Weird Real Estate Sale Price

[Matthew K]

So as one does, I was searching some properties on my local tax assessor and noticed a house that had recently sold showed a price well below its list...

The house was listed right at 1 million (a nice house) and by all means could've and should've gotten it, but the sales price is listed at 245,000. Both the realtor reported price and tax assessor price show this.

So, what happened here? Was there some sort of asset exchange/barter and the buyer paid 245k in cash to cover the remaining? Is that even possible from a sales price perspective?


This is the first time I've run into something like this, any chance our real estate savy members might know whats going on?

 

[Tantalum]

..and this is why you have to be careful with those automated data models, and why I never trust 'Zestimate' and things like that.. there's only so much that you can glean from public records data. Good data models will establish and remove statistical outliers

as far as your question, you'll see transactions for $1 as well, an example could be someone 'gifting' a house to a parent, husband, wife, friend, etc., and the $1 makes it a legitimate transaction. Or, as observed, there could be other considerations of value made as well

A $1M house being sold on paper for $245K is unusual, but there's no 'one size shoe fits all' answer.. they could be taking on other obligations or liens, taxes, etc.

 

[Rgbeard]

^^that. There are many situations where a non-market price is appropriate, and without specific knowledge, you’ll probably never know.

 

[Brad Z]

Usually the tax assessors office will note the nature of the sale, and whether the sale price can be used as input into the assessed value model. You might be able to contact the assessors office and get more detail.

Here are the codes they use here for valid (can be used for the model) or invalid (isn't indicative of market price):



SALES CODES

VERIFIED - valid sales

A no disqualifying circumstances
B purchased by adjacent owner
C actual consideration differs from deed
E while related partnership, sale/lease back, etc.- independent appraisal was prepared for value consideration
F pending verification
G multi-lot sale
H land sale
I condominium sale where the number of parking spaces sold is different than number assessed
LK like kind exchange


VERIFIED - invalid sale

J to relative or related business
K buyer was tenant under lease agreement
L exchange of properties
M foreclosure
MB financial institution or deed in lieu of foreclosure
MS short sale
N divorce decree or duress
O seller assisted financing is major influence
OC City-assisted financing - affordable
P will transferring property - no consideration
Q miscellaneous (does not fit definition in any other category)
R
re-recorded deed



VERIFIED - invalid sale for sales ratio study

S multi-lot sale or assemblage
T subdivision of original parcel
U adjacent property owner is purchaser
V alteration/addition/renovation, or other change in physical condition since last assessed
W reserved for future use


UNABLE TO VERIFY

X three efforts made to contact buyer, seller or agent
Y buyer, seller and agent refused to respond
Z easements/agreements

 

[Matthew K]

Usually the tax assessors office will note the nature of the sale, and whether the sale price can be used as input into the assessed value model. You might be able to contact the assessors office and get more detail.

Here are the codes they use here for valid (can be used for the model) or invalid (isn't indicative of market price):



SALES CODES

VERIFIED - valid sales

A no disqualifying circumstances
B purchased by adjacent owner
C actual consideration differs from deed
E while related partnership, sale/lease back, etc.- independent appraisal was prepared for value consideration
F pending verification
G multi-lot sale
H land sale
I condominium sale where the number of parking spaces sold is different than number assessed
LK like kind exchange


VERIFIED - invalid sale

J to relative or related business
K buyer was tenant under lease agreement
L exchange of properties
M foreclosure
MB financial institution or deed in lieu of foreclosure
MS short sale
N divorce decree or duress
O seller assisted financing is major influence
OC City-assisted financing - affordable
P will transferring property - no consideration
Q miscellaneous (does not fit definition in any other category)
R
re-recorded deed



VERIFIED - invalid sale for sales ratio study

S multi-lot sale or assemblage
T subdivision of original parcel
U adjacent property owner is purchaser
V alteration/addition/renovation, or other change in physical condition since last assessed
W reserved for future use


UNABLE TO VERIFY

X three efforts made to contact buyer, seller or agent
Y buyer, seller and agent refused to respond
Z easements/agreements

Ok so your post made me think, is this possibly an owner finance situation? 245k would be an acceptable downpayment, and maybe thats what got communicated through the documents? But then maybe not since the realtor also reported a sales price of 245k...

