Using a private sale as a comp?

[Michael Joseph]

I am appraising a house in a gated subdivision. There are two private sales that were not offered for sale in the multiple listing service that I think would be particularly valuable if I could verify the information about these sales. The square footage, lot size, room count, bedroom and bath count provided in tax records I believe is very reliable and credible. However I have no information about the condition and if any upgrades to the interior of the house. So my first question is what data source verifying the condition, upgrades, etc in this particular situation would be considered to be credible and reliable? Assuming that I am able to obtain the information can I even use these sales since they were not offered on the open market. They are very recent sales to the effective date of the appraisal and they are selling at about 10% more than all of the sales I was able to obtain from the MLS.

 

[Russ Kitzberger]

I see a good amount of private sales in my practice. I verify a lot of sales with parties to transactions, even MLS sales.

Start with a web search of the property, view prior listings on Zillow, Trulia, etc. Check the auditors classification of the sale. We have a DTE form that the auditor uses to track the sale as well you can view to see what the sale is classified as. Pull the deeds, see if it was a normal deed or another conveyance such as a quit claim deed, executor, etc. Now you are ready to verify the sale.

The easiest way is when you go shoot the comp photos, knock on the door. Tell them you are appraising the house down the street and that it would be helpful to their neighbor if they would answer your questions. Then ask whatever you want. If they are not home, you can also ask the property owner to ask their neighbor call you to verify the sale. If you can't get into the subdivision, then you can reverse phone book the person or buy a subscription to a tracking company like Spokeo. Finally, if you are really hard up for data, you can call the title/escrow company or the attorney that handled the transaction and verify that way. Their return name and return address will be on the deed. Can also subscribe to linkedin premium and track them down on there, facebook, etc.

 

[Russ Kitzberger]

When you are doing the title search on the comp, pull the entire mortgage, if it with a bank, the lender has a responsibility to do prudent lending, if it was financed with typical terms could be an indication of sales conditions. Conversely, see if any prior land contract, lease notices, liens, etc, existed.

 

[J Grant]

I am appraising a house in a gated subdivision. There are two private sales that were not offered for sale in the multiple listing service that I think would be particularly valuable if I could verify the information about these sales. The square footage, lot size, room count, bedroom and bath count provided in tax records I believe is very reliable and credible. However I have no information about the condition and if any upgrades to the interior of the house. So my first question is what data source verifying the condition, upgrades, etc in this particular situation would be considered to be credible and reliable? Assuming that I am able to obtain the information can I even use these sales since they were not offered on the open market. They are very recent sales to the effective date of the appraisal and they are selling at about 10% more than all of the sales I was able to obtain from the MLS.

I would be reluctant to use 2 sales I could not verify esp as they both sold 10% higher. Use one of them as a fourth comp unles you can obtain enough info on them, if the HO phone number listed , old zilow listings etc

 

[alebrewer]

When private sales are in line with MLS sales, I'm more willing to use them. Problem with private sales is that you often cannot verify condition, concessions, financing terms, site improvements, etc. These can have significant impacts on the sales prices and could serve to artificially inflate said prices. I knew a builder once who 'threw in' trips to Hawaii. Of course this was something that appraiser's could not verify...

 

[Russ Kitzberger]

I would be reluctant to use 2 sales I could not verify esp as they both sold 10% higher. Use one of them as a fourth comp unles you can obtain enough info on them, if the HO phone number listed , old zilow listings etc

When private sales are in line with MLS sales, I'm more willing to use them. Problem with private sales is that you often cannot verify condition, concessions, financing terms, site improvements, etc. These can have significant impacts on the sales prices and could serve to artificially inflate said prices. I knew a builder once who 'threw in' trips to Hawaii. Of course this was something that appraiser's could not verify...

How are we going to provide valuable insight to clients and stay relevant in the valuation spectrum; If we do not embrace the fact that non-MLS sales are going to grow due to tech enabling peer-to-peer sales and Ebuyer/Ibuyers, wholesalers, and direct to consumer cash investors.

We can provide a valuable service, people share interior photos of their house to zillow for free in order to get a "more accurate" zestimate.

As agent, owner, investor; I have sold more properties than I have purchased cars recently, however, I get more calls verifying my auto warranty status than I have from appraisers.

 

[alebrewer]

 

[ramrcdk]

When private sales are in line with MLS sales, I'm more willing to use them. Problem with private sales is that you often cannot verify condition, concessions, financing terms, site improvements, etc. These can have significant impacts on the sales prices and could serve to artificially inflate said prices. I knew a builder once who 'threw in' trips to Hawaii. Of course this was something that appraiser's could not verify...

LOL I knew a builder who charged the folks from the WEST coast more than he charged local buyers for "options". When I ask the quite honest... yet naïve builder's sales agent for the answer: they are used to paying higher prices over there in CA. When I ask how I was suppose to justify that she said: guess just use sales where the Buyers lives-around-here! LOL

I knew a builder when: he would report tens-of-thousands of paid closing costs on say $250k new home. I mean like $10-$25k. Always Declined properties in his Neighborhoods. Time went by & later saw him on the News headed to the clink for "trust fund" "escrow account" violations.

**So, to the Thread Poster: IF you could obtain a copy of the Appraisal to the Sale while speaking with that Buyer & via use of Deeds & Such...perhaps it would reveal a True Arms-Length Transaction.

Guess why the 1004 Form SCA Grid HEADLINERS ....are the
Data Source(s)
Verification Source(s)
&
Sales or Financing
Concessions

 

[lostinthezone]

This has come up for me a few times in the past and I just try knocking on the door. Owners have almost always been very forthcoming with information once I explained who I am and why I'm asking for their help. Like anything, you have to gauge how the conversation is going to get a feel for how much information you can push for. If they are agreeable to talking with me I usually open up with asking them to confirm/verify information which I already have data for, it helps put them at ease. After that, you'll want to ask the critical but basic information questions first, then ask more personal or questions that might be perceived as a little more intrusive later as they get more comfortable with the interview. If you feel like its going sideways, just stop and thank them for their time. Verify the information with whatever other sources you can and cite it all. If you're unable to get sufficient information about the sale to include it as a comp, you can always cite it in your addendum with the details you have, and discuss what support it lends to your conclusions.

 

[Tim The Enchanter]

I'd be very reluctant to use them. Maybe not arms length. But sometimes you have to dig deep.
Russ K, I'm not sure if he is going right down the rabbit hole, or what. But some good points. Digging extra deep.