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Yes, it is used as a comp. But it may not be a very good one. As I've promoted on this thread before to others...use them as comparables, but ALWAYS look at the days on market, and the condition. If the home is only on the market for 2 days, then is it a really good comp? But if the foreclosure is on the market for just about the average days on market for the area, then you bet your behind that its a comp.
Sheepskate 1, Alpine 0
I don't know the answer to this exact question, but I noticed that some of the transactions on zillow are postfixed with an asterix, which is supposed to mean the following,
Transaction Not Included in Zestimate This transaction was not used in computing the Zestimate for this house due to anomalies we detected with this transaction. These anomalies can include unusual document or transaction types, sales between possibly related parties, unusually high or low transaction prices, or other data irregularities that might indicate the transaction is not a full-value, arms-length transaction.
There might be a similar rule for the comps.
Accoridng to njrereport, the #1 doom website in NJ, short sales are NOT used as comps. SO the score is 1:1.
I should also add that the house in question was sold by the woner, NOT the bank. It is not a REO since the bank never took possession of it.
And this argument is exactly why the appraisal industry is safe from being replaced by computers.
Whether it is used as a "comp" or not, a short sale or REO transaction removes a buyer from the "mainstream" market - and I think there are already few there to begin with. Fewer buyers = less demand = lower prices. Effectively the same impact, just takes a little longer.
Exactly why it needs to be used, but examined. And before anyone uses the argument of "well maybe a flipper could have bought it"...he's gonna re sell it. The more you are into the market, the more homes you see go up for sale, the more that sell...you start to get a feeling of the area, that is usually backed by the comps (whether foreclosure or not.) You know how much work needs to be done on a foreclosure, or even just a normal resale, and you can adjust. The market is a living, breathing thing (lately turned beast). I've always thought of my job as "measuring the pulse of the market".
Alpine
Typically any type of distress propertie sales as well as transactions that are not "arms length" are not used in new fi nor in refi appraisals. (Unless the lender directs the appraiser otherwise)
However, in BPO's and in appraisals for preforeclosures and foreclosures, often distress property sales are used to evaluate for the foreclosing lender or the REO dept to give such information as value at quick sale vs. 30 vs. 60 vs. 90 DOM evaluations and "as is" vs. "as repaired" evaluation
Thank you Durenda.
Alpine: 2; Sheapskate Aldreth: 1
At the end of the day, the bank's appraisal is the one that matters the most. In most transactions, the bulk of the money is coming from the bank, not the buyer. The CMA is the kitten and the bank appraisal is the elephant.
Alas Alpine, now we're back to exactly what I said in the other thread. You 'comps' are used for bank appraisal purposes, i.e the HELOC you're getting. You're going to have a tough time convincing a would be buyer of your house that the foreclosure and REO prices of properties that sold in your area should not be counted as comps.
So...
Penalties on Alpine
referee ruling: Subtract 2 points from Alpine, as both pieces of evidence actually prove sheepskates point from the previous thread and give those points to sheepskate.
Sheepskate: 3
Apline: 0
"You're going to have a tough time convincing a would be buyer of your house that the foreclosure and REO prices of properties that sold in your area should not be counted as comps."
I don't have to convince a buyer of squat. Their agent willl likely do a CMA for them, and I can guarantee that the short sale house will be missing from it.
At the end of the day, the bank's appraisal is the one that matters the most.
At the end of the day, what a buyer is willing to pay is what matters most. Comps and appraisal sheets are nice to look at and dream about that money, but you can't deposit an appraisal in your checking account.
And Alpine, if you are getting a HELOC to double down on real estate, you are even more delusional that I imagined. You are like the guy in vegas that is down a few thousand bucks and his wife is going to kill him if she finds out, so he hocks his wedding ring to get more gambling money to 'make it all back'.
You have lost a lot. But you are going to lose everything if you do this.
Ok, fine.
If you find a stupid buyer, then, hey... include only the comps that are favorable to your sale price.
Perhaps that is how you ended up bidding $840K
I won't lose anyhting. I will be buying in a very affluent area where property values will remain stable, as they currently are. Wealthy areas always perform the best since they have the least foreclosures.
"If you find a stupid buyer, then, hey... include only the comps that are favorable to your sale price. "
I'm not including any comps. THat is the agent's and appraiser's job. And I seriously doubt that the house will be used as a comp since it is a distressed property.
You are making a huge mistake. Gambling is what got you into this. Cut your losses and get out!
I am not gambling. Real estate always goes up in the LONG TERM. Please do not compare it to blackjack or a slot machine.
The best time to buy RE is when people tell you that you are crazy do so so. Rob bought houses in Phoenix back in the 80s, and people told him that he was nuts for doing so. Fast forward 20 years later, and he made out quite good and those who said not to buy now have egg on their face.
You will end up seriously regretting what you are about to do.
Sure I will.
"Real estate always goes up in the LONG TERM."
BAHAHAHAHAHA.
Real Estate prices track the devaluation of the currency plus a smidge based on all the times your landlord has to crawl up onto the roof with a bucket of tar.
Now and then there are speculative bubbles which eventually crash and prices over correct and can take generations to return to their bubble ways.
Huge mistake. You had enough cash in 2005 where you really didn't need to worry. You have burned through a good portion of it on this crazy speculative flip. You now feel silly that you have lost money, so you are going to throw the hail mary with what you still have in equity in your home.
You are going to lose it all. You will still be working when you are 75.
I am not going to lose $600k. You sound like one of those people with the sandwich board screaming the the end of the world is coming.
Prices in NJ will not fall that much. We have a relatively low foreclopsure rate, we are close to NYC, and we did not see the same insane appreciaiton that many bubble states saw, liek CA and Florida.
I always love this argument:
Real estate always goes up in the LONG TERM
The problem with this mode of thought is as humans, we do not have infinite time on earth. Some times this 'LONG TERM' extends beyond the day you're planted into the ground. Thus, while you are technically correct that 'real estate always goes up in the long term', what good does that do you when you start to talk of cycles that can last more than 15 years to break even? Last housing bubble, had those who bought at the absolute peak (1988) wait until 2002 to break even -- nominally!
It seems to me you pretty much hit the peak, I have no idea when you'll break even, I just hope you do in your lifetime. Otherwise you've put your life on hold for a break-even pay day that never comes to you.
... and, it's free and anonymous
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Are Pre-Foreclosures Used as Comps?
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If a house is in pre-foreclosure and is sold at short sale, does it get used as a comp? Let's assume thae house is in an area with a relatively low foreclosure rate.
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