Term for a property is encumbered by sales contract by value is as-is

[J Grant]

I'm confused why you are referring to sales contracts as an encumbrance - we often appraise subjects that have a pending contract and we disclose and analyze the SC, but it is not considered an encumbrance on the property .

A sales contract is a legal agreement between two parties with seller side typically holding escrow money and if buyer defaults seller might keep the escrow, but SC are between parties, not typically a lien or encumbrance on the property itself - unless I am missing something ..

 

[Overimprovement]

I think JG has an interesting point. Lets say a house easily worth $200K goes under contract for $150K due to ignorance of the seller. What is the value of the property prior to closing? The buyer has the OPTION and potential obligation to purchase the house for $150K. To the current owner, their CURRENT bundle of rights is definitely affected by this contract/option. It is similar to a leased fee interest in some respects. They cannot simply 'change their mind' and sell it for $200K, which may be the true 'market value'. Market value is not changing, but the value of the bundle of rights does change immediately before and after the sale closing. So it depends on what value we are providing, to whom, etc.

To the OP's question, does any part of the current valuation depend on these 3 contracts post-zoning/usage change? I would say 'market value' does not depend on these contracts, just like market value would not necessarily change with or without the sales contract in my example above.

What MIGHT affect market value (assuming that is the value you are determining) is of course the zoning/usage change, if it allows multiple lots where only one was allowed before. For that reason, I think a HC would be the way to go here, so long as you think that will be the actual outcome. Because IF the zoning change occurs, BUT all the contracts still go away, the market value will still have increased, yes?

 

[Mike Kennedy]

I'm confused why you are referring to sales contracts as an encumbrance - we often appraise subjects that have a pending contract and we disclose and analyze the SC, but it is not considered an encumbrance on the property .

A sales contract is a legal agreement between two parties with seller side typically holding escrow money and if buyer defaults seller might keep the escrow, but SC are between parties, not typically a lien or encumbrance on the property itself - unless I am missing something ..

see posts 2 and 3

 

[Tim The Enchanter]

I don't drink. Or toke. I do hang out on this forum though; and it's affected my head.

Well. That was pretty funny.

 

[J Grant]

see posts 2 and 3

Sales contracts are not on the lists of items that encumber a property on either of those two posts.
A sales contract is not a recorded lien on a property, it is a legal agreement between parties.

If one defaults, they can sue each other, but that does not affect the property itself, unless the seller is prohibited from selling till suit is resolved. I am not a RE lawyer but the damages are usually monetary, it is a legal agreement affecting parties, but not the property , which the owner retains ownership of till closing.

 

[J Grant]

From what I understand, these sales contracts are contingent on getting plat map approval If the approval does not happen, the contracts I assume are void. .

If the plat maps get approved. it will affect value of the property. That would happen whether or not sales contracts are written on the property)

The property value to be higher is contingent on plat map approval, the value not contingent on the contracts - even if the contracts are made contingent on getting plat map approval.)

 

[Mike Kennedy]

Sales contracts are not on the lists of items that encumber a property on either of those two posts.
A sales contract is not a recorded lien on a property, it is a legal agreement between parties.

If one defaults, they can sue each other, but that does not affect the property itself, unless the seller is prohibited from selling till suit is resolved. I am not a RE lawyer but the damages are usually monetary, it is a legal agreement affecting parties, but not the property , which the owner retains ownership of till closing.

post 2 blue box last sentence "any interest"

 

[J Grant]

https://www.cpp.edu/~hturner/ce313/real_estate_law.pdf

View attachment 45300

WHERE is "sales contact" in the above ? Since when did a sales contract become a lien on a property? A mortgage is recorded on a property deed, as is unpaid taxes and mechanics liens, deed restrictions etc. I am not a lawyer and maybe a state or region exists where a sales contract can be filed as a lien ?( but I have not personally heard of it)

A sales contract is a legal agreement between two parties,- the deed shows a sold price after title transfers at closing. I have never seen a deed with the sales contract recorded on it...

 

[J Grant]

post 2 blue box last sentence "any interest"

I think you are really stretching it here with your personal interpretation of "any interest" ... means a sales contract.

Neither one of us are RE attorneys, but since contracts are so common, one would assume if a sales contract created a lien or interest in a property they would have been named as such on the lists . That's not to say some attorney somewhere might make an argument for it -

 

[Mike Kennedy]

one example

"While the buyer is making payments to the seller, the buyer is considered to have an “equitable title” to the property. As an equitable title holder, the buyer has an interest in the land contract property and the seller is precluded from selling the property to a third party or subjecting the property to a lien or encumbrance that would interfere with the buyer’s interest in the property."

The Basics of Land Contracts

A land contract is a written contract with the seller used to purchase real estate. Learn about the basics of land contracts, including the benefits they offer.

www.nolo.com