Requiring an MLS listing before a coop sale?
May 8, 2018 2:08 PM Subscribe
Members of our townhouse coop association frequently sell their units privately, without going through a realtor. Because the units are not listed on the MLS, the sales aren't getting used as comparables for future sales, and we are concerned that this is depressing prices and/or interfering with the ability of buyers to get mortgages. Help me understand whether it might make sense to require sellers to list their property on the MLS before a sale!
I'm on the board of my townhouse coop association. Our coop has a great shared outdoor play space which is just lovely for young families, and as a result there's always a line of people waiting to buy one of our units whenever they come on the market.
Perhaps because of this ready market, many of the recent sellers have chosen to do private sales, without involving a realtor.
The problem comes when buyers look at comparable sales when applying for their mortgage. Because all of the recent coop sales have been for sale by owner, none of them show up on the list of comps. The nearby units that do show up on the comps lack the essential features that make our coop so desirable: namely, its identity as a coop and its shared outdoor space. Therefore, the comps are underpriced relative to what people are offering for our units, and sometimes the appraisals are coming in short and leading to trouble with sales.
It was suggested to us that we institute a rule that requires sellers to list their properties on the realtor's Multiple Listing Service (MLS), "even for just one day", so that the sales could be used as comps for future sales. We would ask that sellers either go through a realtor or use a flat rate listing service. I can't figure out whether this makes sense or not. Please hope me!
1. Really what we would like is for the final selling price to get recorded somewhere, so that these sales can get used in comps. Is there another option here apart from the MLS that we are missing?
2. Would our approach even work? Would a unit that's listed for only a day on the MLS even get counted in comps?
3. Do banks only tend to use sales in the last 90 days when computing comps? Our coop has 1-2 sales per year, so maybe the typical last sale would be considered to old to be included, MLS or no MLS?
4. Are there downsides to the buyer/seller to this request that I'm not thinking about? We know it will cost several hundred dollars to sellers to have them list their units. I think people are a little concerned about being inundated with interested buyers, especially if they already have somebody in mind to sell to already.
We have a lawyer and will be talking through any potential rule with her, so I'm not asking here about the legal aspects of this requirement (although I suppose if you know that this idea is blatantly illegal/unenforceable, I could just stop wasting my time right here.) I just... don't understand real estate transactions, and am hoping the good people of metafilter can help me out!
I'm on the board of my townhouse coop association. Our coop has a great shared outdoor play space which is just lovely for young families, and as a result there's always a line of people waiting to buy one of our units whenever they come on the market.
Perhaps because of this ready market, many of the recent sellers have chosen to do private sales, without involving a realtor.
The problem comes when buyers look at comparable sales when applying for their mortgage. Because all of the recent coop sales have been for sale by owner, none of them show up on the list of comps. The nearby units that do show up on the comps lack the essential features that make our coop so desirable: namely, its identity as a coop and its shared outdoor space. Therefore, the comps are underpriced relative to what people are offering for our units, and sometimes the appraisals are coming in short and leading to trouble with sales.
It was suggested to us that we institute a rule that requires sellers to list their properties on the realtor's Multiple Listing Service (MLS), "even for just one day", so that the sales could be used as comps for future sales. We would ask that sellers either go through a realtor or use a flat rate listing service. I can't figure out whether this makes sense or not. Please hope me!
1. Really what we would like is for the final selling price to get recorded somewhere, so that these sales can get used in comps. Is there another option here apart from the MLS that we are missing?
2. Would our approach even work? Would a unit that's listed for only a day on the MLS even get counted in comps?
3. Do banks only tend to use sales in the last 90 days when computing comps? Our coop has 1-2 sales per year, so maybe the typical last sale would be considered to old to be included, MLS or no MLS?
4. Are there downsides to the buyer/seller to this request that I'm not thinking about? We know it will cost several hundred dollars to sellers to have them list their units. I think people are a little concerned about being inundated with interested buyers, especially if they already have somebody in mind to sell to already.
We have a lawyer and will be talking through any potential rule with her, so I'm not asking here about the legal aspects of this requirement (although I suppose if you know that this idea is blatantly illegal/unenforceable, I could just stop wasting my time right here.) I just... don't understand real estate transactions, and am hoping the good people of metafilter can help me out!
Best answer: This article is relevant: "Appraisers can use non-MLS sales as “comps” in an appraisal report if the sales can be verified with someone principle to the transaction."
This suggests that there might be a way to supply the data directly to appraisers, or to create a database of past sales that would be made available for future sales. You could contact appraisers in your area to ask them specifically where they get their data and how to best supply them with information.
posted by Mr.Know-it-some at 2:22 PM on May 8, 2018
This suggests that there might be a way to supply the data directly to appraisers, or to create a database of past sales that would be made available for future sales. You could contact appraisers in your area to ask them specifically where they get their data and how to best supply them with information.
posted by Mr.Know-it-some at 2:22 PM on May 8, 2018
Response by poster: I forgot to mention: I think I saw somewhere online that often the public property records are too slow to be updated, so that these sales are sometimes too old to count by the time they show up in the records. But if I'm wrong about that, I'm happy to be corrected!
