Are Foreclosures A Factor?

[heelsfan]

Generally speaking, 25-30%. Yes, most of the homes in need of rather significant rehabilitation are being flipped. However, properties in fair, average and good condition are still marketable and values have remained stable across the board. It’s not like it was a few years ago, when the only sales were foreclosures and flips, with little to no demand for owner occupied homes in average condition.

 

[CANative]

I just got finished with a big job (multiple SFRs) in Oakland, CA. My thought is that investors don't really care all that much how much they have to pay as long as they can make a profit on the deal. $50k in repairs/updates/upgrades and make $50k at the end (selling for $100k more).

 

[Don Clark]

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?

The reviewer is correct. Also, in the appraisal report for a VA this statement is also supposed to be stated(I put it on an addenda). "I HAVE CONSIDERED RELEVANT COMPETITIVE LISTINGS AND/OR CONTRACT OFFERINGS IN THE PERFORMANCE OF THIS APPRAISAL".

Contract offerings are Pending sales, for the record. That gives the reader an idea of what the market is like. This is in addition to the 1004MC and is a specific requirement. It is usually expressed this way:

'DATA IS FOR A 365 DAY PERIOD: THERE ARE 8 ACTIVE MLS LISTINGS IN SUBJECT AREA AT AN AVERAGE OF $181,962 THERE ARE 17 CLOSED MLS SALES AT AN AVERAGE OF $149,900.= 82% LIST TO SALES PRICE RATIO. THERE ARE 2 PENDING SALES AT AN AVERAGE OF $149,900. . THERE ARE 3 EXPIRED MLS LISTINGS AT AN AVERAGE OF $208,024. AVERAGE DAYS ON MARKET FOR CLOSED SALES IS 107 DAYS. VA/FHA AND CONVENTIONAL FINANCING ARE AVAILABLE AS WELL AS OTHER FORMS OF FINANCING. '

I would also question your use of only REO sales as comparables. The VA and the lender want to know about the market, and how the subject competes in the market. I would suggest using 1 or 2, perhaps more sales that are not REO and make adjustments for condition based on market reaction.

Just my take. I have only been on the VA Fee Panel 23 years.

If