Opinion of value below contract price

[Jerry Bone Jr]

Hello everyone,
Not sure how often people get asked this but it's a first for me. The AMC wants me to comment on the opinion of market value coming in below contract price. I want to say "its the whole narrative and analysis of the report, along with my reconciliation" and leave it at that. Does anyone use a "canned" response to these requests?

The subject's pending price ($500,000) is not within the comparable sales indicated value range ($425,000 to $475,000) and appears high (due to the $50,000 in concessions).

 

[ZZGAMAZZ]

Hello everyone,
Not sure how often people get asked this but it's a first for me. The AMC wants me to comment on the opinion of market value coming in below contract price. I want to say "its the whole narrative and analysis of the report, along with my reconciliation" and leave it at that. Does anyone use a "canned" response to these requests?

Based on advice from the AF over the past fewyears, every report includes a section entitled"
Opinion of Value Relative to Various Market Factors
---OV compared with the Prdominant Neighborhood Value [from 1004 page 1]
---OV compared to the subject's Prior Selling Price
---OV compared to the Contract Price

Graned that some of the info might also be reported elsewhere in the report, although IMO that is an efficient section that makes it easier for the Intended Users, and also deflects various after-report questions/conditions.

 

[ZZGAMAZZ]

Based on advice from the AF over the past fewyears, every report includes a section entitled"
Opinion of Value Relative to Various Market Factors
---OV compared with the Prdominant Neighborhood Value [from 1004 page 1]
---OV compared to the subject's Prior Selling Price
---OV compared to the Contract Price

Graned that some of the info might also be reported elsewhere in the report, although IMO that is an efficient section that makes it easier for the Intended Users, and also deflects various after-report questions/conditions.

BTW in the last of 3 topics above, I also describe the relationship of the results of the SCA to the final OV, taking it a step further by summarizing all interaction with listing and selling agents, including their response to my offer to provide "potential comps for my consideration" in the SCA, as well as the approximate number of comps in the SCA that were based upon their recommendations..."which also were revealed during the appraiser's independent search for comparables." MUCHO BLAH BLAH BLAH THAT ONLY TAKES A FEW MINUTES, BRINGING TOGETHER VARIOUS ASPECTS OF THE APPRAISAL REPORT THAT IMO DEMONSTRATES A COMPREHENSIVE ANALYSIS OF THE MARKET BY BEING ADDRESSED IN VARIOUS SECTIONS OF THE REPORT AS WELL AS THE INTEGRATION OF VARIOUS APPROACH TO VALUE.

 

[ZZGAMAZZ]

Well, you could tell them how spectacular Comp. No. 1 and No. 2 are, how they bracket the subject and how they provide convincing evidence to support your objective, unbiased opinion of the value of the subject as of the date of the appraisal.

THAT INFO M.U.S.T. BE INCLUDED IN THE SCA RECONCILIATION that often is the basis of the Ultimate Opinion of Value expressed in the formal Final Reconciliation.

 

[Tom D]

I also like to say that i was not involved in the negotiation during the sale, or the listing, of the property and do not know the motivations of the parties involved. Although, there should be some other clue as to why it could be lower. I say could be, cause i haven't seen your report. Most times the listing price was too high, or there just aren't any higher sales. If the sale price was within your adjusted comp range, then that is a thorn in your finger. In which case i would have looked at putting in more comps. Nobody here has seen your report, so we are guessing at your brilliance.

I only put a comment when the value is higher or lower that the predominate, but every client has a certain tolerance level. Surprisingly, you didn't get a rov.

 

[J Grant]

The subject's pending price ($500,000) is not within the comparable sales indicated value range ($425,000 to $475,000) and appears high (due to the $50,000 in concessions).

I like your comment about the price not being within the indicated value range ! I personally would not use the word high or low for a sale price because it can be subjective (or sound biased) I would say the price appeared affected by concessions, or the price was affected upward by the concessions.

