Foreclosure Adjustments

[numbercruncher]

Is it appropriate to assign a positive adjustment to a comparable that is a foreclosure sale that per say sold for $75K if there is an identical property in the same subdivision that sold for $100K under a typical sale transaction during the same month. Is a $25K positive adjustment appropriate in this example ??

Thanks..

:new_newbie:

 

[Thomas Fiehler]

I am curious to read these responses! What did your supervisor say?

 

[444nutman]

Ok I'll bite. How long was said property on the market? What was the condition? How many foreclosures are in the sub? What are the listings in the sub showing you?What is the basis for the 25k adjustment, one sale or many sales? Answers these ?'s and i can help a little better.

 

[Lee Lansford]

Is it appropriate to assign a positive adjustment to a comparable that is a foreclosure sale that per say sold for $75K if there is an identical property in the same subdivision that sold for $100K under a typical sale transaction during the same month. Is a $25K positive adjustment appropriate in this example ??

Thanks..

:new_newbie:

No, it is not appropriate to do as you propose.

Solution: Find another sale as a substitute for the foreclosed property sale.

 

[Mary Tiernan]

Is this the only sale in the subdivision? Is this the ONLY foreclosure sale in the subdivision?

You should also check relevant listings to see if there is a trend toward the reduced sale price or a rash of foreclosure properties available.

Also check with the listing agent of the $100K sale to see what motivated the purchaser to overlook the foreclosure property?

In my market, typical foreclosure properties are in need of repairs and are aggressively priced for quick disposition. When and if I have to utilize a foreclosure sale as a comparable property, I check with the realtor to see what the condition was at time of sale and inquire if they thought the property was discounted for foreclosure status.

But, I live in a rural area where sales are not always plentiful . . . I only use a foreclosure sale with positive adjustments for repairs and status in my area if there are no other sales.

 

[Joyce Potts]

Remove the word foreclosure and start calling the Realtors and/or parties involved and get to the bottom as to why it really sold so low first.

That said, there's not such thing as a 'foreclosure' adjustment, per se. It had to have sold lower for some quantifiable reason.

 

[Hamlet]

What do you mean by a foreclosure per say? Is this a sheriff sale or an REO listed through the MLS and exposed to the market in the same manner as your other comparables?

A large number of REOs will influence your market and may be considered by a typical buyer along with all the other non-REO offerings. If exposed to the market as the other non-REO comparables. Most likely the difference would largely be attributable to condition, assuming that the REO was damaged by the occupants before vacating. You will need to talk to the sales agent to discuss the condition of the REO and as Mary said their motivation.

The stigma of an REO property is more likely when the market is stable and there are very few of them out there. Sadly, they are becoming the market in most areas.

 

[Bama Bayou]

I agree with the responses given so far. The condition may have a lot to do with the difference. It may also be that the title is clouded by a right of redemption but I am not familiar with Texas foreclosure law.

Just because an adjustment may not be warranted there is nothing wrong with giving this sale less weight since the seller was most likely highly motivated.