In a short sale, the seller is motivated by having to sell is a market where the proceeds will not cover the encumbrance and relies on the willingness of the financing entity to take less than is owed. I do not consider that a "typical" sales situation whereby the seller is typically motivated.
I don’t know why you don’t consider the short sale transaction in which the seller agrees to sign the contract and sell that home not typically motivated seller. The definition says that buyer and seller are typically motivated. It doesn’t say that they are happily motivated. They might be unhappily motivated but they are motivated sell the property on their own free will.
The key word is “motivation”. Motivation means free will. Free will means the buyer or seller is not under “UNDUE INFLUNCE”.
If a mob or gang member put a note on the owner’s door telling him that he must sell his him and get out of there or his family is going to be dead and here is the purchase contract and the sale price, please sign it or else. That is called extortion and if the buyer signed and the house was sold, the value is not market value because the seller was not typically motivated.
If a listing agent hypnotizes a homeowner or get him high by drugs or alcohol and make him to sign the contract, it is not typically motivate.
If the listing agent uses a persuasion technique by fast-talking, false presentation and scare tactics to get a listing from a seller or make a buyer to buy a home, it is not typical motivation.
In the short sale transaction, the homeowner makes the decision to sell the home on his own free will. There is no undue influence on him. There is no inducement or manipulation. He is a facing a market reality and he has an option to let the home foreclosed or he can walk out. But he doesn’t want his credit be tainted. He knows that he is not able to pay the mortgage payment anymore. He still owns the home and has paid the mortgage so far but he cannot do it further. He is not able to refinance and if he wants to sell the home, the market value of the home is going to be more the mortgage amount outstanding. Sadly but wisely from his own free will he calls the lender and tell him that he is not going to be able to pay the mortgage for coming month and the value of home is less than the mortgage amount and ask him to let the home sold. The lender, after getting a drive by appraisal and a BPO, finds out that the market value of the home is indeed lower than the mortgage amount and willingly agrees to take the loss and let the home sold.
Why buyer and the seller are motivated in this situation although both of them are losers? The seller compares his decision in letting the house sold to not letting the house sold and if letting the house sold relieves him from stress, that is a free will motivation. Happiness or sadness, wining or losing are not absolute. They all are relative and if you decided to do on your own free will, you are motive. So, for the seller it is a good deal at this situation to get the lender’s approval, sell the home and get out of here.
The lender also compares the selling the home now and get whatever is the market value to let the home foreclosed, and then turn it to REO, which would take months or years and sell it for less with more expenses. The lender, although is losing money, but is happy that he can cut loss and get rid of the home. So, the lender is motivated
What is the motivation of a typical home seller? It can be anything. It can be a financial need, it can be the increase in the family, it can be a job transfer, and it can be just getting tired of the neighborhood. You cannot come up with a single definition for a typical motivation or typically motivated but you can say what is not a typically motivated transaction. If the decision is not based on person’s free will or is under undue influence, it is not typically motivated contract.
As to REO's/bank owned, their motivation is to get the real estate off of the books as they are unintended owners of the property as the result of foreclosure. Most often, the sooner the better. Yes they are motivated but in my mind, a lender/owner is not a typical owner of a property with an intention of selling the property to receive the maximum possible value for it in the market place.
It doesn’t matter if lenders intended or not to be the owner of that REO home. The fact is that they are the current owner of that home and they have the same right that a typical homeowner has. They can move to that home, sell it, rent it, destroy it or let it sit there for years but like a typical homeowner who is looking for his own best interest, they are looking for their best interest which is to sell that home prior to the foreclosure
Of course lenders are motivated to receive the maximum amount for the sale of their properties. bankers by default are the most capitalistic, materialistic and stingiest group of people and try to collect the last penny,
You may parse and define all you want but my interpretation is that the sale described in the definition of Market Value in the FNMA forms does not describe sales of bank owned properties nor short sales.
It doesn’t describe sales of any entity. It just says sales or the seller.
As I said earlier, it is impossible every typical motivation in the world is because any action that we take on our own free will is a typical motivation. You drive your car; you are typically motivated to drive your car. No body forces you do it. You take an assignment to do an appraisal; you are typically motivated by your own free will to do it. No body put a gun to your head to do it.
The best way to define typically motivated agreement or transaction is to define what is not a typically motivated agreement. The agreement or transaction, which is not based on, the free will or is done under undue influence is not a typically motivated transaction.
We can appraise to a value that would include the consideration of such bank owned and/or short sales sales and we can consider the impact of these sales in the final opinion of value based on indicated sales prices and market conditions but, IMNSHO, we should use them when appraising under the FNMA definition of Market Value as they are N/A.
When 75% of market consists of short sales and REOs and those transactions have followed all those 5 market value definition, then what is the problem? You may don’t like it but that is the reality and you have the accept it like the homeowner who has to sell the home at the short sale because it is better than getting it foreclosed or walk away form it and get a tainted credit history.
Is the short sale transaction cumbersome and long sometimes? Yes it is but this can happen to any transaction. Sometimes, the homeowner needs to transfer to property by a quitclaim deed to the lender in order to close the deal. Sometimes the lender who is handling the short sale is a servicer and need to contact the note holder. In a typical homeowner sales also there are some delays sometimes. The wife needs to quit claim the deed to the husband, a title needs to be cleared for some liens or judgments. These are the nature of real estate transactions
