Buyer in Watercolor

Interesting note: "Please do not use as a comp, this was a low sale from builder's inventory." :roll:

J & T Investments is the builder--not! Can't believe they're still trying to manipulate the market...tsk, tsk, tsk.

(Contrats on your sale though.)

That particular note is not allowed, according to the MLS Rules.

I am sure that people will or will not want to use it as a comp depending which side they are on, and other sellers are now saying "Thank you St. Joe, may I have another!"

Based on my math, they built that house for $31.70 a sqr ft. after you take out the lot costs.

I happen to know the seller, J & T Investments, LLC, and your math is a bit off on the cost per sf, just a weeeeeeeeeeeeeeeeeeeeeeeeeeee bit. I like the house, though. I could live in the carriage house.

That note about not using it as a comp sounded a little like a prayer to a higher power, rather than a note in MLS. Must be an agent with a lot of listings!!

You should see some of the notes which agents write, like: "good job Jane. Thanks for the smooth transaction." These notes are supposed to be factual information, rather than subjective, to inform other agents and appraisers of the transaction. Was the sale an arms' length sale? some correct examples might be: Seller paid for buyers closing costs and home was sold furnished, with the furniture estimated at $50,000 (truthfully, and furniture or cars being included in the sale, should be an outside contract), buyer paid cash for a quick close, etc.

I happen to know the seller, J & T Investments, LLC, and your math is a bit off on the cost per sf, just a weeeeeeeeeeeeeeeeeeeeeeeeeeee bit. I like the house, though. I could live in the carriage house.

I know they didn't actually build it for that price. ;-)

Just to break even building a 2,600 sqr ft house on a $770,000 lot and selling if for $855,000, you'd have to have a construction cost of $31.70 - about a 1/10th of normal costs, so someone lost some $.

I know they didn't actually build it for that price. ;-)

Just to break even building a 2,600 sqr ft house on a $770,000 lot and selling if for $855,000, you'd have to have a construction cost of $31.70 - about a 1/10th of normal costs, so someone lost some $.

Don't forget to back out the commission of $50k or so. They basically got back the cost of the lot and gave the house for free.

This being sold on PropertyFiresale.com, I can give you bit of reasoning to the note.

After speaking with an appraiser I work closely with he said they would not use the sale as a comp because out of the recent activity in WaterColor this doesn?t meet the typical numbers we have been seeing. Most of this is paraphrased but in short that is where it came from.

Would this appriaser use this as a comp if another home sold at this price per sq ft? Propertyfire sale.com has nothing to do with it. Are homes that sell at auction exempt from being used as a comp? I think maybe.......... a sale is a sale is a sale.

I agree and from my Realtor? stand point I would go into watercolor and list at that range. Reason being we have another preconstruction home that’s priced already in that range. If more homes go for this price in WC the comp would defiantly be supported, but at this point in time it is not. It is so low, and out of the ordinary, that it wouldn’t be used by an appraiser. That is how it has been explained to me.

I agree and from my Realtor? stand point I would go into watercolor and list at that range. Reason being we have another preconstruction home that?s priced already in that range. If more homes go for this price in WC the comp would defiantly be supported, but at this point in time it is not. It is so low, and out of the ordinary, that it wouldn?t be used by an appraiser. That is how it has been explained to me.

However, whether the sale should be used as a comp is not up to the listing agent who entered the note. That is up to the appraiser and other Realtors who choose to look at it as a potential comp.

Steyou, my guess is that auctioned sales are not typically used as a comp because they are not arms' length transactions. Currently, most are forced sales. However, so many areas don't have enough sold properties to use as comps, so an appraiser may take an auctioned property into consideration to use as a comp.

I agree SJ

Ditto.

Why don't auctioned sales count?

They are becoming more prevalent and it's definitely a sale that shows what the property can be sold for.

I'm not saying that all auctions wouldn't be Arms' Length, but in the case of the ones going to auction in today's market, there is typically pressure to sell, thereby making them not Arms' Length transactions, and not useful for comp purposes for appraisals.

