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Sp/Lp ratio adjustment for this one?

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CANative

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Jun 18, 2003
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California
Refi appraisal in a waterfront type community in a rural county. Very bad market conditions at this time. Pricing is all over the place in this development. I typically make adjustments for Sp/Lp ratio. But the same day I inspected this one I also inspected the property across the street for a purchase.

Not listed in MLS... pocket listing or else the agent found this property for a guy looking for a vacation place. ( Rich guy buyer from out of the area. I don't know why he wants a 2nd home in this kind of dingy developmetn or why he's getting financing instead of paying cash).

In using this as a comp for the property across the street, I don't know whether to apply an adjustment for this contract sale even though I have the contract. My appraisal may effect the price paid. I don't think the contract price is supported.
 
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Jeez, it must be hell appraising in certain parts of CA now. As to your specific question, if you do not think the contract price is supported, do not use it as a comp. It is tempting though because it is certainly proximate to the subject. You mention that pricing is all over the place in that development so your final value conclusion will probably be more of a "gut" feeling of value than a value that has significant empirical support. All things considered, I don't know if I'd toss that particular comp into the ring. (might just further muddy the waters......but it IS really proximate though)
 

Mary Tiernan

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Not exposed to the open market, and you have questions as to validity of sale price.

Why use it? I would certainly mention that the property across the street sold and detail the terms, but then explain that it is not considered a valid sale.
 
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I think it's a valid comp, even though the sale price is a high end outlier. One comp is an outlier, two comps may be a trend, but three comps are a solid market indicator. (Not necessarily, but that's often the way our business works.)

You don't have to give it a lot of weight, and if you are using it as an Under Contract comp, the discount you apply should reflect your opinion of the real market value for the property.
 

Mztk1

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A contract price is confidential information. I wouldn't put the comp's contract price in unless I had the okay from the agent involved.

Sometimes sales are too high (I got a cash sale now at over 700K in an area of 400K houses) that I throw them out. If we can do that with a closed sale, Why not a pending?

You know that house across the street better than anyone. Decide whether it reflects the market and if not discuss why it is not used in the appraisal in your narrative. If you find it does reflect the market use it and ask the agent if you can disclose the price in another appraisal you are doing. If they say "No" then make a list price ratio adjustment based on the market and weight it accordingly.
 

Mike Boyd

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I presume the property is in the Keys?

Remember, the canal CLOSEST to the lake has more value, in itself, than the house across the street where the canal is farther from the lake. The farthest from the lake can go dry or nearly so, every fall before the rains start. Or, it might have a superior boat dock. I would use it, but, all other features equal or made equal by adjustments, give it little, if any, weight. This is summer and those properties typically sell better at this time of year.
 

CANative

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California
The market has become too unstable to discern price differences between anything but major differences in the channel location anymore. Too many REO's, foreclosures, short sales, etc. The refi house appraisal is on one of those 35 foot lots with a structure oriented perpendicular to the street with the garage at the front. There are so few comps with such a wide variance in sales prices and I am set against using anything which sold in 2007. The market has declined 26% (at least) and the current median is almost the same as the 2003/2004 median.

I'm hanging my hat on the unadjusted sales price of a 6/08 sale with similar lot and house. Adjusts upwards for a modest carport versus the subject's 24 x 20 garage. $223,000 I can live with.

But there is a pending sale of a property with a larger lot (house not in as good condition) the adjusts down to $180's or $190. Which makes my $223 look bad. But the pending sale I inspected across the street has a wide lot with a similar age house oriented parallel to the street with garage that forms an L shape. GLA is only 180 sf larger and it's a 3 bedroom versus 2 bedroom. But it has a contracted price of $347,500. These two pendings illustrate to the reader just how irrational pricing can be. Investors picking up project houses from banks and now it's turning into an auction market. A house a lot like the $347k house above sold at auction for $155k. Granted, it needed some TLC but you could build a new house for less than the $200k difference.

:Eyecrazy:
 
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Colorado
Rich folk don't get rich by giving away their money, but one of the easiest marks for Real Estate Brokers is the affluent out of state (or region) buyer, who brings a market perception from a much higher value area. I'll bet the buyer across the street would appreciate an honest appraisal, especially if his lack of knowledge about the local values led to a purchase price 20-30% or more above market value.

I heard about the sale of Condo in the Cherry Creek North sub area (Denver's version of Rodeo Drive, but not as tony). The relitter picked up the foreign national buyer at the airport, showed him the condo, and sold if for $2m+ -- which was probably several 100k more than it was worth. But it's a closed sale, and for this type of buyer, it's often funny money -- they have so much, the price doesn't matter.

You never know when a market is going to turn -- out of town buyers might have decided that it's close enough to the bottom that now is the time to pick up some bargains. But this high end contract sounds like an unfamiliar buyer.
 

CANative

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California
The price is about right for mid 2006.
 

Mike Boyd

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California
I'm hanging my hat on the unadjusted sales price of a 6/08 sale with similar lot and house. Adjusts upwards for a modest carport versus the subject's 24 x 20 garage. $223,000 I can live with.
:Eyecrazy:

I agree with you. The other houses you write about are just too different for that sub-market.

However, if you spent a few consecutive hours in that development when one channel is nothing but mud, rotting algae and dead fish and the channel across the street is still open, you might have a better take on it. You might confer with Janice on that issue. (for other readers, Janice is a broker who has spent her entire RE career working that specific subdivision.)
 
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