Yet Another Seller Concession Question

[J Grant]

Terrell is playing god ...making his own standard where cash is the benchmark, and cash is NOT the standard for MV purpose appraisals....it's cash or terms equivalent thereto ( financing) .

A "cash market" is not referenced.

The market activity as we know it in most areas is a comprised of a mix of cash and financed transactions . . If anyone wants to argue it should not be so, they can do that, we appraisers are hired to deal with the reality of markets as they are, not as they should be.

Personally, I don't think RE sales commissions should be rolled into prices, but they are.

MV definition that states a PRICE unaffected by special or creative financing or concessions. It does not reference net to seller, (which can vary for many reasons)

What a seller nets will be a motivation and enter into how they negotiate, just as what a buyer spends is part of their motivation....appraisers focus on the result ( price) ,and whether price is deflated or inflated by special terms on buyer side or seller side in the form of concessions, credits, buy downs, special financing, terms, etc.

In those cases where there is a sizable price difference between cash deals and finance deals, something is causing that effect which needs to be analyzed.

 

[Terrel L. Shields]

making his own standard where cash is the benchmark

Another stupid remark. I am simply reading exactly what the words say. And they say "in terms of cash" and unaffected by "sales concessions"

• payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
  
  
• the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

If someone pays a concession then it is affected. Simple language. read it some time and not put a fannie mae twist in it. Sellers pay concessions because they have to in order for the deal to get done. When I sold a house at auction, they tried to work a deal, but told them read the contract. 30 days to close or we keep their ten % down and it goes back on market. We eventually closed a few days late but no concession. You still have the concept of CEV. Cash equivalency rules and giving back 3% isn't equal to COB. Cash on the barrelhead

 

[J Grant]

they say in terms of cash OR in terms of financial arrangements comparable thereto.

Re the language on adjusting for concessions....they say adjust when it is seen to affect price....(not adjust anytime a concession is made)

Personally, I'd prefer it if the "rule" was adjust dollar for dollar, each and every time a concession is paid...but that's not the instruction .

Adjusting for concessions is NOT about cash equivalency, it's about whether or not the concession affected the sale price. A seller gets cash at closing whether buyer used financing or not ...so a concession is not about making terms equivalent to cash, A concession is about, as you comment and I agree with that comment , an incentive to get a deal done, or done at a certain price/time frame. Perhaps the buyer is cash poor, or greedy/looking to save their own cash, cover cost of repair, or simply an incentive from the seller to get a buyer to buy their property rather than the one for sale next door..

 

[Terrel L. Shields]

it's about whether or not the concession affected the sale price

Duh, it not only affects the sale price, the sale won't happen without it or they wouldn't be doing it n the first place.

 

[J Grant]

Duh, it not only affects the sale price, the sale won't happen without it or they wouldn't be doing it n the first place.

That may be so, then include that in analysis...

 

[residentialguy]

Financing is NEVER equivalent to cash by definition.

I don't agree with this. It is equivalent to the seller. Now if their is special financing by the seller, then it may not be equivalent.

Without financing sale prices fall.

Doesn't matter what financing is doing to the market. Lots of things affect the market prices.

 

[Terrel L. Shields]

It is equivalent to the seller.

not if they are getting 3% less than the stated sale price

 

[residentialguy]

not if they are getting 3% less than the stated sale price

True, if the seller pays the concession for the buyer. That obviously is adjusted.

 

[Mike Garrett RAA]

I would be interested in knowing what percentage "cash sales" are in your markets? I see very few IN MY MARKET with the exception of REO sales and there those are usually very short term with the investor (flipper) using a line of credit for such purchases.

 

[J Grant]

not if they are getting 3% less than the stated sale price

?/ Why would a seller take 3% less ...that has nothing to do with whether the buyer is paying cash or finance, a seller "taking 3% less sounds like you are figuring net to the seller...did the seller offer a concession or not in this example? If the seller agrees to take 3% less than the stated price (whatever that means), the price was not affected by the concession/( if you meant to say seller offered a 3% concession.)

If seller increased the price by 3% , then the price was impacted by the concession. That is what appraisers look for and adjust for. (impact on price, not what a seller decides to do to move a property which can include many things from lowering a price to offering a concession to making repairs )