Are lenders going to overlook these "comps" when they put their money on the line....not!

Game over.
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Shelly, the lender is not looking for comps outside of those on the Appraisal. Whether or not to use a low priced sale as a comp, would be up to the Appraiser, not the lender. A decent Appraiser will make a phone call to the listing and or selling agent to find out more details of the sale, including whether it was an Arms' Length sale. If it is a non-Arms' Length sale, and there are other sales to use for comps, that particular sale would likely not be used to determine value for another property. Of course you know this and are just trying to stir the pudding, but I wanted to try and better explain it to others who are unaware.

Shelly, the lender is not looking for comps outside of those on the Appraisal. Whether or not to use a low priced sale as a comp, would be up to the Appraiser, not the lender. A decent Appraiser will make a phone call to the listing and or selling agent to find out more details of the sale, including whether it was an Arms' Length sale. If it is a non-Arms' Length sale, and there are other sales to use for comps, that particular sale would likely not be used to determine value for another property. Of course you know this and are just trying to stir the pudding, but I wanted to try and better explain it to others who are unaware.

Are these "decent" appraisers the same ones that colluded with the banks and lenders to run up home prices over 20% a year for 5 straight years??? Any sensible person, let alone a sensible person whos job it is to appraise houses, would know that the values being "appraised" in 2004-2005 were complete pipe dreams...

I personally would much rather base my buying experience on a SALE... no matter it being Arms' Length or not (could be better referred to as ARM's length possibly)... than some coo coo appraiser that thought the same house was worth twice as much just two years ago...

Destin,I would have to think the buyers ran the prices up...

A decent Appraiser will make a phone call to the listing and or selling agent to find out more details of the sale, including whether it was an Arms' Length sale.

Appraisers are under the gun to actually do the work and stop relying on folks with a vested interest in hitting the number; and lenders are at the mercy of gun-shy investors and tighter requirements by Fannie & Freddie to offload their mortgages. A new day has dawned in the credit markets that supply cash to purchase assets.


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Are these "decent" appraisers the same ones that colluded with the banks and lenders to run up home prices over 20% a year for 5 straight years??? Any sensible person, let alone a sensible person whos job it is to appraise houses, would know that the values being "appraised" in 2004-2005 were complete pipe dreams...

Sounds like you have some resentment. Let me remind you that buyers were the ones who ran up the prices in 2004 and 2005, not appraisers. Also, since a "sensible person" without the title of "appraiser" is not able to calculate appraisals for lenders, we will have to stick with the appraisers calculating the appraised value on sales.

Appraisers are under the gun to actually do the work and stop relying on folks with a vested interest in hitting the number; and lenders are at the mercy of gun-shy investors and tighter requirements by Fannie & Freddie to offload their mortgages. A new day has dawned in the credit markets that supply cash to purchase assets.


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Originally Posted by Smiling JOe
A decent Appraiser will make a phone call to the listing and or selling agent to find out more details of the sale, including whether it was an Arms' Length sale.

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Reading back through my post, I can see how I miscommunicated. I was referring to the appraiser calling the listing agent and or selling agent on a property which would be potential used as a comp, rather than calling the listing or selling agent on the property which is under contract, for which the appraiser is calculating the value. Sorry for the miscommunication. I think your statement above is very true.

Sounds like you have some resentment. Let me remind you that buyers were the ones who ran up the prices in 2004 and 2005, not appraisers.

Appraisers were nothing but the market's Biyatches according to their testimony before the Senate Banking Committee in June 2007:

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Appraiser coercion

Appraiser pressure has received a great deal of media attention in recent months, and it was the subject of an independent study conducted earlier this year by the October Research Corporation. This study found that 90 percent of appraisers were pressured by mortgage brokers, lenders, realty agents, consumers and others to raise property valuations to enable deals to go through. This was nearly double the abuse findings of a similar study three years ago.

Moreover, the survey found that 75 percent of appraisers reported “negative ramifications” if they did not cooperate, alter their appraisal, to provide an artificial valuation. The prime culprits of pressure, according to the survey, were mortgage brokers (71 percent), real estate agents/brokers (56 percent), consumers (35 percent), lenders (33 percent), and appraisal management companies (25 percent). Pressure comes from every direction.