posted by wyzewoman at 2:23 PM on May 8, 2018
posted by wyzewoman at 2:23 PM on May 8, 2018
Yeah this may be location dependent but where I live (Vermont) all the sale prices are public (and, on preview, available fairly quickly) and comps are created using public sale prices. The only weird issue is that public sale pricing doesn't always take other things into account (like bank assessed value or specific condition things). I am on my town's abatement board where people fight a lot about their assessed values and we use comps going back a few years but then the town lister or assessor often will talk about whether the market is "hotter" or "colder" than whenever the comps were from. It may be, and I don't know, that MLS listing will help for stuff like Zillow and other online comp things but not actual comps that an appraisal would use.
posted by jessamyn at 2:26 PM on May 8, 2018
posted by jessamyn at 2:26 PM on May 8, 2018
I think it depends somewhat on location, but judging by the speed at which I get those hinky "mortgage insurance" offers in the mail, I am pretty sure sales are public pretty soon after closing. This is in three different states so if publicly available sales info is slow, that probably isn't the norm.
posted by rabbitrabbit at 2:27 PM on May 8, 2018 [1 favorite]
posted by rabbitrabbit at 2:27 PM on May 8, 2018 [1 favorite]
I don’t think it makes sense because (up here anyway) not just anyone can list on MLS. So you’re forcing someone into entering some kind of agreement with a broker or paying for a flat fee service. Faira claims it’s free but they charge buyers.
posted by warriorqueen at 2:27 PM on May 8, 2018 [1 favorite]
posted by warriorqueen at 2:27 PM on May 8, 2018 [1 favorite]
You’d, essentially, be banning private sales by requiring the MLS listing, which probably wouldn’t go over very well. At least in my area, no one other than realtors can post to the MLS, so you’d be forcing everyone to contract with a realtor.
posted by Thorzdad at 2:42 PM on May 8, 2018 [3 favorites]
posted by Thorzdad at 2:42 PM on May 8, 2018 [3 favorites]
Best answer: Have you considered discussing this with some appraisal services in your area?
posted by OrangeDisk at 3:25 PM on May 8, 2018 [1 favorite]
posted by OrangeDisk at 3:25 PM on May 8, 2018 [1 favorite]
Response by poster: Thanks guys — talking with the appraisers is a great idea. There’s only one lender who deals with coops around here, and I’m guessing that they just use one or two appraisers, so this should be doable. Hopefully they’ll be able to tell us what information they would need to include our sales (if indeed they are not getting included), and we can make this happen more directly.
Thank you also to the other commenters pointing out that this is perhaps a more onerous ask for the sellers than I was imagining.
posted by wyzewoman at 3:34 PM on May 8, 2018 [1 favorite]
Thank you also to the other commenters pointing out that this is perhaps a more onerous ask for the sellers than I was imagining.
posted by wyzewoman at 3:34 PM on May 8, 2018 [1 favorite]
Best answer: It would be far easier if you required each owner to share transaction information with the board when they sell a unit, and if the board makes that information available to assessors or others during a purchase.
posted by NotMyselfRightNow at 4:14 PM on May 8, 2018 [6 favorites]
posted by NotMyselfRightNow at 4:14 PM on May 8, 2018 [6 favorites]
Best answer: So I just bought into a co-op. There were a few units available (a lot of people are aging out) and I went with the unit where the realtor had a good relationship with both the Board and the lender. The other two units sat on the market for about 2 months.
Now, I paid considerably less than you'd expect in my market. More impressively, I paid asking price in San Francisco, where things go for 10-50% above. The co-op governance is value added for home-owners, but also weeds out a lot of investor money that is making the area unaffordable.
You add a seller who can't walk you through the weirdness of finding a lender that offers a co-op loan, the anxiety producing fear of a board interview. It all added to them having a harder time finding buyers when everything in the market screams otherwise.
I would make sure you have a solid package to provide to members when they're getting ready to sell their share. A copy of the by-laws, information about your preferred lender, with clear language that they're preferred because co-op lending can be difficult to secure, not because you have a personal relationship with this bank. You can include a history of previous sales in the co-op.
I know that you're saying it's the comps that are throwing things off. But when I was in the process, that was only part of all the weird things that made me wonder if this was all going to blow up horribly, since it's not the usual process that I can google about.
posted by politikitty at 5:59 PM on May 8, 2018 [1 favorite]
Now, I paid considerably less than you'd expect in my market. More impressively, I paid asking price in San Francisco, where things go for 10-50% above. The co-op governance is value added for home-owners, but also weeds out a lot of investor money that is making the area unaffordable.
You add a seller who can't walk you through the weirdness of finding a lender that offers a co-op loan, the anxiety producing fear of a board interview. It all added to them having a harder time finding buyers when everything in the market screams otherwise.
I would make sure you have a solid package to provide to members when they're getting ready to sell their share. A copy of the by-laws, information about your preferred lender, with clear language that they're preferred because co-op lending can be difficult to secure, not because you have a personal relationship with this bank. You can include a history of previous sales in the co-op.
I know that you're saying it's the comps that are throwing things off. But when I was in the process, that was only part of all the weird things that made me wonder if this was all going to blow up horribly, since it's not the usual process that I can google about.
posted by politikitty at 5:59 PM on May 8, 2018 [1 favorite]
Response by poster: Thanks, this was all very helpful.
posted by wyzewoman at 8:01 PM on May 8, 2018 [1 favorite]
posted by wyzewoman at 8:01 PM on May 8, 2018 [1 favorite]
This thread is closed to new comments.
posted by rockindata at 2:18 PM on May 8, 2018 [1 favorite]