Verifying Sales

[Eli]

No interior info on comp. Call to buyer's agent reveals information on condition of comp and call to listing agent confirms what selling agent said (verification?).

 

[DTB]

Property sells above list and been on market typical DOM. Stable market. Indicates above market but when I call agent they tell me owner replaces flooring which verifies that property sold above list and explains why. And also changes my condition rating and makes me more credible in court than if I wouldn't have called agent.

The agent initially input that it sold over list, therefore not verification.

Agreed, your report is more credible than a report with less data and less understanding of the data. No argument there at all. My point is about verification and most appraisers' understanding of it.

If opposing counsel just hammers at your use of and understanding of verification, it will be a rough go for you (the proverbial you).

Fannie's expectation or ba$tardization of the word notwithstanding.

Just a slippery slope to get pushed down, as is the statistics gambit. Unless one is quite confident in their statistical understanding.

I am not by any stretch saying NOT to call agents and gather more information. Appraisers just need to be aware that is what is being done.

 

[hastalavista]

Although this will probably persuade no one who doesn't think that agent interviews are a form of data verification, I offer these quotes since they are from recognized texts dealing with appraisal methodology.

From The Appraisal of Real Estate (AI, 13th ed., p. 304-305)

Verifying Transactional Data
Appraisers should verify information with a party to the transaction to ensure its accuracy and to gain insight into motivations behind each transactions. The buyer's and seller's views of precisely what was being purchased at the time of sale are important. Sales that are not arm's-length market transactions (in accordance with the definition of market value used in the appraisal) should be identified and rarely, if ever, used. To verify sales data, the appraiser confirms statements of fact with the principals to the transaction, if possible, or with the brokers, closing agents, or lenders involved. Owners and tenants of neighboring properties may also provide helpful information....
Referencing public records and data services does not verify a sales transaction. It simply confirms that a transaction was recorded. Similarly, referencing the source of secondary data only confirms its existence and does not verify the transaction. Generally, secondary sources do not provide adequate information about sale concessions, whether the sale was an arm's-length transaction, if multiple properties were involved in the sale, if personal property was included, and other factors influencing value.

Some say The Appraisal of Real Estate text is mostly geared toward commercial appraisal.
Here is a passage from Appraising Residential Properties (AI, 4th ed., p. 316)

Verification of Data
Data on sales of properties considered comparable can be obtained by interviewing one of the parties of the transaction. Although the buyers and sellers were most actively and directly involved in the transaction, appraisers must recognize that those market participants are not disinterested parties. If necessary, information provided by interested parties can be corroborated through other sources. Statements of fact can be verified by real estate agents, closing agencies, lending institutions, property managers, and lawyers involved in the sale. Owners and tenants of neighboring properties can sometimes provide important clues about the reasons for the sale. In verifying data, an appraiser must recognize that some sources of information may be more reliable than others and always ensure the confidentiality of the parties consulted.
The appraiser seeks answers to the following questions:

- What was the sale price and what were the terms of the financing?
- Were any concessions or incentives other than financing involved in the sale?
- Were items of personal property included?
- Exactly when was the closing price established?
- Are the parties to the transaction related?

Sales used as comparables should be arm's-length transactions made in the open market by unrelated parties under no duress.

I suppose someone will say,
"Ok, but it says verify statement of facts. So why do you ask about motivations or non-fact items and consider that?"
From Appraising Residential Properties (p. 110)

Data Verification
Sale prices, listing prices, options, offers, rejections, financing terms, seller concessions, and rental rates may be listed in multiple listing services. The transfer tax stamped on a deed may also indicate the sale price, but this information must be used with caution. Title companies also supply this type of data. In all cases, however, it is best to verify information with parties involved in the transaction- i.e., the buyer, the seller, the sales agent or broker, attorneys for both parties, or the mortgage lender. not only are these sources often more reliable, but these individuals can answer important questions about the conditions for the sale such as
- What were the specific financing terms?
- Did the seller participate in the financing? If so, how much financing did the seller provide and was the sale price influenced?
- Were any of the parties to the transaction under duress?
- Was any personal property included in the transaction?
- How long was the property on the market and did it receive enough exposure?
- Were the buyer and seller related or unusually motivated?
- Was the sale atypical for any other reasons?

