This thread is for any discussion pertaining to real estate and the like. I was prompted to start this after a discussion on another thread as to what market value is.

It was suggested that market value is whatever price a buyer is willing to pay for a property, but I disagree. I addition to other reasons that the purchase price is not always equal to market value, buyers can be uninformed about buying and can buy based on individual needs that the market doesn't perceive as valuable.

The actual market value is the most probable price a property will bring on an open market - not the highest price the property could possibly sell for.

Here's an example of when the purchase price would not be equal to the market value.

There was a sale of a property in this neighborhood in which I was appraising and I was looking at it as a possible comparable sale (comp) for the appraisal. It was odd because the comp in question sold about $50,000 higher than any other sale like it in the neighborhood (range was around $140K-190K).

I normally would have just ignored it as an outlying sale, but the homeowner in this case (was seeking an equity loan) had told the bank about it so I had to look into it. He thought his house should be worth more because this one sale had set the high range for his neighborhood. So, I tracked down the seller in his new house and determined it was not an arms length transaction - can you guess why?

I knew something about it was funny and this was why. The guy who bought it was an older gentleman who had been born and had grown up in that house and persuaded the seller to sell even though he initially wasn't interested. The seller said the buyer kept raising his price until he'd have been dumb not to sell.

We get examples like this all the time, both to the high extreme and the low.

(from the other thread)

thedynasty1998;446620 wrote:You are correct. Not sure what your debate is, but I think both would be right. It's just a battle of words. One can say the buyer sets the market value, but it is really the banks unless you are making a cash offer.

Another example, I bought a house in April and what we paid for it was 4% less than what the bank appraised it for. So did I buy it for less than market value, or did I set market value?

Our neighborhood only has like 10 different models, so everyone that has our model now looks at our sale price to determine market value, but they are unaware of what it appraised for.

I wouldn't exactly say that the bank sets the market value. It's more like the appraiser has to come up with credible support for the loan. The bank really doesn't get involved in it other than reading the bottom line on the appraisal. The appraiser needs to show support in the form of similar sold properties proximate to the subject property. If he can't, the bank declines the loan or reworks the deal.

Regarding your house, I'd need to know more about it to make an intelligent comment either way. Was it built new for you? Your case just might lead right into my next example. Who built it?

ccrunner609;446817 wrote:so is this where you want us to post the pics of penises?

What? Why do you have pictures of penises to post?

Steel Valley Football;446575 wrote:That's fine...you still have some knowledge.

Con Alma says that a property's market value is whatever a prospective buyer is willing to pay for a property. Agree or disagree?

Con_Alma;446899 wrote:I have never said such a thing.

The market value is the price point when the price a buyer is willing to purchase at meets the price that a seller is willing to sell at.

It's not the most recent, comparable selling price. it's not what the sell thinks it's worth. It's not what the buyer is willing to pay.

It's the price point that both are willing to transact act.

Except you are forgetting the term we are defining: market value....with the key word being "market".

By your definition, you have a single buyer. A single buyer does not make a market . Meaning, the price point in your example must be the most probable price the market will pay - the market.

So, your price point could be above or below market value. To test that, the buyer must be able to RE-SELL that property for the same amount given a reasonable time frame.

What you are describing is the selling price or selling point. Selling price does not always equal market value.

Steel Valley Football;446810 wrote:Regarding your house, I'd need to know more about it to make an intelligent comment either way. Was it built new for you? Your case just might lead right into my next example. Who built it?

Not a new build. Was built in the early 80's. Fairly mature neighborhood of probably a couple hundred homes.

A judge had to approve the sale price, because the seller filed bankruptcy at some point, but she was current on her mortgage. She listed it in February when we had bad snow, we went through in late March the morning before their first open house. Seller dropped the price by $5,000 the night before open house and we ended up going into contract a week later for $7,000 less than that. Owner came away from sale with $1300 profit after paying $2000 towards closing.

Like I said, it appraised for 4% more than purchase price. Did I set market value? Or is market value what it appraised for?

Similar models are on the market currently in neighborhood (we have 2 bath, most have 1.5) for 8-12% more than what we purchased. If someone goes into contract for 10% more than our purchase price, does the appraiser look at our purchase price and say that the should be paying the same as we paid when we have an extra bath?

Steel, are you an appraiser?

thedynasty1998;446960 wrote:Steel, are you an appraiser?

Yep, started in 1993. Let me look at your above post for a few minutes.

Got another general question for you...

What do you think about flippers and how they affect market value? Say a flipper buys house for $100,000 and "fixes it up" and sells it 30 days later for $175,000. As the appraiser, what do you consider in your opinion?

thedynasty1998;446959 wrote:Not a new build. Was built in the early 80's. Fairly mature neighborhood of probably a couple hundred homes.

A judge had to approve the sale price, because the seller filed bankruptcy at some point, but she was current on her mortgage. She listed it in February when we had bad snow, we went through in late March the morning before their first open house. Seller dropped the price by $5,000 the night before open house and we ended up going into contract a week later for $7,000 less than that. Owner came away from sale with $1300 profit after paying $2000 towards closing.

