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What Is: Well Informed Or Well Advised?

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Another thread was getting onto an area that I've been interested in discussing.

What does constitute a buyer:

!) to act 'prudently'

2) be 'typically' motivated

3) be 'well informed' or 'well advised'

Seems to me that in order for them to act 'prudently', they need to be both 'typically' motivated AND 'well informed or well advised'.

This is a great example I'm about to work on:

A small community of townhomes where most are owned by widows, second ownership is retired couples, the past few years a few are younger women alone and a couple of families. A local woman, widow, wants to sell her larger house and purchase in that townhouse community. Has an appraisal completed by me with a 60+/- days on market 'market value' of $147,000. Hires a Realtor to list and sell it. Realtor claims my appraisal is too low and lists it for $159,900. On the market for 135 days prior to a contract and closed for $150,000. More than double the marketing time due to a Realtor that decided I don't know what I'm doing.

Now enters a girlfriend of a co-worker of this woman who is a Realtor that is going to help her get one of those townhomes. This woman finally has a sale pending on her house and really, really wants to buy one of those townhomes. Second Realtor contacts owners of the townhomes to attempt to find one for her, doing her job. Connects with an owner of one who lives with his boyfriend. Boyfriend's mother is also a Realtor so Mom lists this townhome at a very inflated price ($145,000) and contact's the other Realtor. The widow with a sale pending on her house and no other townhomes available in this project at that time and on the 'advise' of her Realtor, offers $5,000 less than the listed price. This particular unit is NOT in very good condition, 20 years old with the ONLY updates being a range and dishwasher, wood rot in numerous places, roof very badly in need of replacement. Last one in similar condition EXCEPT it already had a new roof (expensive roofs there in the $5 - 6K range for that unit) sold for $103,000 last May. The other sales during this past year range from $125,000 to $135,000, superior condition and the higher priced ones are full 3 bedrooms and larger, some with completely new kitchens and baths.

Mortgage Broker Lender is one that I have been tracking for a while and shows up on some of the highest priced sales for certain subdivisions. I talked to the widow who has already spent about $10,000 to fix this place after closing 03/14/03 at $140,000. Yes, it closed with all the necessary repairs to be done by the buyer on her own after closing. She told me that the LO did have a little trouble with the appraisal, but he did talk the appraiser into finally bringing it in at the contract price!!!

:twisted:

THIS is a PRIME example of a buyer that was NOT typically motivated.

THIS is also a PRIME example of a buyer that was not only NOT 'well informed' or 'well advised', I consider this a PRIME example of a Realtor that actually and intentionally MISINFORMED and criminally gave BAD advise to the buyer.

This is also a PRIME example of why we are not supposed to use a sale that is obviously above the normal range of sale prices.

This is also a PRIME example of why the loan officers and Realtors SHOULD NOT have anything to do with ordering the appraisal!!

This is also a PRIME example of a Real Estate market either well into or going into a bubble - IMO
 

Mike Garrett RAA

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If the buyer was totally well informed they wouldn't buy. :rofl:
 

Phil Rice

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Colorado
My comments:

I read the story of the little old lady (LOL) who got screwed, and I ask myself, if we could go back to square 1 and start over, how do we get to a better end result?

I wish that more people would hire an independent appraiser to represent their interest. Most people who sell a home rely on the real estate agent, they see no need to spend the $300 for a second opinion.

In your story, you could have been the hero if the LOL had you on her side.

To anyone about to sell their home, would $300 be well spent? I say even if the appraisal says the same thing the real estate agent said, it is worth $300 to confirm that the asking price is correct. Could the appraiser reduce the likelyhood of a $5,000 mistake on a $250,000 home?

When buying a home, every offer should have an appriasal contingency. After the initial offer is accepted by the seller, and a price is agreed to, the buyer hires an independent appraiser (homebuyer is the client, not the mortgage company). The buyer has the option to back out and get their earnest money back if they change their mind after reading the appraisal. If the buyer decides to go ahead with the purchase, that same appraisal should be used to secure the mortgage.

The existing rules make this hard to do, but it is not impossible.
 

J in Florida

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Jan 17, 2002
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Florida
Pam, that is an all too familiar scenario. Seems as though that MBA and NAR have stopped recognizing the sales comparison approach in favor of the "if I scream and yell enough" approach or the "if you don't give me the number I'll find someone who will" approach. And let's not forget the ever popular "this is an important realtor" approach.

