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Brian

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Reply with quote  #51 
What if there is no probable price without the concessions because the property wouldn't have sold with out them?

Not trying to be difficult, but this has to be considered. I think its different if your appraisaing an arms length sale using arms length comps. 2-4% of the sales price is paid by the seller for closing costs in virtually all these sales. The typical buyer expects it and will move on to the next property if they don't get it.

If your appraising in an REO market with mostly cash sales and zero closing costs then an adjustment (never mechaical) is probably appropriate for any closing costs paid with the exception of those that the seller is required by law to pay.
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BillDing

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Reply with quote  #52 

No, I don't think you're trying to be difficult.  You're thinking and that's a good thing; I appreciate that more than words can express.

MV is a presumed sale...sometimes there are no good comps.  Lack of sales does not mean lack of value, though.  Concessions are the easiest, imo because it is just a presumed sale dealing with nothing affecting the price (a cash sale or conventional with no concessions).  Cash is pretty predictable.  Much easier then trying to find the market reaction of a distressed sale vs non distressed sale.  They just want to know if the buyer offered to buy it with a conventional loan with no seller paids, what could he buy that house for?


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BillDing

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Reply with quote  #53 
Since we're exploring here, let me throw out another twist

Think about what you said. You said there would be no probable price without the concessions because the property wouldn't have sold with out them.    If there is a zero price without concessions, guess what the concessions were worth?  That means the contributory value of the concessions are worth the price of the house.  Please adjust $200k for that $6,000 concession.  

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Jman

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Reply with quote  #54 
Hey Mag-It's First Option Mortgage, zero closing costs; biggest nobrainer in the history of earth.
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BillDing

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Reply with quote  #55 
Closing costs

Pay'm Now, Pay'm Via Rate Bump, Pay'm Via Bigger Loan

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Brian

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Reply with quote  #56 
Good try Bill. I understand your point and I love exploring too. However, I go by the written word printed on the forms I'm signing. I cannot consider the  2-4% closing costs that are paid on virtually all arms length transactions either creative or special.
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BillDing

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Reply with quote  #57 
Brian,

If it said on virtually all arms length transactions, you would have a leg to stand on.  But it says "virtually all sales transactions".  

FNMA Selling Guide, Part XI, Section 406.5 (C) states;
"The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area.....
The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions"


If you were serious about your words, "I go by the written word printed on the forms I'm signing", this forces you not to do as you suggest.

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Brian

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Reply with quote  #58 

Like I said, "if you were in an REO market". In my neighborhoods REO sales range from 20 to 30%. I'm not judging all my sales by one small segment. As always we are to judge things from the actions of the typical market participants.

Not "without concessions". The question is how did the concessions impact the sales price? No sale no sales price. If concessions are 10% in a 3% concession market then of course you make the adjustment. You have to be reasonable.

When did we abandon reasoning and start appraising to the lowest common denominator?

Do you make mechanical adjustments or are we just having an exercise?

I really enjoy the back and forth. We don't get that much here anymore. You have proven that your a serious operator and I respect your opinions. Anyway, interception Falcons. I'll check with you tomorrow.

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BillDing

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Reply with quote  #59 
But but Brian....if it didn't have the 10% concession, it might not sell...better not adjust  

Do I make mechanical adjustments?  I don't know how you can read my posts and ask that.  No, I call and verify if the seller what the seller would sell for without the concessions.

Anyway, have a good game.  I have to work      I'll let you ignore what is actually required....for now.  I've enjoyed our discussion, too and appreciate what you have to say.

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Brian

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Reply with quote  #60 
So your calling the seller on every comp you put in a report? I'm not even sure how that's possible. Your moving down on the credibility meter.

I know what's required. I can read it on the 1004 same as you.
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BillDing

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Reply with quote  #61 
No, not the seller, but his/her agent.  They know what they're willing to do. 
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Brian

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Reply with quote  #62 
K
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Hippie

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Reply with quote  #63 
C. Get a law for recording a HUD one and make the transaction transparent as it should be. The you know more about the sale you are using as a comparable

The Realtor will send there RPAC people right on this request.  Better yet discount dollar for dollar, kill the sell and get some support fro the MLS providers.        
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BillDing

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Reply with quote  #64 
I like your idea with the HUD 1

Typically the sale with concessions will fall within a reasonable range of value. I find that most deals are killed because distressed sales were inappropriately used and the subject sale was ignored. 

The concessions issue could easily be cured.   All the lenders have to do is allow a 3% leeway on market value to finance that added price covering the concession money.  