We must do everything we can to ensure an independent appraisal process in mortgage transactions. We cannot do that in a market halfregulated.
Pressure is especially strong when appraisals are delivered to parties whose
compensation depends on getting people to the closing table to complete the sale and mortgage. If the loan doesn’t close, these parties don’t get paid. They do what they can to be sure they get paid.

Unfortunately, these parties with a vested interest in the transaction are often the same people managing the appraisal process within many financial institutions, and therein is a terrible conflict of interest. In this situation our members experience systemic problems with coercion. Appraisers are ordered to doctor their reports or else never see work from those parties again.

http://banking.senate.gov/_files/hummel1.pdf

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Appraiser coercion

Appraiser pressure has received a great deal of media attention in recent months, and it was the subject of an independent study conducted earlier this year by the October Research Corporation. This study found that 90 percent of appraisers were pressured by mortgage brokers, lenders, realty agents, consumers and others to raise property valuations to enable deals to go through. This was nearly double the abuse findings of a similar study three years ago.

Moreover, the survey found that 75 percent of appraisers reported ?negative ramifications? if they did not cooperate, alter their appraisal, to provide an artificial valuation. The prime culprits of pressure, according to the survey, were mortgage brokers (71 percent), real estate agents/brokers (56 percent), consumers (35 percent), lenders (33 percent), and appraisal management companies (25 percent). Pressure comes from every direction.
...

Unfortunately, these parties with a vested interest in the transaction are often the same people managing the appraisal process within many financial institutions, and therein is a terrible conflict of interest. In this situation our members experience systemic problems with coercion. Appraisers are ordered to doctor their reports or else never see work from those parties again.

http://banking.senate.gov/_files/hummel1.pdf

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So maybe you can explain to us how real estate agents and brokers hold a carrot on a stick above the appraisers' heads, since we are not the ones ordering the appraisals and are not the ones referring business to appraisers. We truly have no influence over the appraiser, and typically don't even know who the appraiser is until after we see the appraisal. I find it difficult to believe that 56% of all brokers and real estate agents influence an appraiser's decisions. Now, if you want to talk about the lenders having some influence, that could be a different story.

to borrow a phrase from the early 1900's which might be called the buyer's lament: "In 04-05 we trusted in 07-08 we busted."

Should I not have some resentment toward the entire RE complex... The collusion, fraud, and anything to get a buck mentality is exactly what put us in this situation...

Sure the buyers bought the property... but they needed someone to loan them the money... someone to hit the number of the forever increasing 20% per year real estate always goes up number... and the beat went on... they couldn't afford the loan but your industry just wanted their cut... then the banks can just repackage the crap and pass it to someone else... maybe even your oh so safe money market retirement fund... yea I have resentment and I think well deserved.

If you fed the frenzy your part of it... and because you fed it we hear about bail outs every single day in the market... eventually those bailouts will be looking for those people that didn't actually buy into the crap that your industry was selling and actually have some money in the bank for the day a purchase of property actually makes sense beyond speculation... maybe to live in!

...eventually those bailouts will be looking for those people that didn't actually buy into the crap that your industry was selling and actually have some money in the bank for the day a purchase of property actually makes sense beyond speculation... maybe to live in!

"my" industry was selling real estate. You can call it crap if it makes you feel better, but I think of it as being something contrary to crap. If you have complaints with the lenders and appraisers, that is one thing, but I'm tired of being lumped into the group of people pushing crap. When you make blanket statements, you affect many people who were not involved in schemes of any sort. You do make the distinction of saying, "if you fed the frenzy your part of it..." but many people will read right past that, thinking that everyone involved in real estate is an evil person who is out to con people over. I can name many Realtors in our area who are good, trustworthy, honest, hard-working people, whom you would be proud to know and call your friend. You can find crooks and fraud in every industry which exists -- real estate just happens to be at the forefront of the National press right now.

Sorry for the rant, but that needed to be said.