Using foreclosures as comps

[Pappraisals]

With so many foreclosure sales and so many new construction homes that the builders are trying to just dump so they stop loosing money how should we adjust for these?

Typically I try to not use a foreclosure as a comparable but with the market - there are area's that you don't have a choice. When the subject is in good condition and in a good market area but there is a comp that is the closest and the newest sale I hate not to use it. I want to adjust and I would normally put on a condition adjustment butr I talked with a realtor today and the forclosure that I want to use was in decent condition just needed carpets cleaned and interior paint. The price of the home still sold about 10-15K lower than other homes in the area. Where should this adjustment go on the grid or should I just totally stay away from it?

Another one I had a comp on the same street for a new construction subdivision the builder had to dump and told me it was one of the last spec homes and dumped it about $30K lower than he wanted to sell it for.

 

[ccooper]

if you owned the house and were going to sell it, would you be pricing the subject based upon the REOs? If the answer is yes, then REO sales might be good comps.

 

[Metamorphic]

Seems like around here you're either dealing with a market stocked with foreclosures or just a few.

Where you're stocked, the foreclosures define the market and there's very little price difference between the f's and the non-f's that cant be covered by a condition adjustment; there's also usually so many of them you can help but use them. In the areas where there's few F's the F's seems like they are about 20% under the market, sell in less that 30 days (usually to an investor) seem to be NOT to be the market. Obviously in those cases we avoid using them, treating them like an anomalous transaction that's not really market defining.

 

[Pamela Crowley (Florida)]

With so many foreclosure sales and so many new construction homes that the builders are trying to just dump so they stop loosing money how should we adjust for these?

Typically I try to not use a foreclosure as a comparable but with the market - there are area's that you don't have a choice. When the subject is in good condition and in a good market area but there is a comp that is the closest and the newest sale I hate not to use it. I want to adjust and I would normally put on a condition adjustment butr I talked with a realtor today and the forclosure that I want to use was in decent condition just needed carpets cleaned and interior paint. The price of the home still sold about 10-15K lower than other homes in the area. Where should this adjustment go on the grid or should I just totally stay away from it?

Another one I had a comp on the same street for a new construction subdivision the builder had to dump and told me it was one of the last spec homes and dumped it about $30K lower than he wanted to sell it for.

You must consider all other market conditions to make this decision.
How many active listings?
What are the pendings?
What are the total days on the market for similar properties, including all expired and withdrawn listings?
How many price reductions happened / are happening?
What are the sales price / listing price ratios?

etc.