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Are Foreclosure Sales (REO Sales) A Factor In The Market?

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Pilgrum

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Nevada
Well? Are they? At what point do you consider them to not be?
My stance is that if there is even one, it is a factor in the market.
 

RSW

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I can see that is there is only 1 sale in the market. Let's say you have 20 sales in the last 12 months and there is only 1 REO sale. Is that considered to be a factor? Could be or not. I would also look at the number of REO active listings in order to determine if REOs are a factor.
 

Meandering

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Pennsylvania
You could cite the old Lincoln institute study that said when there was only one, it impacted all the values in the neighborhood. (if you believe it), or if there were only one and it sold, than there aren't any more that are currently impacting the market. As RSW states, check on the listings. That's what's impacting the market.
 

Noreen

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Certified Residential Appraiser
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New Hampshire
You could cite the old Lincoln institute study that said when there was only one, it impacted all the values in the neighborhood. (if you believe it), or if there were only one and it sold, than there aren't any more that are currently impacting the market. As RSW states, check on the listings. That's what's impacting the market.

How would you look at 7+ pages of Foreclosure Filings in a state that has a 45 day process.. some will be cancelled ( not many) due to "catch up" ? Would that impact market analysis?
 

Meandering

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How would you look at 7+ pages of Foreclosure Filings in a state that has a 45 day process.. some will be cancelled ( not many) due to "catch up" ? Would that impact market analysis?
Most certainly
 

residentialguy

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Minnesota
Well? Are they? At what point do you consider them to not be?
My stance is that if there is even one, it is a factor in the market.
If have one or 500, the sales price of your comps reflects any influence they might have. If the REO sales are low, then I typically say that they are not a "significant" factor (that leaves you a little wiggle room). I always do a separate market analysis of the REOs to show the variance between REOs and typical non-distressed sales. This is needed for support of the 1004MC form.
 
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J Grant

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Dec 9, 2003
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Certified Residential Appraiser
State
Florida
Well? Are they? At what point do you consider them to not be?
My stance is that if there is even one, it is a factor in the market.

Depends what that one REO is relative to. Are they a factor is an MC form question, and MC form relates to COMPS for subject. But even if we did not have an MC form. appraisal to find market value does concentrate on what are comps for subject. So, are these REO properties, similar in condiiton, size location etc to subject...re a substitute property your identified typical buyer for subject would consider? If yes, the REO activity is a possible factor. IF no, then it is not a factor. If your subject is in good condition with upgrades, and the REO sales are in fair /dated condition they are not comps ( they would not be good comps as regular sales either).But if the REO's are upgraded/good condition, then they might be comps. So it depends.

Regarding numbers, it relates to what proportion of activity one REO sale or listing represents. Imo there has to be a fairly significant number of them present to be a factor in the market. There is no hard and fast rule what that amount is, for me personally If I see 20% or more of sales and listings to be REO I consider that a factor, but if its a segment of properties not relevant to my subject, I explain they are present but not relevant to the subject competitive market . Depends on your market and analysis of it, imo if more than a few REO are present and you say they are not a factor, good to CYA and explain that though 10 REO sales were found in area in past year, they are not considered a factor because of (explain).
 

Meandering

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Feb 26, 2006
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Real Estate Agent or Broker
State
Pennsylvania
Rethinking the question,

I'm thinking the answer depends on the neighborhood.

In second or vacation home communities, most people would have no clue an REO exists, unless told them by a Realtor, or if they found it on a GSE website. At least here, second home communities do not allow yard signs, so there is no signage advertising an REO, and because of the nature of second homes, many look vacant, most of the time.

So it just depends on the neighborhood, if it is a factor, or if it is a knowable factor to buyers and sellers, or if it is privileged information only to be disclosed at the discretion of an agent. As the MLS is, privileged. That's why you pay dues.

.

.
 

Mike Garrett RAA

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Jan 14, 2002
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State
Colorado
Not in my market at this time.
 

glenn walker

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Oct 11, 2006
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Certified Residential Appraiser
State
California
1-REO = Outlyer *** Thinking -Thinking-Thinking (analysis complete) :)LOL
 
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