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Realtor shenanigans

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Michael Martin

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Jan 21, 2005
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Certified Residential Appraiser
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New Hampshire
So - I'm doing an appraisal in a small town with very few comps. There is a subdivision within 1 mile(incidentally, the only comps within 1 mile). MLS listings have overstated selling price on each sale between $10-25000 from what the town has recorded(which is taken directly from deeds). I haven't spoken to realtor in this case yet but a couple weeks ago ran into a similar situation where it appears the realtor is overstating the closed sales to justify current listing prices.

I am just curious if anyone else has been running into this and was wondering what the consequences are for these realtors?
 

Karl

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Jan 15, 2002
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Licensed Appraiser
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Arizona
I feel your pain happens here constantly. The purpose is that they HOPE the Apprasiser will only use the MLS & YES!! there are some out here that do use ONLY the MLS.
 

hastalavista

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May 16, 2005
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Certified General Appraiser
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California
Are those new construction sales or resales in the other subdivision?
 

Ed Falkowski MAI SRA

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Jun 25, 2007
Professional Status
Certified General Appraiser
State
Pennsylvania
If you find multiple violations from any given realtor, I'd turn them in to whatever board of realtors that they're associated with. Unlike MBs, realtors are bound by a code of ethics and this certainly falls under that jurisdiction... :new_2gunsfiring_v1:
 

Michael Martin

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Jan 21, 2005
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Certified Residential Appraiser
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New Hampshire
They are new construction sales.
 

Terrel L. Shields

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Certified General Appraiser
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Arkansas
whatever board of realtors that they're associated with
Our state Realtor board has something to say about being misleading...much worse consequences than the MLS
 

Ken B

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Feb 18, 2004
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Certified General Appraiser
State
Florida
Our state Realtor board has something to say about being misleading...much worse consequences than the MLS

Yep...MLS will slap their little hands, fine them $50, and tell them to be good. Agents consider the fine a cost of doing business and could pretty much care less about it.

However, threaten them with a multiple thousand dollar fine and possible loss of their license...now you have their attention.
 

hastalavista

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May 16, 2005
Professional Status
Certified General Appraiser
State
California
They are new construction sales.

In that case, the sale price in MLS may not be misleading.

It is (or, was) very common in many of my markets for buyers to pay for certain upgrades outside of the purchase contract; the purpose of which was to reduce the tax liability.

So, base price was $500k.
Upgrades were $50k
Contract price is $550k.
Reported transfer price is $500k.
Actual cash-out-of-pocket from buyer is $550k.
MLS reports $550k as sales price.

This may not be the case in your situation.
Had the buyer not paid for upgrades outside of the contract, then it would have been wrapped into the sales contract and the recorded price would have matched the MLS price. But the bottom line to remember is the buyer would have been able to take possession of the house unless he or she coughed up $550k; so the actual sale price was $550k.
 

Michael Martin

Thread Starter
Junior Member
Joined
Jan 21, 2005
Professional Status
Certified Residential Appraiser
State
New Hampshire
It is (or, was) very common in many of my markets for buyers to pay for certain upgrades outside of the purchase contract; the purpose of which was to reduce the tax liability



You raise an interesting point here. Let's assume they are doing this(which as far as I know is illegal- side deals outside of closing) And let's also assume that the realtor admits this to me in my interview - I suppose I am bound to disclose this in the report. The fact that there are very few good comps available could make this a very interesting appraisal.

I am very curious to hear what the realtor says.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Just to give you another instance where it was done and I would think legally is in the payment of real estate commissions.
Buyer could negotiate with seller to pay the real estate commissions outside of the contract price.

In fact, a variant of this happens a lot when the seller is also the listing agent; rather than take the commission as wage-income, she or he will take the commission in net sale price for favorable tax consequences.

But, please do us a favor and post (if you can) what you find out.
 
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