Like I said, it appraised for 4% more than purchase price. Did I set market value? Or is market value what it appraised for?

Similar models are on the market currently in neighborhood (we have 2 bath, most have 1.5) for 8-12% more than what we purchased. If someone goes into contract for 10% more than our purchase price, does the appraiser look at our purchase price and say that the should be paying the same as we paid when we have an extra bath?

I have to see the neighborhood sales data to give any kind of answer, but you probably picked it up at below market value given the scenario.

It's also hard to comment on the listings because those are just arbitrary prices set by the realtor/seller that have a bargaining amount factored in. Plus, who knows if they priced it right. It's all pretty SUBJECTIVE.

Regarding the appraiser who does the houses currently going into contract, any appraiser worth his salt would likely not even consider your purchase in his new appraisal because (if I'm reading it right) it was a distress sale/bankruptcy and not an arms-length transaction. It also sounds like it didn't get enough exposure time to be considered arms-length.

Regarding (whether you set market value or is market value what it appraised for), I would say neither. Market value is the probable price you would get from the market when:

1) buyer and seller are typically motivated 2) both parties are well informed or well advised, and acting in what they consider their best interests 3) a reasonable time is allowed for exposure in the open market 4) payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto 5) 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.

(yeah that last part 1-5 is not mine lol)

I could probably ask you a hundred questions, but here is one more easy one...

As an appraiser, do you have access to local mls sites or do you just use public records? When doing an appraiser or two similar models in the same neighborhood, do you look at pictures of the interior, or are mainly looking at comps, square footage, etc...

thedynasty1998;446974 wrote:Got another general question for you...

What do you think about flippers and how they affect market value? Say a flipper buys house for $100,000 and "fixes it up" and sells it 30 days later for $175,000. As the appraiser, what do you consider in your opinion?

Flipping is tricky cuz losta flips don't get fixed up. If it's a legit flip then I consider it a normal transaction. Though, if I saw it was a flip and it was that soon I would probably just toss it out as a comp. The federal govt has attempted to address using flipped sales as comps in appraisals by making us disclose all previous sale prices in the report because it was such a problem. Also, bank will sometimes ask for a new comp if you use a flip sale so that's why I just avoid em.

I was planning on addressing the bad kind of flipping later and the ways it can absolutely kill a neighborhood. Hopefully, I'll be able to do that. We'll see how it goes or if anyone even cares or posts on the thread.

thedynasty1998;446980 wrote:I could probably ask you a hundred questions, but here is one more easy one...

As an appraiser, do you have access to local mls sites or do you just use public records? When doing an appraiser or two similar models in the same neighborhood, do you look at pictures of the interior, or are mainly looking at comps, square footage, etc...

Yes, I always look at interior for condition. That help us figure out why two similar models may sell for different prices. I use MLS, county auditor, anything I can to get a better idea of the comp I'm using.

So you do have access to the mls?

Yes I'm a member. It's a necessity now for appraisers. In the old days it wasn't imperative to have it, but if you ever see an appraisal where the appraiser didn't cite MLS as a source then that raises a red flag.

Steel Valley Football;446978 wrote:3) a reasonable time is allowed for exposure in the open market
(yeah that last part 1-5 is not mine lol)

I think we might be the only two interested in this thread, but question regarding this.

As an appraiser how much do you take into consideration this point? Two identical houses sell within a year. One sells in February after being on the market for 40 days. The second sells in mid July after being on market for 40 days. House in July sells for 3% more.

When doing the appraisal, do you consider the timing? There are obviously more people house shopping in July, so there is more demand. But at the same time, likely less supply in February. With all things being equal of the two houses, does the timing affect the appraisal?

Steel Valley Football;446978 wrote:...

Regarding (whether you set market value or is market value what it appraised for), I would say neither. Market value is the probable price you would get from the market when:

1) buyer and seller are typically motivated 2) both parties are well informed or well advised, and acting in what they consider their best interests 3) a reasonable time is allowed for exposure in the open market 4) payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto 5) 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.

(yeah that last part 1-5 is not mine lol)

I appreciate the information in 1-5 in regards to the topic.

What's interesting to me is your use of the words "probable price you would get".

I might suggest that that lends to an "estimate" regarding what the market price might be.

The actual price transacted when the 1-5 conditions are present would seem like a true market price.

thedynasty1998;447148 wrote:I think we might be the only two interested in this thread, but question regarding this.

As an appraiser how much do you take into consideration this point? Two identical houses sell within a year. One sells in February after being on the market for 40 days. The second sells in mid July after being on market for 40 days. House in July sells for 3% more.

When doing the appraisal, do you consider the timing? There are obviously more people house shopping in July, so there is more demand. But at the same time, likely less supply in February. With all things being equal of the two houses, does the timing affect the appraisal?

If I had data crunched that showed a summer spike in prices then I would adjust for it. I've not really seen that, though...not in the Columbus market anyway.

You live in Columbus?

Con_Alma;447181 wrote:I appreciate the information in 1-5 in regards to the topic.

What's interesting to me is your use of the words "probable price you would get".

