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Seller Concessions

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Bridgewood

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I am doing an appraisal in which ALL of the comps I am using (and those I decided not to use) have seller concessions of similar amounts. My sales contract also has similar seller concessions. I typically make adjustments that match the concessions dollar for dollar and have never had any issues. On this appraisal, my final value comes in below the contract price by an amount matching the concessions.

It seems that the typical sale in this market contains concessions. To me, it would seem logical to not adjust for the concessions. What are your thoughts?
 

hastalavista

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The amounts are the same but are the concessions for the same thing?
What is the concession for your subject and what is it for?
 

J Grant

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new construction or existing homes?

It's a tough question to answer...as the URAR /other directives is that concessions being typical for area is not the standard for no adjustment...the standard is are they present in virtually all transactions?

The second part of the directive ( read the URAR cert and limiting conditions page) is that the concessions be adjusted for affect on price...and it is per appraisers judgement. Thus, if concessions are typical, and the prices in your judgement are not affected upward by the concessions, then you would not adjust. However, if you do research, get feedback from RE agents etc that prices were affected upward by the concessions , then you have to adjust, even if the concessions are typical for the area. Are there non concession similar sales to compare prices to?

Enough to drive us crazy for sure, I personally wish there was a one size fits all adjust $ for $ every time a concession is present, (or better yet not allow them on financing, problem solved )
 

Peter LeQuire

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Tennessee
The question is (or ought to be): What would the sales prices of the comparables have been without the concessions?

Or better said - unaffected by concessions.
 
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Bobby Bucks

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North Dakota
This has the makings of an excellent thread, maybe we'll all finally find out if 100 minus 4 equals 96 or 100.
 

bnmappraisal

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Certified Residential Appraiser
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Florida
Call each of the agents for each of the sales (both sides) and ask if the concessions influenced the final price.
But that would take a bunch of time! :fencing: and be considered as "verification" of the data presented in the report :dancefool: (he says with great sarcasm)
 

glenn walker

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Just remember you don't adjust the Subject for concessions only the comparable sales ** So take the Subject off the table and clear your head .
 

residentialguy

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Mar 24, 2009
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Certified Residential Appraiser
State
Minnesota
It seems that the typical sale in this market contains concessions. To me, it would seem logical to not adjust for the concessions. What are your thoughts?
That logic would be wrong.
The following excerpt from the Selling Guide, Part XI, Section 406.5 (C) provides further guidance for these circumstances:
“The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area—large sales concessions can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate.... The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions.”

As Barry posted...call the agents and ask them if the buyer didn't need the seller to pay their concessions, would they lower the price to equal the concessions. I bet ya they would...dollar for dollar. Maybe more!.
Now, with that said, concessions are what...3%??? Houses that are identical sell with a greater variance than that. Make sure the market trend isn't a supporting factor to indicate that it is selling at market value. Good luck!
 

Meandering

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Feb 26, 2006
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Real Estate Agent or Broker
State
Pennsylvania
If all sales have concessions,

Just be very careful when analyzing the over all market condition, as those concessions aren't readily identifiable with the 1004MC.

Narrate, narrate, narrate.

Expect stips anyway.

.
 
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