development of the opinion of Market Value.

 

[CANative]

But it CAN be relevant in the final reconciliation.

 

[J Grant]

The appraiser is the one who determines whether a subject contract is relevant. In open market exposure AL contract, the price may be relevant as a pending sale.

In a non arms length between siblings with such atypical terms, I would not consider the contract price relevant at all.

 

[spittman]

Appraise the property, not the contract.

I understand this.

As far as the contract being irrelevant, the URAR asks for an analysis and to comment on the terms but was unsure how to since I've never seen gift of equity before.

I mentioned the comparable sales because the contract price seems right in line with the range of sales nearby (several on the same street), so I suppose even though it is non arms-length, the contract is not under or overpriced due to the terms.

I guess I just needed confirmation that nothing fishy is going on here.

 

[J Grant]

It's not fishy, it's a sister helping a sister. Just disclose it and move on. The price may be in line with predominant /typical but the terms are atypical. Again, disclose, does not affect the presumed sale terms for your market value opinion .