Recorded sale price vs MLS sale price

[Fnbpos]

Ms Grant....if you knew your market you would know its happening in every high end golf course & water front community in that area. It STARTED in Palm Beach. And yes, Ms Grant, this is the result of attorneys; I didn't make any of this up. If you appraise in this area, you should know all about this

With all due respect, you need to go back and re-read all this, you are not getting it. The exact same amount of money is netting the seller and the same exact amount is costing the buyer as if they left it at $900,000. its just allocated differently to "produce" a lower price.

Tread lightly; remember your appraisal must be credible.

 

[J Grant]

I'll condense it... I offer you $900,000, you accept; signed contract. Attorney calls us in..."guess what guys, I moved this expense here and that expense there, shifted this here and there; we can allocate for personal property and MAKE IT LOOK TO THE ASSESSOR LIKE YOU ARE ONLY PAYING $784,000. Don't worry you're getting the same amount of money and paying the same amount of money as if we kept it at $900,000. Its a loophole that's perfectly legal....you guys in" And we sign off. You really going to use $784,000 ??

These are wealthy, sophisticated people who have bought and sold multiple properties, and the brokers/agents are very familiar with this practice and help negotiate the deal. I believe most of these future contract changes are already decided in rough amounts as a meeting of minds at initial "higher" price contract signing/meeting of the minds. Buyers and sellers don't; want surprises and big changes to a contract midstream. They go into these deals knowing they are going to call their attorney and direct them to portion out commission and pers property payments and just wait for final exact figures from attorney before signing the changed addendum page.


How about this real life one: Sale price $1,500,000; addendum added allocating $400,000 for "personal property and other fixtures" Recorded price $1,100,000. THE SUBJECT IS VACANT; NO FURNITURE; NO PERSONAL PROPERTY. Are you still going to use the recorded price ?

This last one is so impacted by strange terms I doubt I would use it as a comp. Personal property in this case could mean a high $ boat or car or other property in trade, since subject is vacant. We are referencing well informed buyers acting prudently per MV definition...which would not be a buyer willing to spend 400k over a 1.1 million $ worth house for invisible person property that does not exist.

 

[J Grant]

Ms Grant....if you knew your market you would know its happening in every high end golf course & water front community in that area. It STARTED in Palm Beach. And yes, Ms Grant, this is the result of attorneys; I didn't make any of this up. If you appraise in this area, you should know all about this

This absurd trying to shift this to a result of attorneys. It's a meeting of the minds by the parties and in high probability occurred at initial contract signing and they left the grunt work of the exact closing amounts to the attorneys.

With all due respect, you need to go back and re-read all this, you are not getting it. The exact same amount of money is netting the seller and the same exact amount is costing the buyer as if they left it at $900,000. its just allocated differently to "produce" a lower price.

Tread lightly; remember your appraisal must be credible.

Appraisals have to be credible and not misleading, and they are supposed to analyze and adjust for impact of terms of sale on price.

Any time I use a lower price amount on these deals I explain there was a higher recorded amount on MLS etc. So yes my reports are credible

And btw, these games of diff prices /shifting costs did use to occur more on golf or wf properties throughout the county, don't' see it much anymore except on Palm Beach Island or related area and a few deals here and there in the county.

 

[Fnbpos]

Ms Grant says: This last one is so impacted by strange terms I doubt I would use it as a comp. Personal property in this case could mean a high $ boat or car or other property in trade, since subject is vacant. We are referencing well informed buyers acting prudently per MV definition...which would not be a buyer willing to spend 400k over a 1.1 million $ worth house for invisible person property that does not exist.

Do you just make things up as you go along ?? "This last one is so impacted by strange terms.... " Where does it say that ? you said "could mean boat or car or other property" ??? where did you get that ??

I deal in this market EVERY DAY. You really don't have a clue do you ?

Let me make it clearer for you. Sale Price $1,500,000 signed contract; 2 weeks later addendum signed allocating $400,000 for "personal property and fixtures" DID YOU NOTICE THE WORD "FIXTURES" in there ??? That's real estate. Recorded Price $1,100,000. Interviewed the agent and ask "what personal property was referenced in the addendum" Answer: "there was no personal property" Now, what price are you using when this becomes a comp ?? $1,500,000 or $1,100,000.

Again, didn't make this up...real life case....

 

[Lost Cause]

Just A Minute!

One more reason why a Subject's reported "Contract Price" is irrelevant and should never be "given consideration or weight" in developing an "independent, OBJECTIVE OMV based on the confirmed actions of OTHER buyers of OTHER competitive properties.

Good post. Thanks.

How does this not affect other sales that one might use as comparables just as much as it does a contract on the subject property?

 

[J Grant]

Ms Grant says: This last one is so impacted by strange terms I doubt I would use it as a comp. Personal property in this case could mean a high $ boat or car or other property in trade, since subject is vacant. We are referencing well informed buyers acting prudently per MV definition...which would not be a buyer willing to spend 400k over a 1.1 million $ worth house for invisible person property that does not exist.

