State of SoWal Real Estate - Spring 2009

[idaho]

Non arms length examples would be someone selling to a relative at a "sweetheart" price or a developer getting friends to buy at an inflated price to set comps for the project. Typically foreclosures or short sales are not used or given less weight in an appraisal unless they comprise "a significant amount" of the transactions in an area.

 

[mikeyboy]

My 2 cents worth. This whole idea of tops and bottoms in the market are not really significant for the person who wants to own a place at the beach. I sold my beach condo for a number of reasons in late 2004.I had always wanted a place at the beach but ownership did not meet my expectations. Did I sell at the top of the market? Absolutely not. I could have held that condo another six months and made an additional 30-40 percent. But five years later it appears that I sold at the right time.
If you want to own a place at the beach, now is a good time to buy. There are some good deals out there. Will the market go lower? Probably. But I believe that in five years it will not matter.

 

[Smiling JOe]

I agree. The relationship of buyers and sellers in short sales, foreclosure sales, etc are almost always unrelated making them arms length transactions.

However, SJ seemed to be relating arms length to the fact that a seller might be under duress to sell ,alomg it not an arms length transaction and therefore not a market value transaction. My point is that if a buyer and seller agree on a sales price, then by definition, market value was thereby established.

A non arms length transaction would be likened to some recent transactions in Alys whereby Ebsco bought back several properties at the original purchase price (so it seems per county records).

It all depends on which definition you believe. I am referring to the definition being taught to Real Estate Brokers, which does include transactions with duress. By the way, the Feds regulate the banks and the banks are limited on how much they can hold, so the banks are also being "forced to sell" inventory, thus foreclosures are also not considered "arm's length" by appraisers.

 

[scooterbug44]

IMO the "definition" is that they want to disqualify any cheap comparables to keep values inflated. If you sell a home because of a death, job transfer, divorce, unexpected pregnancy (so you need a bigger place) etc. you could also be "under duress" so I am calling BS at disqualifying every sale like that as a comparable.

I can understand if it's one lot or one house, but in cases where there are multiple or a majority of sales in a certain area it's just more of the nonsense that caused this mess.

 

[fisher]

IMO the "definition" is that they want to disqualify any cheap comparables to keep values inflated. If you sell a home because of a death, job transfer, divorce, unexpected pregnancy (so you need a bigger place) etc. you could also be "under duress" so I am calling BS at disqualifying every sale like that as a comparable.

I can understand if it's one lot or one house, but in cases where there are multiple or a majority of sales in a certain area it's just more of the nonsense that caused this mess.

Well said.

 

[Here4Good]

One more quick comment that I will be interested in hearing what the realtors have to say...

You might even consider denying a broker's license to anyone who has more than two foreclosed properties on their credit report as that would be a red flag for a realtor who may not have much real estate common sense.

Just a thought.

Hear that deafening silence? If real estate and mortgage brokers had to pass fiduciary responsibility standards, the herd would be thinned considerably.

 

[Smiling JOe]

IMO the "definition" is that they want to disqualify any cheap comparables to keep values inflated. If you sell a home because of a death, job transfer, divorce, unexpected pregnancy (so you need a bigger place) etc. you could also be "under duress" so I am calling BS at disqualifying every sale like that as a comparable.

I can understand if it's one lot or one house, but in cases where there are multiple or a majority of sales in a certain area it's just more of the nonsense that caused this mess.

I guess it is a good thing that you are not an appraiser and have regulations to follow when appraising property.

 

[Here4Good]

Here's the definition I find time and time again for this term:

transaction carried out by unrelated or unaffiliated parties, as by a willing buyer and a willing seller, each acting in his own self-interest.
​

What part of this is not true in a foreclosure or short sale, and what part of this has anything to do with "duress"?

ONLY real estate appraisers take the "duress" into consideration. I cannot see why. Again - when the frenzy was on, and you had to plop down $50,000 in the next ten minutes to get a seller to even consider selling you a condo, why was that not duress on the part of the buyer? Why is EVERY relocation and divorce sale not excluded? Why not exclude EVERY estate sale, EVERY case where someone has lost their job, EVERY case when the fourth child made the house too small? How about when you are on a relo trip and have 48 hours to find a house or else you will have to live in a hotel for three months with the kids and the dog? That's duress.

It's silly. If you HAVE to sell, why does that make that transaction different? I also think it's misleading that they have taken a phrase which means the same thing in every other legal setting, and added this "codicil" of duress. Call it something else! Call it a Duress Sale!

 

[Busta Hustle]

ARMS LENGTH: transaction carried out by unrelated or unaffiliated parties, as by a willing buyer and a willing seller, each acting in his own self-interest.

What part of this is not true in a foreclosure or short sale, and what part of this has anything to do with "duress"?
​

You now have entered into the world of rule versus the interpretation of the rule. Property appraisers add "duress" to exclude shorts and foreclosures. It is interesting that even some state property appraisers offices around Florida are "requesting" that shorts and foreclosures be considered arms lenght (qualified in their words) since they represent such a large portion of the total transactions. In Walton Co. a full 30.5% of sales were considered unqualified in 2007 for your 2008 tax comparisons.

Additionally all you have to do is notice that another percentage of sales in the area be it on land houses or condos are 30%- 50% and sometimes a bunch more below peak prices so in almost all categories you can find " broker approved" comps that agree property values across the board are tanking.

Most re brokers teach the past 6 months sales of "broker approved" arms lenght transactions is what needs to be considered to do their CMA, competitive market analysis. If the room is dark can you see the 3000 pound gorilla?

 

[Smiling JOe]

Hey, I don't make the rules. I'm just telling you how Real Estate Appraisals work. They do include "duress." I mentioned nothing about logic. Logic isn't going to get you a loan, but an appraisal might help.