How Does My Neighbor’s Short Sale Affect My Home’s Value?

[khush]

Actually I am trying to list my home and one agent advised me to list at a price on which previous sale was closed. It was a short sale and house was closed at a very low price.

 

[Bob Ipock]

If you were a buyer and could buy a short sale in your neighborhood for $150,000 or a very similar home listed with a broker for $200,000....which one would you buy?


It is called the Principle of Substitution and is one of the few principles of real estate (and real estate appraisal) that actually still works.


You can see the same principle at work daily at Wal-Mart as people flock to buy the lowest priced goods that meet their needs.

 

[Couch Potato]

The value of your home is set by prices paid for other similar homes. No single sale has an effect on your home's value, but when considered with other sales and general market conditions your neighbor's short sale might affect the value of your home. When setting a listing price you need to consider other current listings and recent sales. I would never list a house at the price of a recent similar sale because it leaves little room for negotiation if that is what I expect to receive.

Make sure you interview several agents before signing a listing agreement. Listing too low will cost you money, but so will listing too high.

 

[Lloyd Bonafide]

Make sure you interview several agents before signing a listing agreement.

I agree - a sale next door may be important, but it's only one sale. If it really did sell well below market, an agent or an appraiser shouldn't give it too much consideration. The agent needs to consider all similar listings and recent sales in the area when setting your asking price.

 

[Mr Rex]

The effect is that every potential buyer, RE agent representing a buyer, Appraiser, and lender will want to know why it was necessary to sell the "competing" house low, short sale or no. It shows a weakness in values in your neighborhood for sales that must occur now or in the near realm. Appraised value is based on the premise that there is a hypothetical sale of the property on the day it is appraised after a reasonable marketing period and exposure to the market. Further research may reveal a "dump" accepted by the short sale lender, or may reveal a realistic value based on a limited marketing period/exposure time.

 

[Mile High Trout]

Surf previous chats in the Ask an Appraiser section.

This question I'm sure has come up before in there over the past few months.

 

[Smokey Bear]

If you were a buyer and could buy a short sale in your neighborhood for $150,000 or a very similar home listed with a broker for $200,000....which one would you buy?

It depends, short sales are notorious for tying your money up forever then not getting the deal. That's why they're priced lower, the buyer expects a discount for the trouble.

 

[Pilgrum]

I agree - a sale next door may be important, but it's only one sale. If it really did sell well below market, an agent or an appraiser shouldn't give it too much consideration. The agent needs to consider all similar listings and recent sales in the area when setting your asking price.

And remember. That realtor is motivated by a commission. Earned quickly if the property can be listed at a lower than market price. He or she will have minimal marketing expenses as well.
You are hiring a realtor to do a job for you. Interview several just as you would when searching for any employee.

 

[Bob Ipock]

Rex,

When a short sale or foreclosure comes along it ain't a surprise. The borrower and lender has known for months (or longer) that the house would either need to be sold or foreclosed on.

I don't see many foreclosures or short sales where the home was not marketed for some period in the 12 months or so before D-Day came along.


I would say in many cases....the NEIGHBORS know a short sale or foreclosure is in the near future.


A buyer could not care less if a home has or has not been exposed to the market. They are looking for blood in the water.

This is a buyer's market like never before and buyer's are buying foreclosures more than they are anything else.......except in Chapel Hill and East of Raleigh! Reports are showing more foreclosures than new home starts....by a large margin.

If you have a house to sell.....get a good agent and be reasonable......you are competing with
lots homes that can be sold cheaper than you can......and the buyer is not concerned about your financial situation. They want the cheapest substitute.

 

[Bob Ipock]

http://appraisalnewsonline.typepad....s/appraisal_news_for_real_e+(Appraisal+Scoop)



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