Suppressed sale prices in public records

[MBD]

What is the appropriate way to handle suppressed sale prices? MLS says the price is $zzz, realtor confirms that was the actual sales price. Off the record, there was cash under the table to reduce cap gains taxes for seller and property taxes for buyer. Sale price is recorded as 1/2 to 2/3 of actual price.

Typically on the appraisal report, I would state the recorded price, but reconcile at high in the range to account for this.

 

[George W Dodd]

Michael,

Report the actual sales price from MLS and then state why there is a difference in public records.

 

[Smokey Bear]

And don't forget to send a copy of the MLS to the local assessor's office, with you explanation.

 

[Oregon Doug]

What is the appropriate way to handle suppressed sale prices? MLS says the price is $zzz, realtor confirms that was the actual sales price. Off the record, there was cash under the table to reduce cap gains taxes for seller and property taxes for buyer. Sale price is recorded as 1/2 to 2/3 of actual price.

Typically on the appraisal report, I would state the recorded price, but reconcile at high in the range to account for this.

The best way to handle such matters is to DISCLOSE what you KNOW (don't "disclose" anything that you don't know!).

Lots of states & counties deal with these matters differently. In some states the sale price is recorded as "$1 and other consideration", some states use Doc stamps (usually $1.10 per $1,000 sale price), some require the true sale price be recorded (CA has Prop XIII). I don't know what FL does.

Sometimes the buyers & sellers are in cahoots to defraud the IRS (capital gains taxes) and/or the local property tax assessor - and I'm sure that you wouldn't want to get involved as a participant - so just disclose what you know and do your appraisal in an unbiased manor.

Oregon Doug

 

[Walter Kirk]

If there was cash under the table the sale is not appropriate for use as a comparable. If the property is your subject just report what you know or suspect. In most jurusdictions misreporting a sales price is a crime and doing so to avoid capital gains is conspiracy to avoid income tax, a big no no.

 

[Don Clark]

Walter,

I disagree. If the appraiser can confirm from a reliable source, the actual sales price of a property where does it say that the sale cannot be used? One of the purposes of confriming sales data is that there is often conflicting information about sales price, terms, conditions, etc. I see no reason given in USPAP, or by any secondary market purchaser or loans why you could not use that sale. Some states do not even record sales data. Appraisers have to rely on the best information they can obtain.

I say use it and explain it as george has stated.

 

[Walter Kirk]

Don,
A person who buys a property in a cash under the table transaction is not "typically motivated" If the buyer is hiding some of his purchase price he either has something to hide himself (like undeclared income) or he believes that he is getting a bargain. In any event this buyer is not represenative of the market and as such cash under the table transactions are misleading as indicators of market activity.

 

[Pamela Crowley (Florida)]

Those sale prices cannot be verified with public records. The AVMs will be using the recorded price and you will have to provide proof that the recorded price was wrong every time you use one of these. Better get the signed copy of the HUD-1. Fraud was perpetrated for this to have happened and there's no way I'd ever use one of those sales as a comp. I would explain in my appraisals where they should have been able to be used why there were not used though. Might as well do it in the first version of your appraisal report because you can bet they will be asked about.

Jerks everywhere!