Seller/Buyer Motivation

[Tom D]

If the market value opinion is above the SC price we should make a comment - to CYA if nothing else. Since lenders can get audited as well, they might ask for a comment if the value is above the SC price. Imo its worth the effort to be proactive in case the appraisal is ever reviewed .

I think fannie is happy to see something other than your every appraisal pattern meets the sale price in you appraising life. If there is an actual reason the value could be higher you can say it. But mostly lender concerned about higher than the predominate value.

 

[ZZGAMAZZ]

So the Sales Price is $500,000? And your opinion of value is $525,000? I don't know what an institutional sale is, but if you want to say a few words about the difference, I'm sure the report Reader at FHA will appreciate that. Move on.

The purchase contact indicates that "the instituional owner/seller has never lived in the property, nor will the seller make any improvements including mandatory lender requirements."

 

[ZZGAMAZZ]

I think fannie is happy to see something other than your every appraisal pattern meets the sale price in you appraising life. If there is an actual reason the value could be higher you can say it. But mostly lender concerned about higher than the predominate value.

Kinda complex property as a small SFR on a small lot in a small PUD, with only one sale in the pud during the past 30 months...with a list price of $490,000 reduced to about $470,000 after a week, now under contract at $452,000.... and an Opinion of Value of $480,000...

 

[George Hatch]

Some transactions go off at below market prices. It happens. If the contract price is outweighed by the comparable sales then just say so.

 

[ZZGAMAZZ]

Real-world buyers and sellers can make emotion-driven or investment flip or herd-driven decisions. The appraiser is supposed to take that into account when looking at the data.

The appraiser is also supposed to use the MV definition of buyer and seller motivation to vet their own value opinion as well as sale prices, which is why an appraisal market value opinion can be higher or lower than an SC price or desired refi target.

I'm going to describe the brief, wild listing history. Aksi seems that the seller refusal to pay for any improvements even those required by the lender would significantly affect the selling price, although that factor is described in the seller counter offer but not disclosed in the MLS listing,

 

[NC Appraising]

Zz,

In my market, these types of properties have a higher level of physical depreciation due to these properties being rented. They just feel different....a c3 institutional home to a well taken cared for owner occupied c3 home. Buyers seem to notice this too.

There is also a slight stigmatization. Sorta like a vacant home or a estate sale. Buyers have that "we got them where we want them attitude".

Ever noticed that a vacant home sells for slightly less than a occupied home in some cases? Another example is a presale home as compared to a spec home. I have noticed that a spec home typically sells for 3-6% below presale homes.

I have noticed that even when these institutional homes get updated, they are done with low paid contractors and the quality is sub-par. Lip stick on a pig.

Best example is a car being painted by Maaco and a car being painted by the dealership.

As for the sellers not making repairs...OK, they make not make repairs, but i bet that they will lower the price!

I have also seen a uptick in these institutional buyers selling homes..rents are down and many think that the law will be passed on how many homes a institutional lender can own.

It will be similar to the 2010 REO market. Two different price points. One for traditional sellers and one for institutional homes.

 

[Terrel L. Shields]

Again, what motivates an individual to buy or sell? The seller might tell you they are downsizing, moving, want to have a newer, smaller, larger home. But can we quantify that readily? Lots of empty nesters don't need 5 bedrooms. People retire or move (like they are from CA) due to high taxes. Or like oil people move out or into W. Texas and N. Dakota, due to changes in the job market. People are moving to Atlanta, N. Dallas, and NW Arkansas because jobs are plentiful and prices are not falling. But to quantify the individual transaction is a joke.

My SIL just sold her house. In 4 years, she will make a 50% return because of housing demand within easy drive of Walmart headquarters and hundreds of vendors. Before buying that she sold a house at least that good that was 15 years old in Joplin MO and did little more than get her money back. The market there is much less active. That same house would have not even moved the needle if sold there instead of Centerton (a Bentonville suburb.)

There is no way to quantify accurately the motivations of seller and buyer. That's my story and I am sticking to it.

Factoid. "Staged" houses sell for more and AI is creating fake house furnishings to the MLS

 

[Mike Ault]

In relocation appraisal work clients are interested in buyer/seller motivations and I like to seek out other homes which are being marketed by relocation companies instead of private sellers so I can demonstrate how the property could be stigmatized in the market by institutional ownership. Once a relocation company buys out the transferee and everybody knows it, the market typically applies a substantial discount to such ownership as it is considered a distressed offering. However, in those assignments we are interested in "anticipated sales price" instead of "market value", so in a typical market value lending appraisal assignment I would just discuss but not adjust for the subjects form of ownership or other issues in the contract which make it appear distressed.

 

[J Grant]

Again, what motivates an individual to buy or sell? The seller might tell you they are downsizing, moving, want to have a newer, smaller, larger home. But can we quantify that readily? Lots of empty nesters don't need 5 bedrooms. People retire or move (like they are from CA) due to high taxes. Or like oil people move out or into W. Texas and N. Dakota, due to changes in the job market. People are moving to Atlanta, N. Dallas, and NW Arkansas because jobs are plentiful and prices are not falling. But to quantify the individual transaction is a joke.

My SIL just sold her house. In 4 years, she will make a 50% return because of housing demand within easy drive of Walmart headquarters and hundreds of vendors. Before buying that she sold a house at least that good that was 15 years old in Joplin MO and did little more than get her money back. The market there is much less active. That same house would have not even moved the needle if sold there instead of Centerton (a Bentonville suburb.)

There is no way to quantify accurately the motivations of seller and buyer. That's my story and I am sticking to it.

Factoid. "Staged" houses sell for more and AI is creating fake house furnishings to the MLS

There is no way to quantify the motivations of each individual seller and buyer (out in the market ) accurately.

The above is why we do not overly concern ourselves with their motivations, because we, as the APPRAISER when seeking market value, use the modeling of hypothetical buyer and seller motivation that appear in the market value definition.

While we can not accurately quantify the motivations of an individual seller and buyer, there are buyer and seller patterns of behaviors that are more prevalent and therefore considered typical among most market participants in a given market cycle or for an X type of property and price range.

 

[J Grant]

I'm going to describe the brief, wild listing history. Aksi seems that the seller refusal to pay for any improvements even those required by the lender would significantly affect the selling price, although that factor is described in the seller counter offer but not disclosed in the MLS listing,

If the lender requires improvements, and the seller refuses to pay, then who is paying for them? The above makes me question if repair or other conditoins affected price.
A price due to repair items is a different animal than a price due to buyer or seller motivation ( though the two can overlap)