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Is it ever o.k. to use comps sold from a foreclosed property

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Debra

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
Hello

Is it o.k. to use a sale that has been bought from a property that was forclosed on if it appears to have sold at a "normal price"? thanks!!! :roll:
 

airphoto

Senior Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Pennsylvania
Deb,

Such sales are particularly useful in valuing other repo'd properties for the purpose of their disposal by the reposessing institution/lender. Would suggest that they might have use as a 4th (or greater) comp, but there are too many ifs, ands and buts involved to use for #1-3 unless you simply have nuttin' else available.
 

Ray Ohler

Sophomore Member
Joined
Jan 15, 2002
Debra, your question was "Is it OK to use a sale that has been bought from a property that was foreclosed on..."

Are you talking about the foreclosure sale itself or the subsequent sale of that (foreclosed) property?
Makes a difference. I assume you mean a subsequent sale of a property that was foreclosed on. I only asked because in SOME (not all) foreclosures, what you see as the consideration is the amount on the writ (that is the "cost" to the foreclosing party to repossess the property- sometimes this amount can be considerable if there were tax liens or other junior liens that could not be extinguished by foreclosure). If it was a subsequent sale of that property and you have supporting documentation that the subsequent sale was "at market" then it IS a good sale. However, extreme caution and research into the "comp" has to be done (it CAN get pretty complicated - not always but sometimes). There are literally a hundred different things to consider. That's why it is considered by some to be a lot easier (and it usually is) if you have other sales NOT to use such a sale. Then again, if your subject is located two doors away and it appeared "at market" you could be criticized for NOT using it. Hope this helps.
 

jtrotta

Senior Member
Joined
Jan 16, 2002
Ray & Bill are on the door step and the answers are great, but I would use typical arms length sales and as Bill suggests use IT as the fourth 8)

Happy Hunting :)
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
If I'm doing a foreclosure, I try to include at least one. If I'm doing a refi in a typical market (no significant foreclosures), I avoid them due to the fact that you really don't know the condition of the foreclosure. However, I have a manufactured home area that ALL of the sales are foreclosed properties (original buyers got suckered), so the foreclosed properties ARE the market. So, the bottom line is that the decision to use a foreclosure sale is very dependent on what your are appraising and what your individual market is.
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Yesterday I was doing appraisals for an estate. The deceased property owner made a living off of rental property that he accumulated over the last 50 years. Almost all of it is in substandard areas and all of the dwellings are on their last leg. Most are boarded up. I was appraising one of these old dwellings in a very substandard area. I knew the price was on the bottom scale so I went to the MLS book to find some comp sales of most similar properties. I found plenty. All of the sales were between $13,000 and $18,000, but there was a wide range of property types from very old to fairly modern. All were HUD repo sales. One of these comp houses I recently appraised for a bank and it was clearly about a $35,000 house in a nice urban neighborhood. My question to you guys is that under these conditions, is it appropriate not to use foreclosed sales? What is driving the market? I see this a lot with manufactured homes. You go to a sales lot and similar homes sells for $40,000 installed on the site. The client just bough the one year old subject for $15,000 as a repo. What would you use for comps, repos or recent sales. If repos are a significant part of the market mix, how do you handle this situation? This is a common situation in this market. Last week I appraised a manufactured home repo that the finance company sold for $15,000 and $55,000 was owed on the note. The home was in a mobile home park.
 

jt

Freshman Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Pennsylvania
Deb,

If the property sold at market value and you confirmed the sale, it’s a comp. However, as narrow minded and cautious as some lenders are, you may have a problem convincing them that is was an arm-length sale which sold at market value; they will simply request another comp.

jt
 
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