CindyR
Senior Member
- Joined
- Oct 26, 2003
- Professional Status
- Certified Residential Appraiser
- State
- Arizona
Well here is an interesting situation I came across this week. A real estate agent sent over an odd sale in response to a VA tidewater request. It was a property last listed in MLS in 2013 for $44,000 and expired. An investor bought the tiny condo in 2015 for $50,000. In November 2016 it transferred to another investor for $60,000 and on the same date to yet another investor for $70,000.
So I looked at all these transactions and one odd fact intrigued me. Both the November sales were to two LLCs who had the same Statutory Agent and business address. For my Tidewater response, I explained that there was no evidence that these were market based transactions and this sale at $70,000 was not a relevant indicator of value for the subject. Actually I did include a model match from that complex that sold for $51,000 and noted in the report that it was the highest sale in the complex in the past year as further support that the $70,000 sale was not really a valid market sale.
But as I continued working on this assignment I found 2 or my comps in the subject complex had similar extra transactions. Comp 1 sold through MLS for $52,000 and on the same day transferred to another LLC for $71,000. Comp 2 sold through MLS for $50,000 and transferred on the same day to another LLC for $62,000. All recorded documents signed by the same Statutory Agent. These 2 LLC's own 5 and 4 other properties respectively.
So I do some more research. Said agent is the Statutory Agent for 203 LLCs here in AZ. All of the LLCs involved in my appraisal were for foreign investors in New Caledonia. I looked at some more Corporation Commission records for some of the other LLCs and found some from France and Australia. Bottom line is that these high dollar transfers to these LLCs are not in any way market based transactions or indicators of market value. The foreign investors probably don't care how much they pay but the typical buyer would likely be more well informed. These are not really sales but they are valid transactions. I also looked at a sample of the properties owned by some of the other LLCs and all of these transactions I saw involve very low priced properties – not one had a real sale price over $60,000 and none of the LLC transfers were over $75,000.
And while these are really some low dollar properties, if you do the math and assuming all 203 LLCs own 5 $50,000 properties that is still a $50 million enterprise. And that Statutory agent and her LLC is making some serious money on managing these properties and transactions.
But these transfers are now part of Public Records. And surely most appraisers are smart enough to question these transactions and not use the higher price as a comparable sale, but likely it will happen. And all those computer models, AVMs, LSAMs, CUs etc will use those higher transaction prices as though there were really sales. And if this is going on here it is surely happening in other parts of the country as well so be on the lookout. I am calling them Real Fake Sales.
So I looked at all these transactions and one odd fact intrigued me. Both the November sales were to two LLCs who had the same Statutory Agent and business address. For my Tidewater response, I explained that there was no evidence that these were market based transactions and this sale at $70,000 was not a relevant indicator of value for the subject. Actually I did include a model match from that complex that sold for $51,000 and noted in the report that it was the highest sale in the complex in the past year as further support that the $70,000 sale was not really a valid market sale.
But as I continued working on this assignment I found 2 or my comps in the subject complex had similar extra transactions. Comp 1 sold through MLS for $52,000 and on the same day transferred to another LLC for $71,000. Comp 2 sold through MLS for $50,000 and transferred on the same day to another LLC for $62,000. All recorded documents signed by the same Statutory Agent. These 2 LLC's own 5 and 4 other properties respectively.
So I do some more research. Said agent is the Statutory Agent for 203 LLCs here in AZ. All of the LLCs involved in my appraisal were for foreign investors in New Caledonia. I looked at some more Corporation Commission records for some of the other LLCs and found some from France and Australia. Bottom line is that these high dollar transfers to these LLCs are not in any way market based transactions or indicators of market value. The foreign investors probably don't care how much they pay but the typical buyer would likely be more well informed. These are not really sales but they are valid transactions. I also looked at a sample of the properties owned by some of the other LLCs and all of these transactions I saw involve very low priced properties – not one had a real sale price over $60,000 and none of the LLC transfers were over $75,000.
And while these are really some low dollar properties, if you do the math and assuming all 203 LLCs own 5 $50,000 properties that is still a $50 million enterprise. And that Statutory agent and her LLC is making some serious money on managing these properties and transactions.
But these transfers are now part of Public Records. And surely most appraisers are smart enough to question these transactions and not use the higher price as a comparable sale, but likely it will happen. And all those computer models, AVMs, LSAMs, CUs etc will use those higher transaction prices as though there were really sales. And if this is going on here it is surely happening in other parts of the country as well so be on the lookout. I am calling them Real Fake Sales.
Good research.
Other sellers and appraisers will catch on to "increasing prices", then they'll sell the properties on the open market at a higher price.