The conditions of the sale can affect the property price and therefore its reliability as an indication of market value. In most cases, only an individual involved in the sale can supply this type of information. The names and addresses of the parties involved in a transaction can be found in title records, abstracts, and public records- particularly the property deed.

While questionable or unverifiable sales are typically excluded from further consideration, sometimes they are the only sales available. In these cases, the appraiser must fully disclose their use and any limitations on the reliability of the results.

The Uniform Standards of Professional Appraisal Practice require appraisers to collect, verify, and analyze all information necessary for credible assignment results. Verification is as integral to understanding a market as the data-gathering process itself. Advisory Opinion 22 highlights the importance of verification to the appraiser's understanding of the market, the subject property, and competitive properties, and any conditions of sale affecting the sale data:

An appraiser is expected to be at least as knowledgeable as the typical market participant is about the market for the type of property to be appraised. By completing research and verification steps while performing the assignment, the appraiser is expected to become as knowledgeable about the subject property and its comparables as the typical market participant.​

 

[ucbruin]

The agent doesn't know that the buyer wants that house because his mom lives next door??? They don't know that their client has to sell because they're facing foreclosure??? They don't know that their clients have to sell quickly for a dire relocation situation? They don't know that the concession was placed because the buyer had radon mitigation done?

Okay, RG, you just had to "pull me back in" , thanks!

Now down to business. I'll agree with your above examples. Makes sense to me. Now after the agents provide you with that bit of "data/information", you should go and "verify" the agents' "data/information" with another party, in this case with the "buyer and seller". You do do that don't you? Otherwise 1. it is just data/information which hasn't been "verified" and 2. It's just 1 source. You should get a second source to "verify" it. So did you knock on his mom's door?

Example, I believe a few years ago, Harvard University may have been purchasing land around their campus. And I believe that they were hiding this by not making the purchases under the University's name (been a while so I don't completely remember the details but I think it may have had to do with Harvard not wanting other potential sellers to jack up their asking price). Eventually the newspaper got wind of it and there was a brief moment of people being upset that Harvard would buy property secretly. Do you think the agent representing Harvard's interest was going to tell anyone the true motivation of the buyer? And do you think the listing agent knew? You wouldn't have gotten this information unless you pressed the buyer and seller, but the seller wouldn't have known and the buyer wasn't going to tell. So start knocking on the doors of the buyers and sellers so you can truly "verify" what the agents tell you were their true motivations. Don't take shortcuts by just believing what the agents tell you. They may not know. And what if they tell you they don't know?

so your argument is don't call them because there is a chance that they may not know a hidden motivation??? Why do an inspection...it may not reveal some problems. :mellow:

My argument with you and others who believe so stringently as you, is not that you shouldn't call. Hell, call everyone all the time. Keep calling, don't stop. In all sincerity it's not a bad thing (I know it's a FNMA requirement), it's a good thing, it's required. I've no beef with you about calling. My argument is that you, (and I use you because we provide each other with examples) are now focusing on the importance of buyer/seller "motivation" (and I will now assume that you become more concerned about it when the sale price seems "fishy" high or low). I don't know how to better explain my position regarding this so that I make myself clear. But I tried my best with the first part of my response (above). Your "verification" process/examples seem inconsistent to me because you don't verify with buyer/seller what the agents tell you.

I can't get past (just my conclusion) the notion that you consider the written words of agents to be data/information (and suspect) and their verbal words as "verification". I'm dense like that.

Not according to FNMA - they list the selling and listing agents as a verification source. FNMA set the terms, not UCBruin :new_smile-l:

I just wish you were as consistent in your real world "verification" process as you are in your FNMA requirements mantra to me. Anyway, thanks for drawing me back in.

 

[ucbruin]

Kind of like when you are sitting at a red turn light and it's been clear and you can see for miles, yet you have to wait. Doesn't make sense. But if you run it, you'll still get busted if a cop sees it.

