Back in January of this year I had a listing that was priced at the very top of its market. Based on comparable sales, I estimated that our listing could very well be overpriced by about $25,000 which in this market was quite detrimental. When discussing this problem with the owners, they pointed out that a friend owned a similar home a block away and had sold it for our asking price. I searched the MLS and could not find this home.
The problem was that even though this comparable sale existed in the real world, nobody that mattered (i.e. appraisers and real estate agents) knew about it because it was not in our MLS system. To help the marketplace understand the value of our listing and to help us get it appraised when a buyer eventually agreed to our price, I instructed my client to have his friend's real estate agent place that sale on the MLS as a comparable sale.
Surprisingly, I received an email from my client's friend with a copy of the settlement statement and express permission to use the statement to support our valuation. With that authorization, I placed the home on the MLS as a FSBO comparable. To make a long story short, the friend of my client, for reasons unknown, did not want the home reported on the MLS and ultimately had it removed.
That leads me to my very interesting chat with an investigator at the Utah Division of Real Estate this week. The MLS did remove the comparable sale but not before an appraiser was able to use it to support the value of a home close by in the neighborhood. Apparently, two appraisals were completed for the subject property. One for $120K and one for $175K! The higher appraisal cited the comparable I entered in the MLS. However, because there was such a discrepancy in the values, a complaint was lodged at the Division (likely because of the low appriasal) and finding a red flag they instead began to question the higher appraisal.
The Division could not see the comparable in the MLS and was very concerned about a fraud being perpetrated by the appraiser. Ultimately, after a lengthy conversation, I was able to clarify the situation and illustrate that the appraiser was acting honestly.
The irony of this whole situation is that the friend that wanted his comparable sale pulled off the MLS has done so to the detriment of the market. Any more appraisals conducted on similar homes will likely be lower in value since appraisers can't rely on his sale as a legitimate comp. This is remarkable because this gentleman has several homes in the same neighborhood for sale. Go figure.
When market volume is down like it is now, FSBO sales are helpful to appraisers and real estate professionals in establishing market value for other homes. This is why I make it a practice to report FSBO sales as often as possible on the MLS. Even though we can't capture market times with FSBO MLS entries, we can capture price points and concessions. I believe that its better for the market to have more information than less. The transparency helps everyone in the marketplace.
2 comments:
1st- You need express permission from buyer AND seller. You may have had seller permission, but did not have the buyers permission. Right?
2- It is now on the MLS after obtaining the sellers permission.
Section 18d or the WFRMLS License agreement:
In the event a Broker Subscriber desires to Submit a Listing for a property which has been sold, but for which a Subscriber is not a party to the transaction, either as a Listing Broker or Cooperating Broker, such Broker Subscriber may petition WFR to allow the Submission of the Listing. The petition shall include all relevant documentation for the closing of the sale of the property, including applicable HUD forms, appraisals, and other closing documents. The Broker Subscriber Submitting a Listing under this Section acknowledges that WFR maintains the MLS Database, and the information maintained in the MLS Database must be accurate and not misleading. WFR advises the Broker Subscriber that the MLS Database may not be used to promote or in any way facilitate loan fraud, or any other illegal activity. Accordingly, the Broker Subscriber, Agent Subscriber, and Staff Member Submitting such Listing jointly and severally represent and warrant to WFR and agree that all information submitted to WFR regarding the Listing, including all information included in the Listing Form, and subsequent documents, specifically including the sold price, is and will be accurate and not misleading, and otherwise complies in all respects with these Policies and Procedures and applicable law, and the Broker Subscriber, or his/her Agent Subscriber, has conducted reasonable due diligence to confirm the accuracy of all such information.
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