Positive Adjustment on Seller Concessions

[residentialguy]

Good post, Cavin.

Since I am labeled by some here as the "savior/crusader of the market", I don't Mike's last post about trying to destroy the market applies to me, lol.

Vets are getting an aid, to which I don't disagree with - I have much respect for them and wish we could help more. But to use that sale as if the seller's aid didn't exist, only inflates housing prices. 3% plus 3% plus 3% starts adding up. Pretty soon, the only way you can appraise a Vet's contract is to only use Vet sales, since they are the only ones supporting that inflated value. But of course, other sales will be inflated as well, because appraisers will continue to use these 3%+ inflated sales as comps without adjustment. Why do I have a Deja vu feeling?

 

[Elliott]

So CAN you aren't willing to accept circumstantial evidence for murder cases and adjustments?

 

[Mike Garrett RAA]

The vet does not finance the closing costs IF the seller is paying for them.

Is too much emphasis given to "paired sales" analysis? Is it really meaningful. How many pairs are necessary to be meaningful? Is regression analysis really the answer? how about percentage of contribution as a method? Is it really necessary to make adjustments at all? Inquiring minds want to know.

The last time I looked...Appraisal was considered an art form...not a science. Are we part of a profession that is no longer meaningful or necessary? How good are we when it comes to valuing residential properties?

 

[CANative]

Perhaps my last post was misunderstood. I am for nominal, $4$ adjustments for purposes of seller financing. It is the safest way to deal with it. No one can argue the logic of it and no one can argue the appraiser didn't adjust for seller concessions.

There is no way to develop a market supported adjustment because these types of concessions hoover around the margin of error. You just can't parse it down in individual assignments but over the course of years working in a market you get the hang of it because it tends to even out the noise left over and all that's left is the variances caused by imperfections in typical negotiations.

It's a "reasonable" adjustment. Just like for half-baths, fireplaces, good landscaping, etc., etc. Actually, it's probably even more credible than those adjustments because there's an exact dollar figure to work with.

 

[residentialguy]

If nominal you mean less than $250, I agree (not that adjusting a comp for $250 will make a hill of beans difference anyway). But seller paids are not like any other adjustment. These are actual numbers that usually have a verified $4$ effect over the sale without those seller paids. The ket word is verified.

 

[CANative]

If nominal you mean less than $250,

That's not what I mean.

nom·i·nal
   [nom-uh-nl] Show IPA
adjective
1.
being such in name only; so-called; putative: a nominal treaty;

Putative
1. : commonly accepted or supposed. 2. : assumed to exist or to have existed.

 

[Calvin the Airedale]

The vet does not finance the closing costs IF the seller is paying for them.

Yes the vet does finance the costs, especially if the seller pays for them. They are baked in the cake, so to speak. The costs are included in the price of the property which he is funding with a 30 year loan.

 

[Mile High Trout]

Personally, I wish they would say...."deduct all concessions dollar for dollar". It would end the debate. Of course it would have a terrible effect on MY MARKET. Maybe that is what many who post here would like to see...the end of the housing industry...as we know it.

Geesh, apparently I've been contributing to the crash of the housing market without even knowing it. Then again, it's a constant argument that those who fail to take the initiative and say no, are the ones really promoting inflation.

So what's better - a long road to stability - or immediate gratitude and an iffy constant inflation work in because net to seller somehow is reported as including financing costs?

I'm quite sure that given the free reigns, the "market reaction" will be to go back to unmanaged gains and losses. People think short term all too often.

I'm way past any illusion at this point. I'll have to go against my personal standards and wishes to gain clients ahead of other appraisers who do overlook dollar for dollar. - Game over.

 

[Mile High Trout]

On an additional note:

We're like rats in a cage or lemmings with this argument.

So long as everything else is "baked in", it's sort of ironic that real estate appraisers of all people are considering a net to seller equivalent issue.

Of all the people, and all the topics. We're following the leader, without clear direction.

"Roll everything in, even the AMC fee."

It will be just like gobmnt & education. The more money we pump into it, the more expensive it will get.

Just forget about value, it's all about price!

The anti-dollar for dollar restated with irony: Net to seller, is the sellers price. What about concessions? Non existent as far as end figuring goes. Price trumps value. Get with the program already.

 

[Elliott]

MHT is right, its like rising the temperature to cook a frog. Gobermint has effectively socialized mortgage lending. The 40% reduction in value is the last 4 years is a function of the system breaking down and the cash equivalent has been determined. Fannie/Freddie still get to be players in arranging the deck chairs, but really don't serve their original mission of providing a system of honest values and a dependable funding system.

It is humorous to see how many appraisers will so easily adopt whatever Fannie tells them is up.