Neighborhood Analysis

[SAM ANDERSON]

After inspection a FHMA repo that was ordered by a local bank, I began research for comparables. The subject is a modest brick veneer dwelling in a small pocket area in our town where there has been no recorded resales within the past three years and no current listings. Research was expanded to similar pocket areas where there are homes in the subject's size, quality, age range. The comparables and the cost approach estimates indicate a value of $47000+-; the property was previously for 180 days @ $49000. The issue is, the contract accepted by FHMA and apparently the only offer is @ $26000. My research has now confirmed that there are four registered sex offenders on the subject's street and none in the comparable developments.

I have consulted with appraisers whose judgment I value and the consensus is: bail on this, the risk is too great. Most likely, the prospective buyers in this price range are aware of the concentration of sex offenders and will only make unrealistic offers. In my discussions with the lender, they are reluctant to offer any guidance; the local realtors are noncommittal and my E&O carrier is not sure what to do. I hesitate to bail since this is a good client who has never had to deal with this issue and truly doesn't know what to do either.

There is no data for paired sales analysis since there are no registered sex offenders in the competing developments. I believe a comment and adjustment is appropriate, but I am not sure how it should be worded. If the buyer doesn't know yet, they could claim damages; if I do disclose and the sale falls apart, FHMA could have a claim for discrimination.

Has anyone experienced this dilemma? I could really use some advice. Please hurry!

Sam :gunfire:

 

[Wendy]

Sorry, i don't have any help for you. Just a comment.

I greatly fear the day that we as appraisers will have to identify sex offenders in the area on our reports. Where does it stop? Will we have to find the multiple DUI fellow down the street who may run you over? How about the rabid dog on the corner behind a weak fence? Look out for that pothole! Could damage the HO's tire!!

 

[Scott Kibler]

What would you have appraised it at if you had no sales contract?

 

[Randy Beigh]

Sam

There is a lot here to think about.

The knowledge of the 4 sex offenders is bothersome, but not in the way one might think. How do you know they are there? Isn't this, really, just the last known address of these guys? They could be anywhere. Washington is trying to deal with that issue. They are required to provide an address at the time, they exit prision, but most don't continue to provide addresses when they move, so the state has no idea where most of these folks are. In fact, they estimate they don't know where over 60% of these folks are. That's huge.

I am reluctant to be making assumptions that sex offenders are the reason the values are low in this area. That, carried out even further, could assume that is why there haven't been any transactions and I would doubt that.

How big is the town? How big is this neighborhood? Are there competing towns?

"the prospective buyers in this price range are aware of the concentration of sex offenders and will only make unrealistic offers."

I, completely, disagree with this statment. For starters, you said no one was making any offers, now you make this statement. The 2 positions are contradictory. Even worse, is if the sex offenders are causing the market decline, then the offers are not unrealistic. They are realistic to that market.

You need to reconcile these and other issues. If you can't do that then, maybe, you should decline the assignment.

A thought. Why not ask the bank why the offer was $26,000? Maybe, it had nothing to do with sex offenders. Maybe, the person making the offer was just trying to get a deal on a repo. Maybe, the house was trashed when he made the offer. I don't know, but gathering the data might aid in your decision making process.