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Meatloaf

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Reply with quote  #65 
John,

Can you still place your hands on that review??? I have an HUD review in my hands that chastizes me for making dollar for dollar adjustments.

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BillDing

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Reply with quote  #66 

I had the same thing.  I responded and shut them up.

 

These adjustments reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions. There are some appraisers and reviewers believe that if the concessions are "typical" in the area, then no adjustments are necessary. This is incorrect with regards to Fannie Mae and Market Value, as defined. 

The definition of Market Value states:
"(6) 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." 

Further clarity is given to sales concessions; Nowhere does it mention or even suggest that no adjustments are necessary for seller concessions if they are "typical" in the market, but rather only when they:
"are normally paid by sellers as a result of tradition or law in a market area" 

How does one identify this? Market Value goes on with additional clarity;
"these are identifiable since the seller pays these costs in virtually all sales transactions." 

There is no such tradition or law in the market area and these costs are not present in virtually all sales, therefore it is clear that typical concessions still need to be adjusted if they result in a different price had the seller not paid them. 

The following excerpt from the Selling Guide, Part XI, Section 406.5 (C) provides further guidance for these circumstances:
“The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area—large sales concessions can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate.... The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions.”

This adjustment is not a mechanical dollar for dollar adjustment, nor should it be. Market value states: "Any adjustment should not be calculated on a mechanical dollar for dollar cost..." The key word is "mechanical"; Dollar for dollar is often the market reaction, but this cannot be assumed. In order to get the most accurate insight, the agents of the comparable sales are called to verify the contributory value of the concessions and then tested against the market for reasonableness and found to be adjusted correctly to the market reaction.

This is completely in-line HUD guidelines

Appraiser/Appraisal Requirements

 

  1. The appraiser must report the total dollar amount of the loan charges and/or concessions to be paid by any party on behalf of the borrower and describe which party provided the concession in the Subject Section of the appraisal report. Use of an addendum with the heading “Loan Charges/Sales Concessions” may be required due to limited space provided in the appraisal reporting form.

  2. The appraiser must also verify all sales transactions for seller concessions and report those findings in the appraisal. If the sale cannot be verified with someone who has first-hand knowledge of the transaction (i.e., buyer, seller or one of their representatives), the appraiser must clearly state how the sale was verified and explain to what extent.

  3. In the Sales Comparison Analysis, Sales or Concession Section, the appraiser must report the type and the amount of sales or financing concessions for each comparable sale listed. If no concessions exist, the appraiser must note “none.”

  4. The appraiser is required to make market-based adjustments to the comparable sales for any sales or financing concessions that may have affected the sales price. The adjustment for each comparable sale must reflect the difference between the sales price with the sales concessions and what the property would have sold for without the concessions. In the Sales Comparison Analysis, Sales or Financing Concessions Section, the appraiser must report the adjustment applicable to each comparable sale listed.



Now Mr Reviewer....explain to me about how I did my adjustments wrong.

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BillDing

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Reply with quote  #67 
Should already have that in your report and nip this kind of sheeet in the bud.
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Meatloaf

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Reply with quote  #68 
You don't get to ask for an explanation.  You are simply told and dictated what you did wrong with no recourse.  

In actuality, if you followed guideline # 3 above, you would be cited for not adhering to UAD guidelines.

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BillDing

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Reply with quote  #69 
Expect this from HUD & VA.  Their reviewers are old school and don't know how to deal with concessions.  Always put it in your original report to nip it in the bud.
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BillDing

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Reply with quote  #70 
And you can contact HUD and explain the problem.
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Meatloaf

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Reply with quote  #71 
When they send you a Notice of Appraisal Deficiency you can call them all you want or stick your finger up your own ass... Neither is going to change their mind.  Its a done deal.  No recourse, no appeal, no changing it.
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RubberStamp

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Reply with quote  #72 
If I'm hearing this correctly - what I believe is going on is that they want you to do a market analysis and find out what the typical concessions are in the market.   Then, make the adjustment off of that.   So you may be right stating dollar for dollar but you just need to indicate that you did some kind of research to determine that your sale is at the average/median or typical range for the market.  I have little experience with this other than I do that in every report and have never heard a peep. 
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We argue this: Meanwhile the agent's assistant just did 5 unofficial appraisal inspections they paired with a Zestimate and granted 90% LTV - all guaranteed no buy back.
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BillDing

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Reply with quote  #73 
Quote:
Originally Posted by Meatloaf
When they send you a Notice of Appraisal Deficiency you can call them all you want or stick your finger up your own ass... Neither is going to change their mind.  Its a done deal.  No recourse, no appeal, no changing it.

So, you've tried???

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