When a sale, isn't a sale.
What happens when you can't trust the MLS to report "real sales?"
Let me introduce you to 3000 Tideswell Rd, a custom 2018 farmhouse in the desirable James River school district. Its features are a mile long, and why shouldn't they be, this 7,262 sf home sold for $1,460,300 on 07/25/2018! Go take a drive by of it! We'll wait... Cause its gonna be a while.
You see, this never actually happened. Money, never changed hands to the tune of $1,460,300, and this house was never built. No, the only thing that transferred on that date was $250,000 for a vacant piece of land, but that didn't stop it from being used to support home values in the stratosphere in Chesterfield county for the next three years as the 7th highest sale in the last three years as of this blog date.
When confronted with the errant data, the CVR MLS Vice President Erika Almstead had the following to say:
...the original MLS listing was for a to-be-built property. The listing agent has an obligation to report high level closing details within seven (7) days of settlement. Therefore, MLS data is good through the closing. The MLS does not track post-closing activities. Our MLS does integrate active tax records as available for each listing, which should also be used as source information. In the meantime, we will look into this listing to ensure that the closing information provided was correct at the time of settlement.
Sadly, if this is the standard, then no information on to-be-built properties can be trusted. The vice president is correct, the MLS can't be the only source of data that is used. The CVR MLS data is being farmed by CoreLogic for their national trends - can we trust the new construction trends that they report?
Finally, a word to appraisers. You need to confirm sales information, every time, but especially with new construction. Sadly, the CoreLogic cloud database records that three separate instances of this property have been used (how many times each is not recorded). This "fake sale" has been used to support the analysis of real properties. Can a contract to build a house be used as a comparable if the house never gets built? How would you confirm the quality of that proposed house without the plans/specs? Perhaps, the original appraiser for the mortgage (assuming there is one), could use the property, having access to the original documents... perhaps. However, this is equally likely to be used as a case of mortgage fraud, as people don't typically contract to a sell $1,400,000 piece of property and then have a "takesies-backsies" clause.
We've requested to be kept in the loop with CVR MLS, and will update as information becomes available.