As for the codes, I know different assessors are all over the place in their use of codes, but in this case its just listed as "Fair Market-Improved" the normal code for a run of the mill market sale.

..and this is why you have to be careful with those automated data models, and why I never trust 'Zestimate' and things like that.. there's only so much that you can glean from public records data. Good data models will establish and remove statistical outliers

as far as your question, you'll see transactions for $1 as well, an example could be someone 'gifting' a house to a parent, husband, wife, friend, etc., and the $1 makes it a legitimate transaction. Or, as observed, there could be other considerations of value made as well

A $1M house being sold on paper for $245K is unusual, but there's no 'one size shoe fits all' answer.. they could be taking on other obligations or liens, taxes, etc.

Totally agree. And thats even more towards the argument that the data these zetismate's use is questionable. I'm very used to seeing $1 or 0$ transfers for family, corporate affiliates, etc. Also familiar with foreclosures listing the sales price as the loan amount...

I'm pretty certain in this specific scenario there are no liens or even significant mortgages that were on the property...so I'm definitely leaning towards that "other considerations of value", or the owner financing.

 

[jrhillma]

Did the transfer deed say "$245,000." Or something like "$245,000 and other valuable consideration"? I spent the better part of a decade in the commercial real estate world as an appraiser. A lot of times, warranty deeds would list "$1 and other valuable consideration" on multi-million dollar deals. The assessing authority would get the actual value of the transaction for taxing purposes, but public records (other than a potential change in "taxable value" which you could sort of use, but not reliably, to figure out the sale price and which also lagged many months, making it borderline for comparable purposes anyway) would only reflect that "$1". In commercial, it was important to have a solid, trusted network to develop reliable comp data for the market approach. Residential it wasn't so much of a problem, but we tended to stay out of that market.

 

[SCCutler]

Varies by state - some states (California is one) required disclosure of transaction prices (property taxes being based on transaction amounts), while others (Texas, f’rinstance) do not. Taxed based upon “assessed value,” which in turn is a ripe topic for argument.

 

[JScarry]

I just did a somewhat unusual refi in my house and Zillow lists it as sold for $3,500. Unfortunately my taxes didn’t change.

 

[mandm]

The pricing models (Redfin, Zillow) are generally wrong and overpriced in my experience. Prices vary greatly on location, school districts, parking situation, among other items that are not generally quantified in black and white on a listing ticket. Yes you know a city, but it’s generally more desirable to be closer to certain parts of the city and a certain direction, the models do not know which streets are cleaner than others, etc.

Of course the transaction process and register of deeds will vary from each state and even each county. Generally a transaction price is needed by the city to assess a transfer tax and whether or not the transaction warrants re-assessing the value of your home (aka to charge you higher taxes - unlikely the city would ever decrease your taxes based upon a transaction without a lawyer suing and winning)

An owner financing deal typically should have the contract recorded on the deed to protect the interest of the buyer, you’d be able to see the transaction price, down payment, interest rate and term. The total transaction price should be recorded.

Now if a million dollar home was sold for 250k, it could be a fire damaged property, or it could be an internal transaction to a relative or entity owned by the seller. Sometimes buyers are required to submit an affidavit on transfer of the property to indicate the nature of the transaction (where related parties can choose a box and the property taxes would remain at the current assessed value), I’m wondering if you could do a FOIA request to get more information on this transaction.

Other than that, I’m not sure. A lot of times the title company will submit the documents and they typically follow the norms pretty closely. Now if it’s a cash deal, FSBO, etc AND the parties choose not to use a title company, then buyer and seller could put whatever they want on the documents. This happens in cities with cheaper values where these transaction costs make up a considerable % of the sale so both parties opt away from the title companies and aim to sell for a $1 or cheap price to avoid fees. It’s a bit more cowboy this way.