Do you just make things up as you go along ?? "This last one is so impacted by strange terms.... " Where does it say that ? you said "could mean boat or car or other property" ??? where did you get that ??

I deal in this market EVERY DAY. You really don't have a clue do you ?

Let me make it clearer for you. Sale Price $1,500,000 signed contract; 2 weeks later addendum signed allocating $400,000 for "personal property and fixtures" DID YOU NOTICE THE WORD "FIXTURES" in there ??? That's real estate. Recorded Price $1,100,000. Interviewed the agent and ask "what personal property was referenced in the addendum" Answer: "there was no personal property" Now, what price are you using when this becomes a comp ?? $1,500,000 or $1,100,000.

Again, didn't make this up...real life case....

Seriously, I would not use this as a comp. There is too much variance in this 400k supposed personal property/fixtures variance and I am not going to trust an agent on it. They have client confidentiality and are not going to tell me everything. If a deal is so strange, why use it as a comp? This deal does not even reflect the typical machinations of shifting around closing costs and commissions, at least you know what happened and why on those deals.

 

[J Grant]

I have a long time appraiser friend in Califronia who does some high end work there. We discuss this as she runs into the same thing on certain transactions and she uses the lower recorded and verified sale prices. So it is certainly not 100% agreed on peer practice to use the higher prices. I can see using them in certain cases but it's a conflicted issue because at the end of the day, the shifting of amounts of closing coss, pers property etc did impact price.

It's games all the way....do you not see that virtually all these contracts are cash deals? Which means the buyer is going to have to perform no matter what. They are just hoping they get an appraiser who appraises market value at the higher amount.

They parties sign at 900k , but , unless they are idiots, agree then and there to lower the actual price to a ballpark estimate of 785k at closing with agreed on amounts for commissions and closing costs and pers property . They agree to sign amendment of revision of price when exact figures are worked out by the attorneys. A week later the attorneys get final closing costs and payouts, an addendum is drawn up for 784 k with costs allocated to be paid by parties and they sign.

So buyer is getting the advantage for a recorded lower price, paying a lower price if buyer pays commissions.

They keep fingers crossed appraiser will come in at original agreed amount of 900k. If that happens, buyer can now borrow a high LTV and borrow 850k, for example, and pay a small amount out of pocket for costs.

If they get an appraiser who appraises to lower amount, they still have to buy the property in an all cash deal but now the buyer has to borrow a lesser amount.

 

[Peter LeQuire]

Lessee, now -

The attorney, seller, buyer and RE agent collude to call a portion of the real property personal property to (1) reduce future real estate taxes and, probably (2) RE transfer, document and recording fees. Somehow, that sounds like they're misrepresenting the transaction in order to avoid taxes. Is that not illegal?

Those terms are irrelevant to the appraisal of the property. However, going forward and choosing whether to use it as a comp: knowing the terms, would you overlook the obvious misrepresentations of how the purchase price was applied and report the higher price? Or would you report the price of the transaction as it was recorded?

Were I to use it (though I'd try hard not to) I would use the amount that was of public record: to do otherwise is to misrepresent the transaction. Using the recorded price is more defensible (IMO) than using the MLS-reported price. Knowing the terms, to use the higher price you'd have to credit the SP with the seller's closing costs the buyer is paying (a "reverse concession"?) and overlook the sworn amount attributed to non-existent personal property. (Or, using the second transaction of $1.5 MM, simply overlooking the $400,000 of "personal property" that doesn't exist).

A parallel game has been played here for decades. TN has an "affidavit of consideration" that must be completed for every warranty deed recorded. The language of the affidavit is that the recorded amount is the greater of the "market value" of the property and the price paid: the amount stated in the affidavit is the amount that determines recording fees and transfer taxes. In some counties, the affidavit will consistently be less than the actual price - people just being cheap and wanting to minimize transfer costs. In other areas, particularly in sales by a developer, the affidavit is routinely higher than the actual price: the developer obviously has an interest in driving prices up. The relatively small amount of higher transfer fees is more than offset by the perception that buyers - and appraisers - have about prices.

 

[Mile High Trout]

Ohhhh.....

Nobody wants the real numbers. Geesh.

If people wanted the actual net numbers, the county record would only record the net to seller, and never include ancillary costs and servicing costs.

Every single financed loan in this country for housing, should have two loans originated with it, if not more.

The primary loan being the amount of the home price.

The secondary loan being the amount of all the other services, usually 7% ish.

The system is designed to be tricky, and allow for concealing this and that. It's flawed on purpose, by purposeful design.

 

[ValueArtist]

I've seen the same discrepancy in sales price here in CA, where the county has the sale some significant amount less than what MLS indicates and the listing explains that the buyer has separately paid RE-com etc. I assumed it must have been some sort of tax scheme, and was confirmed as such by the selling agent.