Listings as Review Comparables

[athome77]

Working on a field review of a "rehabbed" 2 unit on Chicago's south side. Severely declining area (50% over past 12 mos). Original comparables all over six mos. old and not reliable as two of three had same grantor/grantee and all three had same listing agent. Appraised value $350+. 56 sales in past six months, 238 actives. Problem is there are no sales of "rehabbed" bldgs. in the past 6 mos. All, with the exception of 3 others which sold under the circumstances listed above, are bank owned. Looking for opinions of using only listings as review comparables. Unorthodox, I know, but given the current condition of the market area, it seems to be the most reasonable approach. Your thoughts...

 

[athome77]

Forgot to mention, appraisal indicates stable, in balance, 3-6 months. Verbatim neighborhood description: "The subject is located in an area close to shopping, schools, medical, and recreational facilities." That's it.
Won't bother with description of Market Conditions, accept that "Market conditions appear to be favorable..."

 

[Rufus]

From your market analysis, make an appropriate downward adjustment to the comparable sales. You can then include however many listings you need to show support for same.

 

[Vernon Martin]

I don't consider it so unorthodox. Listings set the ceiling of value in today's market, but you still may end up with an estimate of value that is too high.

 

[Wendy]

You might find it interesting to call those listing agents. Perhaps one or two of the listings have had rejected offers. The offer amounts could give you some extra insight.

Just a thought....

 

[JonGalt]

Is it in New City?

I've done quite a few on the south side recently and have even seen "rehabs" as bank owned sales. Be careful about using listings, some people are not in touch with reality when they are listing these homes.

 

[athome77]

Thanks for all of the suggestions. Calls to the listing agent (all 3 sold by same agent) have bot been returned. Looks like the best plan is time adjustment to the original comparable sales and add three additional actives. It appears I will have a strong case for what the property is not worth and will have to do my best to bracket the final conclusion.

ps Jon, It is in New City/West Englewood, 54th & Winchester. Next time you are on the MLS check out the number of actives and note that all of the "rehabs" seem to be owned/marketed by the same people.

 

[Wendy]

Did you try calling the listing agents on the active listings?

 

[Scott Kibler]

A do a fair amount of review in that area including these "rehabbed" frame 1890's two flats that sell for $120k or so prior to rehab then miraculously sell for $350k after installing some siding, paint, cheapo flooring and cabinets.

Comp after comp, all in the MLS, supporting this $350k sales price....until you start noticing the same grantors, same RE agents, 1 day DOMs , etc etc etc.

But there are other similar rehabs out they that sold for way less. Remember the principal of substitution.

 

[athome77]

Scott, you described the situation exactly. Having a hard time coming up with any sales that are rehabbed and are not of suspicious origin. I spent some time researching most of the "miraculous" $350K rehabs in the area last night. All share two or three of the same listing agents, most were quitclaimed two or three times to different holding companies within the same week, and all have current mortgages well over $300K.

There was a similar "situation" going on on the west side in the Austin neighborhhod in the mid 90's. A couple of companies, some may have heard of them, "E*sy Life," "A*e," and "N*w Era" were turning and burning properties among themselves, creating a pool of "rehabbed" comparable sales to fool unsuspecting appraisers. The ring finally got busted up when the Sun Times took up the case of one of the new homeowners whose roof started leaking the day after closing.

I guess the trend will continue.