What the Heck is a "Z" Sale

What The Heck is a "Z" Sale?

10.29.08

One of the little secrets of the MLS, which many agents don't even know exists, is having the option of recording a transaction as a "Z Sale". The sale will appear as full price on the MLS, but there is a "Z" on the form denoting it was in reality an undisclosed price. The only requirement is the buyer and seller must agree within the contract that neither party wants the sale price reported to the MLS. Proof of that agreement must be submitted to the MLS within 5 days of the date the transaction was entered.

As you probably already know, once a sale price is reported to the MLS, it becomes public information. And yes, the tax assessors have access to the MLS. I once had a home listed for about $850,000 or so on our website. The seller was contesting his property taxes at the time. I believe he was trying to get the assessed value down into the $600's somewhere. When my client walked into the assessor's office, the assessor didn't say a word, just turned the monitor around showing my client, his home, on our website, at $850,000. My client said the assessor didn't budge a dime on the value.

First of all, people tend to be private and don't want others knowing their business. But there are other reasons. I once sold a home which was on the tax rolls for around $650K. It sold for around $1.2 Million. How did that happen? Your guess is as good as mine, but the taxing authority obviously dropped the ball somewhere along the line. And that seller wasn't going to get them up to speed on it. You can imagine why the new buyer would prefer to keep paying taxes on a $650K home rather than a $1.2 Million home.

After all, the seller is "down the road" after the home sells sells so why should they care?But I can think of several reasons right off hand ... and all have happened to me. A seller might not want a relative, friend, neighbor, etc. knowing what their home sold for. There are more agents out there than you can shake a stick at, so everyone knows someone with access to the MLS.

And how about a builder who sells a home at a heavily discounted price? He doesn't want that sale price to bring down values in the neighborhood where he has other homes for sale. It's bad enough he had to take a beating on one home sale. Why would he want that low sale price used against his other homes for the next 6 months?

I don't like them one bit and I wish they would discontinue their use! In my opinion, they hurt the real estate industry. Buyers, sellers, agents, lenders, and appraisers, all need good, accurate, current information to make a home sale happen. I know first hand how frustrating it is to have the perfect comparable for a home and not being able to use it because I had to record it as a "Z Sale". I sold the home and knew the sale price but it was worthless to anyone but me.

You have to realize, the areas we specialize in have far fewer homes (because they are on larger acreages) than the more densely populated cities like Allen, Plano, Richardson, etc. A "Z Sale" or two in a large neighborhood subdivision in Allen is not a big deal because there are still so many other sales to draw from. But with fewer homes and fewer sales in our area of expertise, we need every single sale to help us with values.

I receive calls from appraisers all the time asking me to give them the sale prices on various transactions I recorded as "Z Sales". I tell them I would be glad to, but I just cannot do it. I feel for those guys because they need that information as much, or more, that I do. When my next listing goes under contract, whoever appraises that home for the buyer's lender might very well need one of my (or another agent's) "Z Sale" to use as a comparable. If we are representing the buyer, we have the exact same problem.

About a year or so ago, I remember hearing something about the Texas state legislature proposing a bill to discontinue the use of "Z Sales" on the MLS. If that's true, it wouldn't surprise me. You can be sure they want to know if they are leaving tax money on the table with artificially undervalued property. However, that was the last I heard of it, so I just don't know if it was a rumor or not. But I am still posting "Z Sales" when asked by my sellers and will continue to do so until the MLS informs me they are no longer allowed.

One last thing. You probably received a notice a month or so after you bought your home from the tax assessor's office. In it, you were asked to disclose what you paid for your home. Many people will just fill it in and send it back figuring the law requires that it be done. Although it is very commendable of anyone to do so, you are not required to return that form nor will the taxing authorities come after you if you don't. It's your call!