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I would appreciate a 3rd party outside opinion on a hypothetical situation:
an apartment has been taken over by HOA through court.
Appraiser was called and appraised the value at $250K - "as is" specifically in his report.
Later HOA discovered various violations and problems that called for repairs of $20K
The apartment was listed on MLS for $250K in "as is" condition (repairs not done yet)
party with knowledge of upcoming repairs made an offer that was accepted, while another lower offer that called for these repairs was not (this party didnt know the repairs were coming).
the costs were later deducted from the balance due to former owner.
The question - is there an appearance of insider knowledge here, even if accepted offer was at full price?
If the appraisal is made mostly on comparative sales - why put "as is" into report? Is it just standard boiler plate?
Does the same apply to MLS listing - should "as is" in the listing just be ignored as standard salesman practice?
Seems to me that an appraiser can only evaluate what is actually there (unless you tell him about some planned improvements/ repairs and ask him to make a guess).
If you did not make it known to prospective purchasers that some repairs were included then you (the HOA) did not get as much as you could have.
Seems to me that a board that allowed this to happen was not operating in the best interests of the association.
As is means don't ask for the sale to be contingent on a home inpsection and don't ask for any single thing to be done in order for you to buy it.
It's sort of staving off future possible contingencies.
Sure there could have been insider knowledge. Do you know who bought it? If they're connected with the board or something? But it really doesn't matter, imo. The seller got full price. There's often someone who finds things out before most everyone else, whether it's because they see people moving out late at night and ask what's going on or whether instead of sending letters to widows and widowers about purchasing their house and/or content, they instead go to church with the person or work with the person. Lots of ways to skip to the chase quickly.
The question - is there an appearance of insider knowledge here, even if accepted offer was at full price?
One offer was higher and one was lower. The HOA accepted the higher offer. How is that inappropriate? The lower offers called for the repairs to be made but was still lower which is the key fact. The HOA clearly didn't care about doing the repairs because they did them anyway. If you told us the two offers were the same amount and the board member's offer was accepted over the other one . . . well that might be a bit shady but nothing wrong with the story as you've outlined it.
If the appraisal is made mostly on comparative sales - why put "as is" into report? Is it just standard boiler plate?
Does the same apply to MLS listing - should "as is" in the listing just be ignored as standard salesman practice?
To hopefully clarify some of your questions pertaining to the appraisal, the answer to your questions above depend on the problem the client asked the appraiser to solve.
In this case, we have to know is which of these questions was asked -- what is the value "as it" or what is the value "as repaired"?
These questions drive the search criteria the appraiser use for his/her analysis.
The report should have a restatement of the Scope of Work so it should say either "As Is" or "As Repaired" (or similar language).
So, if the client requires an "as is" value, the appraiser searches for similar properties with similar issues, e.g. outdated kitchens, roofs needing repair, etc., and derives a value based upon this information.
"As repaired" frequently includes a cost to cure or cost to remedy, if this is requested by the client. The appraiser searches for similar properties using criteria as if the items that need to be repaired are ACTUALLY repaired and in good condition.
As for seeing the term "as is" in a listing, this term by itself is of little value to the appraiser without either a personal inspection of that property OR a chat with the listing agent to determine what issues/problems might be present at that property. Frequently, "as is" properties are foreclosures or REO properties which are priced well below market value and not suitable for selection as a "comparable" for a market arms-length purchase transaction.
the seller was HOA, the buyer - member of the board
It sounds like the situation stinks--but it really depends on the full facts of your "hypothetical" situation.
There is a clear conflict of interest in having a Board member purchase from the HOA. If it was appraised for $250,000 and listed at $250,000...it is NOT a full price offer if the purchase price was then reduced by $20,000 to cover the repairs.
However, if the property was marketed appropriately and if the only other net offers were for less than the Board member offered, it could (perhaps should) be totally appropriate to sell to a Board member. What is stated in the Board's Conflict of Interest Policy? (which they should have!)
As is means don't ask for the sale to be contingent on a home inpsection ..........
Not in my experience.
In Florida, all As-Is contracts have a right of inspection. I realize that real estate is regional/local and that things can differ market to market. May be different elsewhere.
In my market, As-Is contracts are the norm and I have never encountered a single transaction (short sale, foreclosure or otherwise) that did include a right of inspection. The only limitation I have encountered is a lack of any repairs by the seller in the event any work needed on the home. The sale is essentially, "take it or leave it". I have seen some limited concessions from the seller even in an "As-Is contract".
In Florida, all As-Is contracts have a right of inspection. I realize that real estate is regional/local and that things can differ market to market. May be different elsewhere.
In my market, As-Is contracts are the norm and I have never encountered a single transaction (short sale, foreclosure or otherwise) that did include a right of inspection. The only limitation I have encountered is a lack of any repairs by the seller in the event any work needed on the home. The sale is essentially, "take it or leave it". I have seen some limited concessions from the seller even in an "As-Is contract".
This is my experience as well, albeit as an armchair real estate enthusiast and not as a professional. Real estate is always sold as is around here, unless there is some specific warranty as might be the case in a new build. A statement of "As-Is" in the listing simply means that the buyer should not expect the seller to make any repairs--it does not mean that the buyer will not be allowed an inspection.
To the original question: I don't see how the sale was improper. "As-is" is never set in set in stone. Everything is negotiable. This offer netted the association more money than the competing offer would have, and for that reason it was accepted.
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