Opinions on comps

[Green Hornet]

kaien,

Please help me to understand why this is a problem from the buyer's point of view.

If I were the buyer, I would be thanking the appraiser for potentially saving me from a costly mistake.

Do you really want to pay an extra $15,000?

Is this a one of a kind house, multiple offers???

Are there other contract issues that you have not let on...rolling closing costs into the loan, kick backs after closing, etc.?

Thanks for helping me to understand why this is a problem.

 

[glenn walker]

I think that it is common misconception that comparable sale's are not bank owned sales, the market determines what a comparable sale is, if the neighborhood is mostly bank owned, short sales and distress sales then those are the comparables. If I have 10 bank owned sales and 3 non bank owned sales then i am going to place more weight on the bank owned sales. If the market area is decining in price the bank owned sales may be a better indication of the market. It sounds like the market area you located in may be experiencing lower prices and it is very important to look forward , remember sales comparables are what happened yesterday, the home may have declined $15,000 just since you opened escrow. "IS THE HOME GOING UP OR DOWN" in value in the next 6 months ????? its your $15,000 today , it may be $50,000 next year..

 

[Michigan CG]

If the listing agent does their job on a short sale property everything is arranged and the transaction should not take any longer to close than a "normal" transaction.

Substitution says that if there are two identical properties, the lowest priced one will sell first.

In some places short sales and foreclosures are the market, it is just fact and any appraiser who does not consider them is not doing their job.

However, there is a stigma to them, and appraisers should consider and research that stigma vs. "normal" sales. There is market evidence in larger areas that show an owner occupied sale will sell for more than a foreclosure. I have studied it, and it is there.

However, a short sale, from my research, if all the ducks are in a row, does not have the same stigma as an unoccupied foreclosure home.

My last appraisal has three "normal" sales and three foreclosures. All adjusted to within 5% of each other. Most weight given to the "normal" sales.

 

[Dennis J. Black ASA IFAS]

Kaien,

In which county is the property located?

 

[toddmallard]

Tim, I have seen some appraisals on short sales that come in way over the asking price. These are the appraisers that think " we are historic" and will not use other short sales or actives. The bank now see's that the subject is worth more than the asking price and does not accept the offer, even though it is the list price. I spoke to a lady that recently paid for the appraisal and had an inspection completed. The bank turned down the offer and relisted it higher. The lady was out $650.00 The house is stilll on the market.
So here we have a BPO done buy an a-hole and a skippy not knowing how to do an appraisal.

 

[Daystar]

Why would a buyer be willing to pay $15,000 over the appraised value in a market that is flooded with inventory? Is this a special unique property?

 

[Green Hornet]

Daystar,

I agree.

As an appraiser, I would like to better understand the motivations of buyers. I wish that Kaien would come back to the forum and provide some enlightenment.

 

[Mztk1]

I find here in my area, even with good agents, short sales can take extra time. If there is a second lender on the house then especially. Also, on a house that I just used as a comp, the sale contracted for $435,000 and the lender agreed and said they would pay the second lender $3,000. The second lender refused the $3,000. They went back and forth until the buyer, two months later, agreed to pay an additional $90,000 outside of the HUD-1 to the second lender. Whether you consider the price $435,000 which is what will be reported in tax data, or $525,000 is another debate, but one thing it does tell you is that a bank was willing to take $90,000 less then a buyer was willing to pay. Had it not been for the second lender the house would have sold way below market. That's what happens in most sale situations here.

Mostly, at least in most of my markets, I find that short sales sell in line with REO properties and REOs set the lower end of the value range due to the bank ownership stigma. For me, it has become a bank influenced stigma with short sales (where the bank must approve the price) included. I do have markets where all sales in the market are competitive with one another though.

Also, there are some short sales where the seller has the cash to make up the difference. On these short sales there should be no difference in price relative to the regular market, but then the agent does not typically advertise these properties as short sales.

My last thought is an agreement with the historical data problem and some appraisers overappraising the houses. I spoke to one appraiser, who was moving from my market because, according to her, they can't find work due to other appraisers making value while she appraises for market vaue, who told me she only uses sales that are not bank owned and are not short sales each and every time she does an appraisal. I'm sure she was responsible for a lot of over appraising on refinances and potential short sale properties, and she was probably surprised by all the good deals buyers were getting. When the market first starting going soft there was an agent and mortgage broker team team here who were taking the contracts and boosting their price to meet the inflated appraisal, thereby pocketing the extra cash for themselves. They were caught. But a house isn't worth more than what a typical person is willing to pay for it on the open market. Some appraisers, without knowing it, have been trained to make value. They just don't have a clue that they really do not know how to appraise, and now that the clients have gotten more strict on accurate values, they are losing work and not know why. (Not that there is all that much work out there to lose.)