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Sales Price vs List Price

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RW Goebel

Thread Starter
Freshman Member
Joined
Jun 9, 2003
Professional Status
Certified Residential Appraiser
State
Arizona
With the "mortgage fraud" frenzy upon us, what duty does the appraiser have to report a sales price that is more than an MLS Listing price, where the difference is equal to the sales contract "concessions."

Example: An assignment is received from a mortgage broker. Upon research, the appraiser finds that the contract price for the property is $zzz.XX. When researching the MLS he finds that the most recent list price is $YYY.YY.

$YYY.YY is several thousand dollars less than $zzz.XX. In the contract, the seller has agreed to pay $ZZZ.ZZ towards the buyers closing costs. $ZZZ.ZZ just happens to be equal to the difference between $zzz.XX and $YYY.YY.

Other than reporting the facts of the transaction, does the appraiser owe a duty to his client to remark about the possibility of an unetical transaction?
 

Charles Decker

Sophomore Member
Joined
Nov 16, 2006
Professional Status
Certified Residential Appraiser
State
Arizona
To borrow a line from TO:
get your popcorn ready
:new_2gunsfiring_v1:
 

G-man

Member
Joined
Feb 4, 2002
Professional Status
Licensed Appraiser
State
Ohio
What's unethical?

If your asking if it is unethical for the seller to pay buyers closing costs, etc. and then up the asking price to cover those costs, then no, it is not unethical, in my opinion, to do that. You, the appraiser must note these additional costs in the report, where it asks if there is any type of financial assistance being paid. Check yes, explain how much is being paid and for what purpose, and appraise property to fair market value, if that is the assignment.
If the buyer wishes to pay more than F.M.V., that is their problem, not yours. But in todays market, especially where I'm at, any price over list is usually not gonna fly. Hell, list price for most properties ain't gonna make it.
Just my $0.02.
 

DJBanas

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Pennsylvania
First, how do you know it is unethical? There are many times that the Listed Price is not met and it could be either high or low.

Second, just report what you know. Show the listing info where it should be. State the sales contract price and date. Show the concession amount.

Don't offer legal opinions, you'll just get burnt.

Don
 

Joker

Elite Member
Joined
May 28, 2002
Professional Status
Certified General Appraiser
State
Ohio
Other than reporting the facts of the transaction, does the appraiser owe a duty to his client to remark about the possibility of an unetical transaction?
Assuming the appraisal is for present market vaue.....

Has Std 1-5 or 2-2 been removed from USPAP? (In case some are too lazy to look it up, it says you must analyze (and report the results of the analyses) all agreements of sale, and listings of the subject property.

There is a difference between reporting the facts and analyzing the data. Your obligation per USPAP is to analyze the data and provide a summary of the RESULTS of that analyses.

So, yes. You are obligated to analyze and report. I wouldn't be quick to judge or use the "F" word, but report the results of your analyses.
 
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ccooper

Junior Member
Joined
Mar 9, 2002
Professional Status
Certified General Appraiser
State
Missouri
This has become farily common over the years and has been standard on FHA purchases for years. It becomes unethical only when they ask you to hide your analysis of the true facts. If someone calls and asks you to take out any reference to seller paying ZZZ of closing costs. If they send you a revised contract with all of the references to ZZZ payments by seller out and the contract price is still the same, then you just need to make sure you don't mislead the lender. This exact thing happened to us last week. We reported seller paid concessions in original appraisal. Week later we get a revised sales contract, with same sales price, with all references to ZZZ payments by seller gone. We simply stated in an addenda all of the contracts that we had seen. We are safe. Disclosed everything.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
Gee, I wonder why the foreclosure rate is so high???


However, it is possible the property was under listed for the market and it will work out OK. Yeah, never works here, but it must work somewhere. Skippytown, USA?
 

Joyce Potts

Elite Member
Supporting Member
Joined
Feb 6, 2005
Professional Status
Certified Residential Appraiser
State
Florida
Overwhelmingly most appraisers think the sales price recorded in the public records is accurate and they have no duty to qualify a sale that may have built-in concessions or excessive sales commissions. To some extent, they may be right, however, when you have an advertised list price lower than the final selling price, it doesn't take an Einstein to put two and two together.

Sellers, builders/developers and Realtors are much more savvy these days--especially when it comes to 'new' construction and the 'creative' marketing concepts used to get the deal done. I'm seeing concessions and excessive sales commissions being written as addendums which don't usually end up being delivered to the appraisers (probably not to the lender either, but that ain't my problem) or contracts being amended after the loan is applied for.

I continue to be amazed how many appraisers think the title company or whomever is closing that loan has some kind of obligation to adjust the doc stamps and/or intangible tax on that deed to reflect the real sales price. The closer goes by the TOP NUMBER on the contract folks. It's all about HOW the contract is written. You have to look at creative 'credits' within the body of the HUD-1.

The only sure way anyone can get to the bottom of the actual, net sales price is to procure the HUD-1's and LEARN to read them properly. Suspicious credits for 'electrical escrows', decorating allowances, HOA Dues, price adjustments, excessive sales commissions are CONCESSIONS, IMO. These tactics are being used to get the borrowers into the properties with little to no money down shifting the higher risk factor to the lenders and in the worst case scenario, the tax payer which is you and me who will be bailing out the lending industry once again. Where did those billions in profits go? Enron pales by comparison.

In many cases the lenders and/or their reps know what's going on and continue to pressure and exploit the appraiser who will not assume the responsibility to get to the real answer.

I am 200% convinced it will NEVER change.
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
I have stated in my reports there are sales within the subject’s market segment where the two loans equal the sales price. These sales typically are limited to a few lenders who have loan programs that allow 100% finance with the exception of a VA loan. As an appraiser we must analyze these transaction in respect did the buyer buy a mortgage or buy a property?

I typically use sales with traditional market exposure and reasonable financing. It is amazing how many properties where listed in MLS and then are withdrawn from the system and then close for a higher amount with 100% or more financing. It all comes down to what is a reliable indicator of value for your subject.
 

Geoff Hatcher

Junior Member
Joined
Jan 23, 2002
Professional Status
Certified General Appraiser
State
Ohio
Actually, the concession is no always equal to the sales price less the listing price. Often it is higher, the only way to find this information is by verifying the sale. You have to talk to a party involved in the transaction, fo residential properties, that is typically the selling agent, or the buyers agent. 95% of the time they will share the concessions, a few claim client confidentiality.
 
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