Short/Foreclosure Is The Market

[Alison Swain]

What verbiage do you use when explaining your market description when foreclosures and short sales are predominant?

I've got a refi where there is a very similar home which sold under "normal" circumstances in the same subdivision in..........October. One other similar home sold in another community in February. Everything else is recent but short/bank-owned. A couple were purchased for cash when the price was right --- and they sold much quicker than the typical 3-6 months. Do I make adjustments for this "short"-circuited sale condition? If so, how is it figured?

BTW, this is going FHA.

Thanks for all help.

 

[Jack Straw]

What verbiage do you use when explaining your market description when foreclosures and short sales are predominant?

I've got a refi where there is a very similar home which sold under "normal" circumstances in the same subdivision in..........October. One other similar home sold in another community in February. Everything else is recent but short/bank-owned. A couple were purchased for cash when the price was right --- and they sold much quicker than the typical 3-6 months. Do I make adjustments for this "short"-circuited sale condition? If so, how is it figured?

BTW, this is going FHA.

Thanks for all help.

Not really sure what you are asking here........ Are you trying to FIND value for a home that is not in foreclosure (like a refi) in a maket full of foreclosures?

Your Market is predominant REO/short sales? Are they dictating the market?

Use the recent sales, if your market is in decline, make adjustments-downward.

If your market has rapidly changed and there are recent sales, stay away from the old sale of the home which sold under "normal" circumstances. Where I work, the new "normal" is a foreclosed sale.

 

[Mary Tiernan]

I'd say you're half way there already with your description of sales data, however, don't use the word normal.

Just explain the sales activity, how the properties sold, and what condition the properties were in. If you need to, talk to a few realtors involved in the sales and get their input on why only the foreclosure sales have sold.

Were there other offerings at typical market levels? How many listings have expired? How many listings are there, and at what price levels? This information should all help you, and the reader of the report, understand why you utilized the comparables you did and what the market is doing.

Perhaps use the older sale with market condition adjustments bringing it down to the level of foreclosure prices?

 

[Mary Tiernan]

Also, has the employment in the area declined, or has the interest in the area declined? Who are typical purchasers? are they investors willing to hold the property long term in anticipation of profits? are they investors looking for rental income? are they out-of-towners looking for a second/vacation property? What has driven the area down so that only foreclosures and short sales are typical now?

 

[Alison Swain]

Employment has not really declined around here.

Although these are new, large homes (2800-3300 sq. ft.), there are lots of them --- I'd guess many were built during the boom to appeal to investors with the thought they'd be rented out short term to tourists (Disney World is just 10 miles or so up U. S. 27). However, a lot were purchased by young, growing families. In the beginning (before the craziness in 2005), this area was considered a more affordable alternative to buying in Orlando/Orange County.

It looks like sales of the better upgraded, well-kept homes, while much fewer, got better prices with a 3-4 month exposure. The shorts or drastically reduced sold within a month of the price drops.

I guess what I'm trying to say is: "distress"/short/foreclosure listings (basic units, no real upgrades) are selling faster and lower; others (with better features) will sell and for higher, but the sellers are having to wait.

 

[David Dietz]

The number of homes sold per month has dropped roughly 48% over the past year. Foreclosures and short sales of new and barely lived in homes have penetrated the market causing an even greater strain on the current market. Currently short sales and foreclosures male up roughly 51% of the offered properties.

 

[Pamela Crowley (Florida)]

Here's one:

"Sales of the newest, nearest, most similar to the subject are presented here. Currently, there are more residential properties being finalized in foreclosure than are selling in Brevard County, FL. The vast majority of sales are purchases of foreclosed properties for the lower prices, and prices are still declining. There are 43 properties listed in MLS for sale in SE Palm Bay that were built between 1985 - 2000 and between 1700 - 2200 SF GLA with asking prices ranging from $105,000 to $297,500. It appears that the few pending are the lower priced properties and typically will close for less than what they were listed for. If the true concessions paid by sellers were verifiable and adjusted for, the adjusted sale prices of the comps and the Appraiser's opinion of the subject market value as of the effective date of this appraisal would most likely be lower. Comps #1 & #2 were sales of foreclosed properties."

Just tell it like it is.

 

[Lloyd Bonafide]

I would probably forget about the sale in October, if there are a lot of sales in the past three months or so, and if there are a lot of active listings in the same tract also. The sale in October may have nothing to do with values today. The fact that all of the recent sales are either REO sales or short sales just means that it's tough luck for the owner doing the refi.

 

[Alison Swain]

"Sales of the newest, nearest, most similar to the subject are presented here. Currently, there are more residential properties being finalized in foreclosure than are selling in Brevard County, FL. The vast majority of sales are purchases of foreclosed properties for the lower prices, and prices are still declining. There are 43 properties listed in MLS for sale in SE Palm Bay that were built between 1985 - 2000 and between 1700 - 2200 SF GLA with asking prices ranging from $105,000 to $297,500. It appears that the few pending are the lower priced properties and typically will close for less than what they were listed for. If the true concessions paid by sellers were verifiable and adjusted for, the adjusted sale prices of the comps and the Appraiser's opinion of the subject market value as of the effective date of this appraisal would most likely be lower. Comps #1 & #2 were sales of foreclosed properties."

"The number of homes sold per month has dropped roughly 48% over the past year. Foreclosures and short sales of new and barely lived in homes have penetrated the market causing an even greater strain on the current market. Currently short sales and foreclosures male up roughly 51% of the offered properties."

Great! Thanks, guys. I'll incorporate both of those.

 

[Mike Garrett RAA]

Just tell it like it is. Keep your verbiage simple and to the point. Quote your source, maybe even include a copy of recent stats from your MLS.