Yet Another Seller Concession Question

[timd354]

Please note the "for what they are" part.


I see these often for option 1. Condition issues. They are often not above market price nor have balloon payments.
FYI I'm not defending abuse of this tool but I'm not stereotyping those who use it either.

Every market is different and maybe this type of thing is not abused nearly as much in your market as it was in the markets in which I appraised.

 

[residentialguy]

FYI I'm not defending abuse of this tool but I'm not stereotyping those who use it either.

Not trying to stereotype them as all bad. They just require extensive research to make sure they are good because there is much more abuse on them. I think contract for deeds are a great option for knowledgeable buyers if they can't get conventional financing....it's just not a good one for naive buyers. Read that article link in my last post.

 

[J Grant]

It's unfortunate that "financing" and "concessions" are lumped together. Closing costs are reasonably easy to deal with: financing concessions, seller financing, balloon mortgages, "teaser rate" mortgages or quick trigger ARMs are significantly more complex to deal with.

Imo they are not lumped together, we are supposed to adjust for any of it....that affects price (special terms or special financing or creative financing or concessions)...if a few of those are present at once on the same property, lol maybe don't use it as a comp...

 

[Peter LeQuire]

"Lumped together" may not accurately describe it - but they are they are certainly treated as similar in the adverbial clause in the value definition discussing concessions.

 

[J Grant]

It's up to us to differentiate between any of them ( as they are not similar) / explain etc...

personally, if a sale has exotic terms/financing present beyond plain vanilla concessions or a simple form of seller financing I 'd rather not use it as a comp unless I must...

 

[Peter LeQuire]

But an appraiser ought to be able to determine how such "exotic" terms affect a price, should he not?

 

[J Grant]

yes we can determine it, just a preference keep things simple, If there are better comps with more conventional terms I'd rather skip the exotic terms one...

 

[Peter LeQuire]

Sometimes market information that is less straightforward than we want to deal with is all there is for us to deal with. That's why we make the big bucks.

 

[J Grant]

When exotic terms/seller pitching in to make deals work become prevalent in a market it is a screwed up market and that needs its own explanation and analysis...

screwed up markets are mirror image flips of each other...overheated rising markets and rapidly declining markets both see a lot of oddball acitivty...what fun...such things also take place if interest rates become very high as well and conventional financing not attractive, then we see more seller financing, short term second private mortgages or ARMs etc

 

[Tom4value]

I have not seen any comments here that address a certain buyer motivation for concessions, lack of funds for closing costs. Everyone advocating for adjustments 100% of the time forgets that we only adjust when the market says so. That is why the concession adjustment is not necessarily dollar for dollar with the adjustment. I have found in many cases when there is a seller concession that the buyer and seller are fine with the sale price. The issue is the buyer lacks the funds to close. Therefore, when you ask the question, "would this property have sold for less if there was no concession?" the answer would have been "no". It just may have sold with a different buyer.

On the other hand, if seller concessions are rare, if it sells for higher than asking price (especially if the amount over asking price is equal to the concession) or if the concession is added after the "meeting of the minds" and the price changes then yes, it would have sold for less and you adjust. The key, as always, is explain, explain, explain your work.