Are Foreclosures A Factor?

[heelsfan]

I recently completed a drive-by VA liquidation on a home that is in obvious need of repair. I used REO sales as they were the most similar in condition / deferred maintenance. The subject is located in a rather large PUD with 63 sales in the last 12 months, only 6 of which were REO sales. I had to go outside of the neighborhood to find a more comparable REO sale. With such a small percentage of REO sales, I checked the "No" box (I typically check "yes" if REO sales are greater than 30%) on the 1004MC form, in the section that asks if foreclosures are a factor.

I got a stip from the reviewer at the VA that basically said I can't say REO sales are not a factor and use them as comps. Either I check the box "Yes" as REO sales are a factor or replace the REO sales with arms length transactions....

Um, what am I missing here? To me, the sales I used as comparables has absolutely no influence on this box whatsoever. This box represents the subject's market area, not what comps I used. All properties, regardless of size, design and condition, are marketable and have held value for the last 18+- months. Thoughts?

 

[Randolph Kinney]

(I typically check "yes" if REO sales are greater than 30%) on the 1004MC form

Just thinking about what the form is directing you to do. REOs become a factor when they compete with non distressed sales for the same buyer pool (owner-user). REOs become a factor when the price trend rate changes (significantly) with the addition of REO sales to all normal sales. However, if the number of REOs sold is declining and the number of REO listings are declining, that is signaling whatever effect REOs had is decreasing.

You can refer the reviewer to The Appraisal Foundation APB Valuation Advisory #3: Residential Appraising in a Declining Market and APB Valuation Advisory #4: Identifying Comparable Properties

You choose comparables based upon similarities, but specifically as to who the buyers and sellers are and their motivations.

Hope this helps.

 

[Mike Kennedy]

"This box represents the subject's market area, not what comps I used."

um........the "comps" used are in the subject's market area - no ??

 

[heelsfan]

"This box represents the subject's market area, not what comps I used."

um........the "comps" used are in the subject's market area - no ??

"This box represents the subject's market area, not what comps I used."

um........the "comps" used are in the subject's market area - no ??

 

[Mike Kennedy]

Was there supposed to be a message ??

 

[heelsfan]

"This box represents the subject's market area, not what comps I used."

um........the "comps" used are in the subject's market area - no ??

Yes, but can you analyze market conditions and determine whether foreclosures have an impact on your market based on three sales?

Was there supposed to be a message ??

The issue has been resolved-thank you.

 

[Mike Kennedy]

Yes, but can you analyze market conditions and determine whether foreclosures have an impact on your market based on three sales?

The issue has been resolved-thank you.

depends on how many sales occurred during the prior year

 

[heelsfan]

REO sales accounted for 6 of 63 sales the last 12 months, and 8 of 46 sales the prior 12 months.

 

[Mr Rex]

9.5% and 17% are REOs. What do you consider a large enough percentage to be a "factor"?

 

[CANative]

I recently completed a drive-by VA liquidation on a home that is in obvious need of repair. I used REO sales as they were the most similar in condition / deferred maintenance. The subject is located in a rather large PUD with 63 sales in the last 12 months, only 6 of which were REO sales. I had to go outside of the neighborhood to find a more comparable REO sale. With such a small percentage of REO sales, I checked the "No" box (I typically check "yes" if REO sales are greater than 30%) on the 1004MC form, in the section that asks if foreclosures are a factor.

I got a stip from the reviewer at the VA that basically said I can't say REO sales are not a factor and use them as comps. Either I check the box "Yes" as REO sales are a factor or replace the REO sales with arms length transactions....

Um, what am I missing here? To me, the sales I used as comparables has absolutely no influence on this box whatsoever. This box represents the subject's market area, not what comps I used. All properties, regardless of size, design and condition, are marketable and have held value for the last 18+- months. Thoughts?

Are investors fixing and flipping so fast that it's like herding cats?