Since you've admitted that you employ comps in your report that you haven't been "technically" able to "verify", I guess you've gone through this red light a few times. Just yanking your chain because you seem able to take a joke.

 

[Lee Lansford]

No interior info on comp. Call to buyer's agent reveals information on condition of comp and call to listing agent confirms what selling agent said (verification?).

Data source.

 

[DTB]

Verification of Data
Data on sales of properties considered comparable can be obtained by interviewing one of the parties of the transaction. Although the buyers and sellers were most actively and directly involved in the transaction, appraisers must recognize that those market participants are not disinterested parties. If necessary, information provided by interested parties can be corroborated through other sources. Statements of fact can be verified by real estate agents, closing agencies, lending institutions, property managers, and lawyers involved in the sale. Owners and tenants of neighboring properties can sometimes provide important clues about the reasons for the sale.

Many were adamant that the disinterested wording meant that they were disinterested in the subject.

If necessary? Rut Roh.

Owners of neighboring properties? Yikes, maybe the mailman should be consulted too!:blush:

What about neighbors who aren't even aware there was a sale, until the blabbermouth appraiser started questioning them? I'm not going anywhere near some of this stuff written in the Appraiser's Bible.

 

[DMZwerg]

I thought that was the very definition of hearsay. If I run into you at a coffee shop and you admit to mass murder and I go directly to the cops isn't that hearsay?

If a realtor gives me some details over the phone about a transaction isn't that the same thing? Especially if it contradicts the MLS listing or is new information not mentioned on the listing.

If you hear something directly from somebody else, and it is unverified, then tell somebody else it is hearsay. What you HEARD is not hearsay, what you SAID would be.
If you claim <a specific person> said something then you are witness to what they said but not what they did or did not do.

So, a realtor <a specific person> said something to you, and you record it down, you are witness to what they said. The information is used by you, the appraiser, to verify information you gathered elsewhere or have suspicions about. Example: you notice the price of properties A & B seem below normal and property C seems above normal, so you call the selling agent who confirms that property A sold for below normal because it was a short sale (but condition was typical), property B sold for below normal due to condition, and property C sold for above normal due to a highly motivated buyer (wanted that SPECIFIC property because he was relocating from another state and that property had all the very specific features he and his wife desired (location, school, acres, style, granite countertops, and a insulated shop that is grandfathered non-conforming in that area). You, the appraiser, has just VERIFIED the differences in prices you had already noted. Or you verified type & conditions of sale indicated in the recorder of deeds office (& available online), or from MLS, etc.

 

[hastalavista]

Owners of neighboring properties? Yikes, maybe the mailman should be consulted too!:blush:

I interviewed one the other day on a renovation project (downtown Oakland) I'm working on. She popped out of her business and ask me what I was doing; I told her and then started asking her some questions about the property. She gave me some small information (how useful... probably not too useful. But I had the opportunity to ask, so I did).
I've talked to neighbors before; usually they are outside looking at me and wondering what i'm doing. I'll tell them, and sometimes ask them a question about the neighborhood, etc.

I'm not going anywhere near some of this stuff written in the Appraiser's Bible.

It is a recognized text.
You can disagree with it (no problem). :new_smile-l:
But if asked to support a decision, method, or practice, an appraiser would be in pretty good shape if she or he could refer the inquisitor to a recognized text that supported and affirmed that decision, method, or practice (at least, I'd think so). :new_smile-l:

 

[DTB]

It is a recognized text.
You can disagree with it (no problem). :new_smile-l:
But if asked to support a decision, method, or practice, an appraiser would be in pretty good shape if she or he could refer the inquisitor to a recognized text that supported and affirmed that decision, method, or practice (at least, I'd think so). :new_smile-l:

This is where it gets dicey, IMO. What about when texts differ? Guess who takes it in the shorts? i.e. I've always treated the very fact that I'm doing an appraisal on 123 Main Street as confidential, in accordance with USPAP. Anything that would not have been discovered except by completing the assignment is confidential. To me, the notion of having an assignment would be included.

There are maybe 75,000 appraisers more versant in USPAP than I and they might weigh in differently.