Positive Adjustment on Seller Concessions

[texansfan]

Can there ever be a positive adjustment on our grid for seller concessions?

E.g. The subject is giving $5K in seller concessions and a comparable is only giving 3K?

How is this handled?

Further, what about if both the subject and comparable are both givng 5K?

This is assuming we are using dollar for dollar adjustments.

 

[CANative]

You adjust comparable sales to the subject. It doesn't matter if the seller of the subject has no concessions or 100% concessions. It has nothing to do with it's market value.

 

[texansfan]

Here's why I wrote this. I am being told to negatively adjust my comparable 5K because the comp has 5K in seller concessions. The subject is giving 5K in seller concessions. To me that's like saying the subject has no bathrooms (even though it has 2) and negatively adjusting the comparable because it has 2 baths.

 

[Lee Lansford]

Can there ever be a positive adjustment on our grid for seller concessions?

E.g. The subject is giving $5K in seller concessions and a comparable is only giving 3K?

How is this handled?

Further, what about if both the subject and comparable are both givng 5K?

This is assuming we are using dollar for dollar adjustments.

IGNORE...and, let me repeat...IGNORE the subject's contract of sale and the concession from the seller to the buyer. This all is IRRELEVANT to what you are being asked to do: You are appraising the subject property for Market Value.

"PM" me with your e-mail address and I will send you an excellent article on the manner in which appraisers are to consider this topic.

And, for what will no doubt follow in this string of discussion, I hope that you are a bit thick-skinned .

You are NOT "appraising" the subject's contract of sale.

 

[Lee Lansford]

Here's why I wrote this. I am being told to negatively adjust my comparable 5K because the comp has 5K in seller concessions. The subject is giving 5K in seller concessions. To me that's like saying the subject has no bathrooms (even though it has 2) and negatively adjusting the comparable because it has 2 baths.

Again...you are NOT "appraising" the subject's contract of sale. You are appraising the real property interest for Market Value.

 

[J Grant]

Texasfan,
I understand the confusion and it throws many people off.

Here is how to look at it:

Put aside the "real" terms of sale of subject (concessions, etc). Though you would note any concessions in the contract section for the subject if it is a purchase, after that, you put aside the subject contract/price/concessions, etc.

The reason you do that is, for development of MV purposes, the subject is looked at as a "presumed sale", according to the terms of market value (the definition of MV is in the preprinted certification of the FIREEA form). In other words, for report valuation development, the terms of sale for the subject are the presumed market value terms per the definition, and that means no concessions, no undue influence, no favorable financing etc., even if they are present in the "real" subject contract.

The subject, for valuation purposes on the SCA, takes on the presumed MV sale terms.

Read the purpose of the apprasial, top of the 1004 form, then immediatly read the definition of MV on the preprinted certification page. Below the def of MV on the certification, the next paragrahp even gives an example, re, not to adjust financing dollar for dollar on the comps when compared to the subject. Reading it all at once like that makes it very clear.

Then, we adjust (if indicated), any "real world" sales terms of the comps, such as concessions, that differ from the MV definition of presumed MV sale terms, in the order they appear on the sales grid.

 

[CANative]

lol... That is the most confusing explanation I've ever read.

 

[CigarDad]

Fannie Mae Selling Guide, B4-1.4-18

Positive adjustments for sales or financing concessions are not acceptable.

 

[texansfan]

Thank you all for your contributions. They are very helpful.

I was just thinking that you should be looking for what is customary in your area (say 3%) and then adjusting (deducting) for anything after that. How about that?

 

[residentialguy]

Thank you all for your contributions. They are very helpful.

I was just thinking that you should be looking for what is customary in your area (say 3%) and then adjusting (deducting) for anything after that. How about that?

No. You adjust the contributory amount of the concession they made on the sale...in other words, what would seller sell the property for if s/he didn't have to pay that amount. In 99.9% of the time, it would be dollar for dollar, which is equal to the amount the seller gets in his pocket


Seller will sell for 300k for cash...or he will sell it for $305k and give the buyer $5,000 in seller paids. Read the definition of market value on the report. "the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions"