Reporting sales price when $ is held in escrow

[Tim Schneider]

I am working on a subject that is new, and the owner/builder/developer is going to be finishing the basement for the buyer after the sale. The purchase price is $500K, but $20 will be held in escrow to go towards the basement finishing (the total will be more than $20K). So, would you report the sales price as $480K and mention the additional $20K in the contract analysis?

 

[Mztk1]

I'd report the contracted amount and under the analysis of the contract I'd disclose the escrow. I'd also call the client to make sure they are aware and be sure they want the appraisal "as is" without the basement finished. They may ask subject to and then have you go back out for the money to be released.

 

[Carnivore]

That is a mighty stupid buyer and lender who would close the loan with a subject to/escrow amount for less then the actual cost!

No wonder we have this huge mortgage crisis.

 

[Mike Boyd]

I would report it exactly as the contract was written and note that $20,000 will be held in escrow until the basement is finished. I hope you are doing the cost approach with the replacement cost of the basement separated. Let your client determine how they will close it. However, if your client insists on an "as is" report then you would give no value in the market grid for the finished basement.