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Using foreclosures as comparables

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Don Geronimo

Thread Starter
Sophomore Member
Joined
Feb 14, 2006
Professional Status
Licensed Appraiser
State
Virginia
I am doing an appraisal in large development where there apparently are quite a few foreclosures. At first I didn't catch it as the owner/sellers on the listings were listed as SPS or Select Protfolio Servicing Inc or something like along those lines (not all the same name but you get the picture) not something like Bruce Johnson or John Thomas, etc. But as I was researching the previous sales data on what I thought were normal sales, two of the three turned up as what appears to be foreclosures. Anyway what is the general consensus on using foreclosures? The price on the foreclosed homes are in line with the neighborhood for those types of homes and the lost of value over the past two years is in line with the 10-15% the rest of the neighborhood has experienced...So would it be cool to use the foreclosures? Would I disclose the fact that they are foreclosures? Sorry to sound like a rube but this is the first time I have really come across this problem when I can't find a better comp. :shrug:

Thanks
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
Are you using foreclosure sales were the lender takes the title or are the foreclosure sales your discussing a re-sale from a prior foreclosure procedure? I would not use a sale where a lender took the title. Re-define the term foreclosure sale so the forum can respond adequately to your situation. If they are re-sales from a foreclosure where they offered to the open market?
 

Don Geronimo

Thread Starter
Sophomore Member
Joined
Feb 14, 2006
Professional Status
Licensed Appraiser
State
Virginia
Sorry if that caused confusion but these are bank owned sales.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
If bank owned sales are driving the market you can use them but always disclose them and explain them.

If you have very recent (as recent as the foreclosures) traditional resales, they'd probably be a better alternative, though.
 

PointerAppraisal

Sophomore Member
Joined
Jul 3, 2007
Professional Status
Certified General Appraiser
State
Ohio
Does the typical purchaser of the subject property consider both bank owned (REO) properties and typical owner occupied properties when analyzing what to purchase? Are the buyer and seller typically motivated?

I do not know about your area, but in some areas of the NE Ohio market the agents are stating they are showing bank owned and regular listings and they are finding the clients considering bank owned properties as well as more traditional owner occupied properties. Agents are also stating they have seen an increase in very marketable bank owned properties entering the market recently.

I would start by calling the real estate agents of the comps and determine if the buyer or seller were in distress. Look at the days on market, was it on the market long enough, or was the seller (bank) looking to get out of the property quickly. Document and disclose in the report.

Sounds like you will earn every penny of your fee on this report.
 
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