Funny how I never heard anything about this revolutionary change from FNMA, FHA, USPAP, etc.

I just had to sit through 3 hours of mandatory Realtor Ethics training through the local board. I was figuring that Jerry Seinfeld or Chris Rock would be the instructor. :D :D :D
 
Joined
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Florida
Here's a history of another one that makes my head spin:


MLS #145860, shows it was listed on 07/01/2002 for $1,900,000, pending contract on 07/11/2002, closed for $1,900,000 on 07/12/2002. The seller was the owner/broker of ********* in the Jacksonville Florida area. Due to the extremely close dates between listed, pending and sold, and this appraisers experience with some erroneous MLS data, it is assumed that this sale was negotiated prior to the listing date. This sale was during the listing for $1,475,000. The current owners have a mailing address in Jacksonville, Florida that is a property they own that is a much larger (8,344 SF GLA) and newer (1996) St Johns River front estate property in a more exclusive and expensive area that they purchased in 04/1999 for $1,600,000. They apparently do not live at the Orange Park property and it is not known who does live there. This appraiser seriously questions the validity of this sale even though there is a recorded deed for $1,900,000 dated 07/12/2002, OR 2076/1138. There is also a recorded mortgage dated 07/12/2002 for $1,520,000, OR 2076/1139 and an additional mortgage dated 02/27/2003 for $3,120,000, OR 2189/0889 with no release of the first found.
MLS #122091, listing date 10/22/2001, asking price $1,475,000, expiration date of 10/22/2002.
MLS #102423, listed date 01/31/2001, asking price $1,525,000, expiration date of 05/08/2001.
MLS #950933, listed date 01/12/2000, asking price $1,425,000, expiration date of 10/09/2000, with a variety of listing changes showing a 'First Right of Refusal' offer, a pending contract that fell through.
Prior sale was 08/31/2000 for $1,128,000, which is when the Real Estate Broker purchased it without showing that purchase in the MLS data while it was listed for $1,425,000.
 
Joined
Jan 16, 2002
I agree with Mike, in which case all sales taking place do not fit the parameters within the definition of Market Value. If the lisiting and selling agents have their heads up their sphincter how well informed or advised can the buyers and sellers be ?? :(
 

Tim Hicks (Texas)

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Jan 15, 2002
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Certified Residential Appraiser
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Texas
We have a "willing buyer" and a "willing seller".


All too often it is a "willing seller" and a "uninformed buyer". Isn't this why the appraisal profession was developed. To "inform, protect and educate" the buyer and the lender. Somehow, those priorites keep getting lower and lower on the list and are on some back page that nobody ever reads now.
 
Joined
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Florida
Pam,

Your first example sounds like what goes on every day, everywhere, in real estate sales. Par for the course.

There is nothing neat and clean about real estate sales. The ones I worry about are not the deals made with a salesperson in between buyer and seller. The absolute worst deals are made between two individuals, neither of whom know what they are doing. Time will take care of some bad deals, but not all.

Taking a cue from Mike Garrett, what about "under no compulsion to sell"? Everybody who sells is under some compulsion.

Regards,

Tom
 
Joined
Jan 28, 2003
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Certified General Appraiser
State
North Carolina
A little off topic, but not too far I hope. Some don't appear to buy this argument. Do you?

I think the tech stock bubble of the 1990s is a good example.

IMHO, prices were way above all historical fundamental benchmarks, yet the stocks were selling at those apparently absurd prices. The market value of the stocks was the prevailing price even though the prices were absurd based on historical benchmarks such as price/earnings ratios. Prices were outside the realm of historical reasonableness – you could say the market was acting irrationally based on historical benchmarks.

If you buy what I’ve said so far, you should buy the statement that, if the overwhelming majority of the target buyers are all equally irrational in terms of the high price they are willing to pay for said product, they still set the market value. Whether one thinks they are rational or not is irrelevant, because they are setting market value by their willingness to buy at those prices. The buyers who are “rational” are largely irrelevant because they aren’t willing to pay a high enough price.

As appraisers we emulate the market, be it insane or not.

Caveat: One transaction does not make a market. I am not espousing giving heavy weight to that single sale that is outside the range indicated by other recent comps. A market is more than one sale (maybe not all the time).
 
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