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Realtor Purchase- Bad Comp?

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Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
I'm looking at comp where the listing Realtor bought the subject propery directly from the seller. It sold for $158K. The listing Realtor then put the property on the market herself and sold it again (1 month later) for $154K. I'm trying to determine if either of those sales are usable as comps. The first transaction ($158K) might have been motivated by the Realtor wanting a commission-- so she might have overpaid for it. On the other hand, the second transaction is probably more indicative of her just wanting to unload the property- hence the lower sales price. Is either usable?
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
The answer might be "that depends." Sorry I couldn't be more specific, but there just isn't enough info here to know for sure. The realtor might be guilty of an ethics violation; but then again, maybe not.

You are right to trust your instincts that say "be wary of this comp." I would call the parties to the transaction and see if I could get more info. Usually it's the last sale that you would want to use rather than an older sale, regardless of whether the property appreciated or depreciated in value. However, a deal like this might be an exception if the first sale was market based and the second one was not. (It actually sounds like it might be the other way around.)

You generally don't want to use a comp unless it's an arms length transaction. But, there are exceptions and in the exception you would normally make an adjustment for the non-market influence. Keep in mind that if you do so you could be walking on pretty thin air.

Whether you would consider using this sale might depend on whether your client will accept it and might also depend on whether there are any other comps. Another sale, even if it is less like the subject or an older sale, might be a better choice in this case.

Keep in mind that all of this is IMHO off the cuff and other forumites might have additional or different ideas.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Pat

Nobody buys a property to get a commission. Think about is: Spend $158,000 to get $11, 060. Does not make sense.

Perhaps the broker took it in trade in which case there are usually deep discounts in selling price. I would guess that if the broker put it back on the market, listed and on the MLS, and it sold, you probably have a legitimate comp.

The only fly in the ointment might be that the broker did not report the correct sales prices to the MLS but a call to the local equalization will solve that one quickly.
 

Larboard

Member
Joined
Jun 25, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
If the realtor made 7% on each of the transactions, didn't s/he make $21,840 on a $4,000 investment?

158,000 x .07 = 11,060
154,000 x .07 = 10,780
total 21,840

546% ROI. Not bad.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Or the realtor uses the realtor's portion towards down, etc. - cheaper in and out.

Roger
 
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