Which set of comps to use?

[hastalavista]

How can you overlook the short sales and foreclosures when your data is 50/50? With the exception of physical differences as to condition, if the bank owned/short sales or BOSS's are competing for the same knowledge, qualified buyers in the open market, I would argue they are definitely having an impact on market values. If they're priced lower, then why would a buyer pay more for a non-bank owned listing, all other things being equal?

Good point- I agree.

 

[Michigan CG]

I may include some "no-arms length" sales in the market condition analysis section.

market value
The major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. Continual refinement is essential to the growth of the appraisal profession.

1. The most widely accepted components of market value are incorporated in the following definition:
The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.



3. The following definition of market value is used by agencies that regulate federally insured financial institutions in the United States:
The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
o Buyer and seller are typically motivated;
o Both parties are well informed or well advised, and acting in what they consider their best interests;
o A reasonable time is allowed for exposure in the open market;

o Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
o The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Who is to say in this current market that bank owned properties are not the market and therefore arms-length transactions?

Du"ress\, n. [OF. duresse, du?, hardship, severity, L. duritia, durities, fr. durus hard. See Dure.]

1. Hardship; constraint; pressure; imprisonment; restraint of liberty.

One could argue undue duress, but undue is the key. Every seller in the market now is in the same boat (homeowners, banks, short-sale properties), therefore everyone cannot be under undue duress.

 

[Joyce Potts]

A bank owned property is always stigmatized? Really?

I just learned something new.

Where did you come up with that one?

 

[RSW]

Are you doing an REO appraisal or a purchase of the bank owned property? Why not use three of each. This would help you to arrive at the estimate of market value based on a client-imposed restricted exposure time of 90-120 days or what ever they request.

 

[Lee Lansford]

...That said, because of atypical seller motivation, they may not be good indicators of market value...

Good point.

 

[Bama Bayou]

I'm not familiar with California foreclosure law but the so called "stigma" attached to foreclosed properties in AL is influenced mainly by two factors. First of all is condition. Most of these properties are not in the best of condition, not real clean, the landscaping is in bad shape, appliances are missing, and are sold "as is" with no warranty. They simply don't show as well as an owner occupied property. A very important factor also is that in AL we have a one year right of redemption, so the title that is transferred is not as "clean" as a typical sale.

 

[Mztk1]

A bank owned property is always stigmatized? Really?

I just learned something new.

Where did you come up with that one?

Was this directed toward me? Because I never said it was always stigmatized. Maybe I am just feeling paranoid today.

 

[Joyce Potts]

1 - How is the motivation of the seller of a bank owned, pre-foreclosure or foreclosed property any different than any other seller motivation? They don't care if they lose other people's money?

2 - If the property is on the market for 90, 120, 180, 250, 300+ days, who care's about the seller motivation when there are few to no buyers?

 

[Joyce Potts]

market value
The major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. Continual refinement is essential to the growth of the appraisal profession.

1. The most widely accepted components of market value are incorporated in the following definition:
The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.



3. The following definition of market value is used by agencies that regulate federally insured financial institutions in the United States:
The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
o Buyer and seller are typically motivated;
o Both parties are well informed or well advised, and acting in what they consider their best interests;
o A reasonable time is allowed for exposure in the open market;

o Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
o The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Who is to say in this current market that bank owned properties are not the market and therefore arms-length transactions?

Du"ress\, n. [OF. duresse, du?, hardship, severity, L. duritia, durities, fr. durus hard. See Dure.]

1. Hardship; constraint; pressure; imprisonment; restraint of liberty.

One could argue undue duress, but undue is the key. Every seller in the market now is in the same boat (homeowners, banks, short-sale properties), therefore everyone cannot be under undue duress.

Yeah! What he said.