I might suggest that that lends to an "estimate" regarding what the market price might be.

The actual price transacted when the 1-5 conditions are present would seem like a true market price.

Now you changed the terminology from market value to market price. I said before you were describing a sales point or a sales price and based on the above post that's exactly what you are describing....one transaction, one buyer, one seller.

One transaction does not constitute market value. It's not even necessary to have a sale or transaction to have a market value.

thedynasty1998;447186 wrote:You live in Columbus?

Worthington actually. I started out appraising in the Youngstown/Warren market in 1993. Talk about night and day between markets LOL.

Since you have access to tempo, here is my mls number if you are bored and want to see our house:

210004977

Steel Valley Football;447191 wrote: ..
One transaction does not constitute market value. ....

Are you suggesting that one transaction with the existance of the the items defined in 1-5 wouldn't constitute market value? That's one I posted above.

Steel Valley Football;447191 wrote: ..
It's not even necessary to have a sale or transaction to have a market value.

I have always agreed with that but defining the market "value" has always been the disagreement point.

In addition, market value may and at times is* very different than the value present to the owner or even potential buyer. It's when a buyer is willing to purchase and does the land from a buyer who is willing to replace the land with a similar asset at transaction at the same value as the buyer...with the terms of 1-5 being present of course that the true market value is defined.

Con_Alma;447199 wrote:Are you suggesting that one transaction with the existance of the the items defined in 1-5 wouldn't constitute market value? That's one I posted above.



I have always agreed with that but defining the market "value" has always been the disagreement point.

In addition, market value may and at times is* very different than the value present to the owner or even potential buyer. It's when a buyer is willing to purchase and does the land from a buyer who is willing to replace the land with a similar asset at transaction at the same value as the buyer...with the terms of 1-5 being present of course that the true market value is defined.

Why are you all of a sudden adding points 1-5 to all your scenarios?

You said:

The market value is the price point when the price a buyer is willing to purchase at meets the price that a seller is willing to sell at.

It's not the most recent, comparable selling price. it's not what the sell thinks it's worth. It's not what the buyer is willing to pay.

It's the price point that both are willing to transact act.



Well, not meeting points 1-5 are the usual reasons that the appraiser and the bank inform the parties that their "price point" does not equal market value! Duh! You've just added my main points to your definition and then dared me to disagree with it. LOL!

What's the real story here, Con? Fess up as to why you think you know more than the appraiser who apparently killed your deal at some point.

Sorry I didn't reply sooner. ...had a meeting to go to.

Steel Valley Football;447279 wrote:Why are you all of a sudden adding points 1-5 to all your scenarios? ...

I appreciate the seemingly rational behind them and thought it might bring a better understanding to my view on the topic if I added the contingencies which you offered in a previous post.

Steel Valley Football;447279 wrote:...

You said:

The market value is the price point when the price a buyer is willing to purchase at meets the price that a seller is willing to sell at.

It's not the most recent, comparable selling price. it's not what the sell thinks it's worth. It's not what the buyer is willing to pay.

It's the price point that both are willing to transact act.
...

Indeed I did.

Steel Valley Football;447279 wrote:...

Well, not meeting points 1-5 are the usual reasons that the appraiser and the bank inform the parties that their "price point" does not equal market value! Duh! You've just added my main points to your definition and then dared me to disagree with it. LOL!



What's the real story here, Con? Fess up as to why you think you know more than the appraiser who apparently killed your deal at some point.

I'll take these one at a time.

I have zero interest in banks or appraisers reasons for making decisions. True market value exists when a transaction occurs as I stated above. Everything else is simply an estimate until such time that a transaction occurs. To guesstimate a value in a marketplace, in addition to other means, one can use past indicators that relate to the asset. They are not immediately current like the true price transaction is.

I am not daring you to agree or disagree. I have asked questions to inquire and learn and stated my opinion. I have never asked you to consider mine and have no interest for you to do so. I am genuinely indifferent on your observation of my view on the subject which started on the other site when I disclosed the lengthy period of time a doctor who lives next to me had his home on the market.

In fact I think the only reason we reengaged in this dialogue was because I expressed my approval of your offering on another thread even though we had disagreed in the past. You asked what we disagreed about and if I want to chat about it in it's own thread. Combine that with my comment on the land contract thread and your PMs I chose to oblige and offer my views.

It's hardly a dare. Sorry if it was perceived that way but intent is just not there on my part.

What I will "fess up" to is that I am not comparing my opinions on this topic to your knowledge or any appraiser's knowledge at any level. As stated prior I am completely indifferent to what you do, who you are and what you know. It's nothing personal, honestly. It's just my view on trying to guess what something's worth versus what value it has to two parties willing to transact.

I have never had an appraiser "kill" a deal for me. I have had three real estate transactions in my life. My first home on the east coast when a mortgage was involved. My current home which I had built. I paid for the land in cash and then had a construction loan during the build process followed by a 15 year mortgage note which has since been paid off....and finally, the commercial space me and my partner own together which was not financed directly per se but rather the separate LLC pays the business for funding it on the books.