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Positive adjustments in Sales Concession section

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It is not possible to have a positive sales concession.

REO is a sale condition.
 
Last time I looked, there were a number of unnamed lines at the bottom of the Sales Comparison grid. If you don't want to make an adjustment in one of the predefined sections, label one and make it there.

And, whoever said that REO isn't a sales concessions is correct.
 
The top line is for sale type, (REO, Short sale, etc)
and the line below that is for concessions.

They are separate items.
 
Metamorphic said:
Maybe: Contract sales price = $180k. $10k paid by buyer outside of sales contract to 2nd lien holder?
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I'd call that one a "condition of sale" adjustment as well.
From the 12th Edition, The Appraisal of Real Estate (p. 433):
When non-market conditions of sale are detected in a transaction, the sale can be used as a comparable but only with great care. The circumstances of the sale must be thoroughly researched before an adjustment is made, and the conditions must be adequately disclosed in the appraisal. Any adjustment must be well supported with data. If the adjustment cannot be supported, the sale probably should be discarded.
Although conditions of sale are often perceived as applying only to sales that are non arm's-length transactions, some arm's-length sales may reflect atypical motivations or sale conditions due to unusual tax considerations, lack of exposure on the open market, or the complexity of eminent domain proceedings. If the sales used in the sales comparison approach reflect unusual situations, an appropriate adjustment (well supported by the market evidence) must be made for motivation or condition of sale. Again, the circumstances of the sale must be explained in the appraisal report.
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(my bold and underscore)

Meta: I would (and have) used such sales you describe (with a payment outside of the contract price to a 2nd lien holder). Sometimes, depending on that circumstance, the outside-the-contract payment warrants a larger adjustment then the amount paid. Sometimes it doesn't. This requires a call to the agents (or buyer, which I rarely do; I'll speak to the agents) to ask if that cash-payment resulted in a larger discount in the sales price.
I'll describe the condition, make the adjustment, but I don't consider it a positive concession. :new_smile-l:
 
Upward adjustments for REO's are tricky, imo (I tend not to make them and will either weight or not weight the sale depending on the market. )

Most people who upward adjust REO sales do so for what the call "stigma", or the fact that some REO sales sell for less due to appealing to those who want a discount or investors. ( this is separate from any physical condition adjustments of course)

The problem is, the terms of sale of an REO are most times very straigtht forward, and there is nothing in the sale itself that merits an ajdustment...they are usually sold as is but with a right to inspect.

Now marketing time is an area one can pin point that can have an impact on price. If typical DOM is 90 days and the REO comp sold for less and sold in 30 days, it was either priced for a quick sale or the bank was willing to accept less for a quicker than typical sale. That would be a supported reason to adjust, whichever line you choose to make the adjustment on, explain impact of marketing time on price.
 
I'm with you all the way. But its certainly a quirk of the construction of the SCA grid that this one blank is only allowed to be a negative. If one were to postulate what a "buyer concession" or a "positive concession" would be or could be, which seemed to be what Terrell was asking, it would be logical to just reverse the jist of the typical seller concession.

In that context, this situation where a buyer pays off a 2nd lien holder would seem to be one of the most common that would fit the description. Along the same lines, I'm sure its happened at some point that a buyer of real property has paid "$x plus this here boat" at some point. If one were appraising the value of an NBA team you'd have to consider the purchase price, plus greasing the NBA commissioner to approve the sale.
 
J Grant said:
Upward adjustments for REO's are tricky, IMO (I tend not to make them and will either weight or not weight the sale depending on the market. )

Most people who upward adjust REO sales do so for what the call "stigma", or the fact that some REO sales sell for less due to appealing to those who want a discount or investors. ( this is separate from any physical condition adjustments of course)

The problem is, the terms of sale of an REO are most times very straigtht forward, and there is nothing in the sale itself that merits an ajdustment...they are usually sold as is but with a right to inspect.

Now marketing time is an area one can pin point that can have an impact on price. If typical DOM is 90 days and the REO comp sold for less and sold in 30 days, it was either priced for a quick sale or the bank was willing to accept less for a quicker than typical sale. That would be a supported reason to adjust, whichever line you choose to make the adjustment on, explain impact of marketing time on price.
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JGrant:

The only thing I would add to your comment (and it is something that I think is implied already) is that the REO dynamic is very market-specific.
I just hosted a class where one of the presenters was the COO of one of the largest real estate brokerage companies in the Bay Area, and one of the top-20 in the nation. He also personally invests in REOs for flips.
In sum, the appetite of middle- and large-investors in certain markets (like mine) is so great, that investors are outbidding owner-users; certainly investors purchase the poor-quality homes for renovation (many do not "flip" in the short-term; the hold as rentals and then play to sell 5+ years out), but the investors are purchasing... all cash... homes that only 2-years ago wouldn't be considered by an investor because the owner-user would outbid them (due to the utility; income is not a consideration of the owner-user).
The reason for this shift is not complicated, but I may go into it in another post; but the bottom line is that this investor-money is crowding out what I would consider the "traditional buyers" and the REO discount in many of my markets has all but disappeared; and, condition discounts are getting squeezed down as well (and the type of investor I'm talking about has no problem buying short-sales as well).

So, the dynamic is changing significantly in certain markets. This speaker said it is the first time he's seen this happen in his 25-years, and when he talks to the "old timers", they've never seen it either.

Again, I understand that your comments are intended to be applied to specific markets. I just want to emphasize that difference that some markets are experiencing. :new_smile-l:
 
J Grant said:
Upward adjustments for REO's are tricky, imo (I tend not to make them and will either weight or not weight the sale depending on the market. )

Most people who upward adjust REO sales do so for what the call "stigma", or the fact that some REO sales sell for less due to appealing to those who want a discount or investors. ( this is separate from any physical condition adjustments of course)
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Not so tricky. I do it all the time. You can document a clear and consistent price differential between REOs and Shorts vs. Resales going back years at this point. Anywhere from $5/sf to $25 in the markets I work.

Obviously some of the differential is a result of inferior condition, but the magnitude of the differential fairly demands that that there is more there than just condition.

The obvious answer relates to conditions of sale. Banks developed and maintained a horrible reputation as sellers. They under pay agents so the agents do not market the properties as effectively as they do full commission sales. The require additional paper work as part of their offer process. They often ignore offers for extended periods of time. Their robo signing issues have clouded buyers confidence that they can even provide clear title. They dont provide disclosures competitive with normal sellers. The list goes on and on, but you can simplify it this way.

If you were my agent and I was coming into town to buy a house because my company was transferring me. I had 1 week to find and get a house under contract, and I needed to have possession within 30 days. Are you going to show me a short or an REO? Certainly not. We've all heard stories of offers that were ignored for that long. Perhaps those days have passed and the banks have cleaned up their acts, but the reputation still persists. Similarly, if you're in the situation where you need to sell one house to buy another, an unpredictable, unreachable, non local seller can be a big negative for you in your buying decision.

This aspect alone, I believe, shifts demand away from REOs and Shorts, and lower demand equals lower value. Likewise, the buyers that do have the flexibility to deal with the the poor performance of Banks as sellers have a right to expect a discount, if for no other reason then the time value of their money that is sidelined while the transaction drags along.
 
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