Sudden Increase Of Value From Previous Purchase

[J Grant]

You might want to brush up on your reading comprehension, nowhere in my posts was I excusing poor appraisal practice or saying no analysis is needed, nor that the OP scenario needs no explanation.

I was pointing out that appraisers should not be doing retrospective appraisal opinions on prior sales, which might come from feeling they have to defend their value opinion vs the prior sale price.

 

[J Grant]

Bull. Providing an explanation of why the value of the subject property apparently significantly increased

This above is the bull (bait) that appraisers need to watch out for, what I was referencing about making a retrospective opinion of subject prior date value. Your saying one should make an EXPLANATION OF WHY THE VALUE OF THE SUBJECT PROPERTY APPARENTLY SIGNIFICANTLY INCREASED is wrong because if an appraiser says that, they have given a prior date value opinion...( an appraisal). If they claim subject value increased since prior sale, that means they are referencing the value was lower in prior sale (an appraisal opinion of value) .

The PRICE was lower on prior sale date, not necessarily the "value" .

One can say that prices in the market area or subdivision increased, or decreased, or were stable since prior sale date of subject.

 

[timd354]

Bull. Providing an explanation of why the value of the subject property apparently significantly increased

This above is the bull (bait) that appraisers need to watch out for, what I was referencing about making a retrospective opinion of subject prior date value. Your saying one should make an EXPLANATION OF WHY THE VALUE OF THE SUBJECT PROPERTY APPARENTLY SIGNIFICANTLY INCREASED is wrong because if an appraiser says that, they have given a prior date value opinion...( an appraisal). If they claim subject value increased since prior sale, that means they are referencing the value was lower in prior sale (an appraisal opinion of value) .

The PRICE was lower on prior sale date, not necessarily the "value" .

One can say that prices in the market area or subdivision increased, or decreased, or were stable since prior sale date of subject.

Just stop. You know what the problem is, but you continue to make excuses for appraisers who don't do an adequate job.

 

[redfish]

"The subject property was purchased by the current owner in an estate sale. The prior sale was an arms length transaction however the home was not exposed to the public and the current owners were relatives of a close friend to the trustee of the estate resulting in a sale price that was consistent with the low end of the price range in the market at the time of the prior sale."

Snippet from a report I am working on now. Cookie for the first one to answer: "where is this information placed in the 1004 URAR"?

 

[Deleted member 128537]

True, but if a property is substantially under listed, then either one of two things should happen. Either the propertry will sell in a very short amount of time with significantly less DOM than typically priced sales in the area or (in hot markets), there will be multiple offers with the price being bid back up to market value.

I have seen properties sell for under market such that I can't use them as comparables. I have also seen properties sell for more than market such that I can't use them as comparables. Both are outliers. Just because a property sells doesn't mean it sells for market value. If we can appraise a property for less than the purchase price (significantly), we can also appraise a property for significantly more than the purchase price. And indeed that has happened. I have all kinds of examples in my file. I have done 2 this 6 months that way undersold for market and both were on the market for adequate exposure. But there were reasons why in each case. In one case it was nearly 200,000 under market. And when I told other appraisers in the area about it they couldn't believe it. Vacant sites in that area sold for 200,000 more. What I am saying is the market isn't that perfect. There will always be outliers.

As to explaining why a property appraises for significantly more than what it was purchased for clearly that explanation has to be made on the 1004. I am certainly not discounting that. But that also has to be done in the opposite direction. What if the property appraises for significantly less than what it sold for? Either way an explanation has to be made if it can be.

 

[Tom D]

did you ask the listing realtor about the previous sale. it's recent enough maybe they can remember. and that could be the shortest best answer.

my comment is "i was not present when the property was listed. i was not present when the property was put under agreement of sale. i do not know the motivation of the previous seller therefore, i cannot comment on the previous sold price. the current appraisal has provided yada yada." funny thing is the sold appraisal could have been higher than the sold price. but i understand the lender being cautious.
you should have seen this coming as others have said. there are enough answers before me to write a reasonable reply.

 

[Don Clark]

Hi, need help on a condition from the lender. The lender is requesting a comment on why the appraisal value is higher than the previous purchase price 9 months prior sale. I also have reported that the subject is in a stable market. I will add some factors that can be considered.

1. Subject property was improved and renovated with remodeled kitchen, bathrooms, new fence, new furnace, new water heater, and new carpet. These improvements were done from the previous owner and not the current owner.

2. Can I make a comment suggesting appreciation within 9 months prior from purchase in a stable market?

3. Comps with similar amenities are selling much higher than the original purchase price 9 months ago.

Any suggestions would be greatly appreciated, thanks!

Just completed one similar. It sold 3/15 $245,000 and now wants a refi at $355,000

I pulled the MLS interior photos of the prior sale, and the Veteran provided a list of all repairs, upgrades, etc done since then for a total of $72,000 The interior photos on the prior sale assisted greatly in confirming most of what his list contained. May not get all he wants but will get enough to complete the upgrades he has started. Will have to complete a few 3 S's but they are minor. I would leave the appreciation thing alone. It likely will not help.

 

[J Grant]

Just completed one similar. It sold 3/15 $245,000 and now wants a refi at $355,000

I pulled the MLS interior photos of the prior sale, and the Veteran provided a list of all repairs, upgrades, etc done since then for a total of $72,000 The interior photos on the prior sale assisted greatly in confirming most of what his list contained. May not get all he wants but will get enough to complete the upgrades he has started. Will have to complete a few 3 S's but they are minor. I would leave the appreciation thing alone. It likely will not help.

This is an easy one, the owner made substantial upgrades since prior purchase. Which means the appraisal will use similar upgraded comp sales now. The prior price reflected condition of sale at that time.

 

[Slappy]

I do a lot of "flips" in my market (distress purchases/rehabs). I look at several issues. 1. Was the property purchased by the seller below prevailing market? Such as a courthouse sale/divorce sale/REO/short sale etc. 2. Assess/discuss any repairs/remodeling which have enhanced marketability. 3. Assess, the impact of any market factors ie appreciation. The client would expect an explanation of any significant bump in value and and analysis of the interplay of these issues should get you started.