- Apr 23, 2002
- Professional Status
- Certified General Appraiser
$500,00 x 0.03 = $4,000?
Great post ! And illustrates why the fannie guideline is confusing and if taken the wrong way contradicts the URAR mandate about adjust for affect on price rather than mechanically $ 4 $. Because the fannie lingo is what THEY would have sold for without the concession, ( should have simply re iterated the URAR directive, wtf is it with fannie lately one weird thing after another)There seems to be confusion on what an adjustment is. It is NOT what that ONE particular buyer considers a feature to be worth, but what the market in general has considered that feature to be worth. Someone looking for a pool may well consider the value of that pool to be $25,000, and be willing to pay that much more for a home with one. But the market, across the board for that style/size/quality home, may have determined overall the value is $10,000. Which adjustment would go in the report?
Apply that to a sales concession. Buyer A may very well need 4% concessions to make that deal work because they are so short on cash. But how about the market in general? If nearly every deal has/needs such a concession, that is quite different from a market where many sales are for cash.
Some seem to be saying that on a particular investment property (similar to ones which mostly sell for cash in that market) that has $5,000 in seller paid concessions, that $5,000 is thus the appropriate adjustment? How about if that same investment property flips 6 months later for cash? Same house, one with concessions, one without. Clearly the market is not demanding concessions on every sale.
Our adjustments are market-driven, not specific deal/buyer driven.
That is why we go through such trouble DERIVING our adjustments for a feature by analyzing the market in general, not simply letting the buyer tell us what something is worth.
Analyze the sale means to analyze the sale, even if takes another 20 minutes to complete the assignment and move on to the next fee.
How many days on market? What is the typical time to sell a property like the subject and the comparable? How much was the sale vs. the original list price and last list price? What about when the credit is for repairs or changes? Is this a market where concessions, credits and buy downs are needed to secure q sale? etc., etc.
Sometimes $4$ is appropriate and other times it is not. This is an opinion. There is no right or wrong. Explain yourself and who can criticize you?