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

[J Grant]

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?

You are correct in that the value of a property does not change because it has a sales contract of X when the property is worth a value of Y. Prices are facts, market value is an opinion. BUT for appraisal purpose, MV definition states a well informed buyer and seller. In your example, a seller taking 150k offer on a property worth 200k is not a well informed/well advised seller. He is allowed of course to be an idiot and take less $ for his property. But if the property were being appraised, its MV would be 200k, not 150k.

 

[J Grant]

one example

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

Yes a land contract with seller financing the seller has an interest in the property, perhaps seller even ownership revision right till the contract is paid off, but the OP did not state a land contract with seller financing, he t stated 3 buyers are waiting to close. In any case a land contract would not create an interest in the property till after it closed, correct ?

 

[J Grant]

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

I get it, but even with a land contract or seller financing, it does not create an interest in the property till after the title transfer /closing.

The OP did not mention seller financing or a land contract, but the value of a property is not encumbered on a deed just because it has a contract written on it...again I am not an attorney but have never heard of it

 

[jay trotta]

I'm looking for a term for this situation: the property to be appraised is raw land and the appraisal condition is AS-IS. However, the land is pending plat map approval and plan review, with three buyers waiting to close on three prospective sites. I am not appraising the prospective values, only the as-is value of the whole before map/plan approval and closing of the contracts.

So, the property is essentially 100% encumbered by three purchase contracts pending plan review.

When fee simple property is encumbered by a sales contract, WHAT is that called? I saw it somewhere...

I try to keep it simple, "As Is" unapproved - who knows IF an approval will take place, Contract is or maybe is "Subject To" approval and would appear to be binding only IF the approval is accepted by PZC....overworked, underpaid (stress) may be the cause of internal brain malfunctions, you'll get over it and we all have those days.