 

[Tom D]

Yea yea j grant. A 10% concession is pretty high. Could also say that there were no higher priced sales that the ones used, although you didn't get a rov, you must have used the highest sales.
Typically here concessions the most is 6%, although i haven't seen that high lately. Did the concession include the buyer's agent fee. By the way, you never mentioned the list price to help us defend you.

When i was a smart alex i might have written that i wasn't asked to set the highest price that the subject could be sold at.

 

[J Grant]

Yea yea j grant. A 10% concession is pretty high. Could also say that there were no higher priced sales that the ones used, although you didn't get a rov, you must have used the highest sales.
Typically here concessions the most is 6%, although i haven't seen that high lately. Did the concession include the buyer's agent fee. By the way, you never mentioned the list price to help us defend you.

When i was a smart alex i might have written that i wasn't asked to set the highest price that the subject could be sold at.

I often include ( when I remember to lol) a generic statement that I then customize a bit to suit the area -

"The appraiser considered additional sales to the ones used as comparables in the grid. The higher-priced sales in the area tended to be newer or larger ( or Water View, etc.), And the lower-priced sales tended to be smaller, older properties. "
That indicates that, yes, higher price sales were found and analyzed and not used because (they're newer, bigger, etc ). It is good practice to address lower price sales as well because though the initial ROV is usually because the OMV is lower than the SC or a target refinance amount, a forensic review is often triggered by a higher value or nonperforming loan.

 

[J Grant]

Based on advice from the AF over the past fewyears, every report includes a section entitled"
Opinion of Value Relative to Various Market Factors
---OV compared with the Prdominant Neighborhood Value [from 1004 page 1]
---OV compared to the subject's Prior Selling Price
---OV compared to the Contract Price

Graned that some of the info might also be reported elsewhere in the report, although IMO that is an efficient section that makes it easier for the Intended Users, and also deflects various after-report questions/conditions.

I commend you for all your additional work, esp in post 13! Wrt the above-

In my opinion, comparing the OV to a prior sale price and the predominant neighborhood value just opens the door to problems. A benchmark comparison is an appraisal ( USPAP). Meaning,you have done two additional appraisals by comparing your OV to a prior price and a neighborhood value. That means, per USPAP you need a workfile for each appraisal. I am not trying to be a nag, just stating the reality of it.

In addition, you now provided more fodder for someone to challenge you, wrt a prior price or predomiante value. Why go there? It is not required, it can confuse people, and possibly cause problems at some point for an appraiser.

 

[ZZGAMAZZ]

I commend you for all your additional work, esp in post 13! Wrt the above-

In my opinion, comparing the OV to a prior sale price and the predominant neighborhood value just opens the door to problems. A benchmark comparison is an appraisal ( USPAP). Meaning,you have done two additional appraisals by comparing your OV to a prior price and a neighborhood value. That means, per USPAP you need a workfile for each appraisal. I am not trying to be a nag, just stating the reality of it.

In addition, you now provided more fodder for someone to challenge you, wrt a prior price or predomiante value. Why go there? It is not required, it can confuse people, and possibly cause problems at some point for an appraiser.

hmmmm....interesting that I'm unable to agree or disagree with your perspective.....although comparison to the predominant value is simple to address especially if the subject metrics are inferior to that value--although any variance gets flagged by the UAD/HTML/$$$ review master, although possibly better addressed in the Market Research narrative; and the comparison to prior selling price inevitably is explained by condition changes, or by underlying market changes--although one just expects to be called to the carpet if the OP differs considerably from a relatively recent sale, providing the appraiser to be snarky by indicating that "the source of the variance between the OV rendered herin and the recent sales price pertains primarily to the market at that time in which the typical list/sales price ratio was 1.4% - 1.5%, also possibly reflecting the initial list price compared with the final selling price that based upon its exposure can't be justified retrospectively, possibly because the prior appraisal used for lending purposes was identical to the contract price, as often occurs although it is inappropriate to do so purposely.....maybe unnecessary banter, possibly exposing the report to further scrutiny, although human nature being what it is, by the time I first included this type of analysis I naturally presumed it was the absolute perfect approacH, indispensible [like me]. HA HA HA