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All comps are Short Sales or REOs - What to do?

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Socrates

Thread Starter
Junior Member
Joined
Feb 21, 2006
Professional Status
Certified Residential Appraiser
State
California
Working on a 1004 in Oceanside, San Diego, CA. Working within the subject area which consist of approximately 20 homes built in 2003 which is not a PUD with no HOA or Melo Roos fees. The subject is enveloped by PUDs and gated communities that have a nominal HOA. What makes matters worse is that a review of the past 20 sales both PUD and non-PUD that are proximate and relevant to the subject in terms of GLA, age and overall appeal, 19 are either short sales or REOs. The one sale that that was a resale sold within the same range as the bank sales. I am sure that I am going to have to write a book of explanation but I have never had this situation before - at least, not as of yet.
 

James Morris

Sophomore Member
Joined
Jul 27, 2006
Professional Status
Banking/Mortgage Industry
State
Michigan
It sounds like the market there is being dictated by the short sales and foreclosures. There's no way around it. Much of Detroit has been that way for months, if not years. I'm sure your client will protest, but you can't deny the data you're looking at. I'm guessing much of your commentary is going to involve explaining condition adjustments, assuming the REOs as usual weren't properly taken care of, and possibly just explaining the state of the market itself. I've seen people actually trying to flip houses in such markets. That's zen.
 

GPAQ

Sophomore Member
Joined
May 12, 2003
Professional Status
Certified Residential Appraiser
State
California
Working on a 1004 in Oceanside, San Diego, CA. Working within the subject area which consist of approximately 20 homes built in 2003 which is not a PUD with no HOA or Melo Roos fees. The subject is enveloped by PUDs and gated communities that have a nominal HOA. What makes matters worse is that a review of the past 20 sales both PUD and non-PUD that are proximate and relevant to the subject in terms of GLA, age and overall appeal, 19 are either short sales or REOs. The one sale that that was a resale sold within the same range as the bank sales. I am sure that I am going to have to write a book of explanation but I have never had this situation before - at least, not as of yet.

Wait until you get a Murrieta order.. Brutal! I just had the same situation, but I had 72 comps and 2... Yes 2, were actual sales involving a homeowner and a buyer. The other 70 were either short sales or bank owned properties. Crazy time.. I used the short sales because they were driving the market price and the other straight sales to show the listing price compared to the selling price and DOM.
 
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Socrates

Thread Starter
Junior Member
Joined
Feb 21, 2006
Professional Status
Certified Residential Appraiser
State
California
I have managed to find 2 regular resales. One is from August, one is from October. They are in a PUD (the subject is not) within .20 miles of the subject. The only sale that I can use to bracket the subject not being a PUD is the home next door which sold as a short sale. It is within 10k of the lower of the two resales which are within 5 % of each other. I am also going to include a current listing and a pending sale.

I am also contemplating including a print of the one line report via MLS on an image page along with a Realquest radius search. (I believe in supporting my findings).

What are your thoughts about using a PUD versus a non-PuD? The PUD has common property and a tot lot - fee is $80/mo. I'm just a little nervous about going back to August but literally, that is all there is. What is really sad - these things were selling in the high 500's to mid 600's just a year and a half ago. I hate orders like this - too many variables!!
 

Ron Hauser

Junior Member
Joined
Jul 30, 2004
Professional Status
Certified Residential Appraiser
State
Colorado
Sounds like you are trying to hard to make or hit a number and the data does not support the number you are trying to make. Your job as an appraiser is to collect and analyze the data. It appears that you have completed that task and do not like the outcome. If short sales and REO sales are the market and sales that appear to be long arm transactions are within that range than the data does not lie. Report your findings in the subject’s sub area and move on.

If you have comps in your non HOA area use those and avoid using from the HOA area. But what I am hearing is that maybe the HOA area supports the value that your lender may need and the subjects sub area sales do not. I could be wrong about that.

It goes back to the theory that if all things are equal the lowest price should sell first. A seller entering the market today has to compete with short sales, REO’s and builders. Banks and builders can drop their price to make the deals work. The home owner can only compete with these groups if they have equity in their property, (most do not), or their current lender allows for a short sale. That is the market we are in and until things change short sales and REO’s will continue to be the long arm transactions for most markets.
 

Socrates

Thread Starter
Junior Member
Joined
Feb 21, 2006
Professional Status
Certified Residential Appraiser
State
California
Ron -

I have to say I take exception to your comments. You don't know me and you have nerve accusing me of hitting a number. For your information, my client does not provide an estimate of value. The mere fact that I am reaching out for assistance and feedback should be more than a clear indication that I don't hit numbers and I have a deep concern about the correct approach to the problem.

We are in a new environment, Mr. Hauser and unfortunately, it has not yet been my experience to have only bank sales/foreclosures as comparables. Having worked for 5 years as a collateral reviewer, it was our training that use of bank sales/foreclosures in an appraisal was taboo. There were not considered open market and should typically not be considered. Thus, when I encounter this situation, I reached out for help only to have your arrogant, insipid and pretentious comments bestowed upon me to which I say, 'no thank you'.
 

Head Surfer

Administrator
Staff member
Founder
Moderator
Joined
Jan 4, 2002
Professional Status
Retired Appraiser
State
Florida
Okay everyone be nice, or we will need to close this one and issue infractions if we get one more personal attack.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
It seems to me like you were just trying to determine if short sales were indeed driving the market in that neighborhood. Just trying not to make a development error and not trying to hit a value.

The subject property must compete with the high number of short sales and it's probably not reasonable to think that someone shopping for a property like the subject would pay more than what short sales are selling for (assuming they have been exposed to the market... typically through the MLS and for an adequate amount of time.)

If the lender had to take the property back or the borrower could not make the payments then the subject would be an REO or short sale just like the competition.

Yes. Scan in spread sheets from MLS and perhaps a couple of market statistic reports show the last 3 months, 6 months, 12 months and 24 months. Keep up the good work.
 

Socrates

Thread Starter
Junior Member
Joined
Feb 21, 2006
Professional Status
Certified Residential Appraiser
State
California
Thank you, Wayne. I have no issue if you would like to close it. I was fortunate to speak with some other appraisers regarding this issue and have found a reasonable approach. I think Mr. Hausers comments and accusation was completely uncalled for.
 

Socrates

Thread Starter
Junior Member
Joined
Feb 21, 2006
Professional Status
Certified Residential Appraiser
State
California
Thanks, Greg - I was just looking for confirmation. Appreciate your help.
 
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