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Effect of Foreclosures on the Market

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Roger Geisler

Thread Starter
Freshman Member
Joined
Jul 16, 2004
Professional Status
Licensed Appraiser
State
California
I received this in an email from my client on a pending assignment.

"Appraiser to provide an addendum commenting on what impact foreclosures within the subject property’s neighborhood have had on property values."

Should I even try to do this?
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
I would respond from within the subject boundaries stated in the report. If they do not exist then you cannot comment. I would ask the client are the asking for the petition to foreclose, foreclosure sales when the lender takes title and no one show up fat the foreclosures or when the foreclosures become listed with the agents. Are they asking for foreclosure re-sales? The term foreclosures must be clearly defined and understood to communicate with the request.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
They either do have an impact or they don't. Each individual market reacts differently for foreclosures.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
I received this in an email from my client on a pending assignment.

"Appraiser to provide an addendum commenting on what impact foreclosures within the subject property’s neighborhood have had on property values."

Should I even try to do this?
Why not provide the total listings count and range of prices and break it down to how many short sale listings with price range, how many bank owned listings with price range, and how many normal listings with price range? You can compare the current listings to your closed sales, normal market sales versus short sales and bank owned sales.

It should be obvious, the more distressed sales and listings, the more negative impact it will have on the market.
 

ZZGAMAZZ

Senior Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
The 1004 pg 1 "Market Conditions" narrative inevitably should address the impact--or lack thereof--of foreclosures. By way of reference the FNMAE Bulletin "...Declining Markets" requires the appraiser to accurately report on the primary indicators of market conditions in a given neighborhood..."

The absence or relative scarcity of foreclosures would be a phenomenon, itself, that warrants explanation. RK described how to do it above.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I received this in an email from my client on a pending assignment.

"Appraiser to provide an addendum commenting on what impact foreclosures within the subject property’s neighborhood have had on property values."

Should I even try to do this?
(my bold)

Yes, you should. You've probably done it collectively in your overall market analysis- now you just need to break-out the foreclosure component.
 

Kevin Keck

Junior Member
Joined
Jun 2, 2006
Professional Status
Certified Residential Appraiser
State
Ohio
I typically try to quantify the number of listed properties in my market area that appear to be bank-owned or government-owned. I do not specifically quantify the impact of bank-owned or government-owned properties on property values as I do not know. At best I will make a general statement such as "the current number bank-owned or government-owned listings or sales likely have an adverse impact on overall property values."
 
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