Housing News
Should appraisers take distressed properties into account as comps?
Are foreclosures the same as resale?
With recent news from the Appraisal Institute that Nevada, Missouri, Maryland and Illinois are considering legislation barring appraisers from using distressed sales as comparables, some are pondering what a divorce between short sales, foreclosures and the like from standard resale would look like.
Are distressed homes apples, oranges, or living organisms?
The first theory is that all houses in a neighborhood be they new, old, distressed or not, function as a living organism whose health is impacted by each and every part within the organism, so if one part (house) gets sick, the organism is unhealthy until that part gets better and if other parts get sick, the organism gets sicker.
The second theory is that distressed homes compared to healthy homes are not comparing apples to apples. In this theory, each part is independent from the other and bargain hunters will automatically seek out foreclosures regardless of condition, and buyers looking for a standard resale where they feel they carry less risk, therefore apples are not oranges.
Which theory is correct?
It depends on whose shoes you are in. If you’re a seller, then you agree that apples are not oranges, but if you’re a buyer and looking at a neighborhood, maybe it’s more like a single organism. If you’re an agent, an appraiser or a lender, your perspective may change as well.
Regardless of validity, the move for states to exclude distressed sales from appraisals seems like a fair one to most we have spoken to and we anticipate other states could follow suit.
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Housing News
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
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Housing News
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.
…Click here to continue reading this story…
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Troi Paris Kaz via Facebook
March 25, 2011 at 1:46 pm
I think they must be considered, but that we all need to use a bit of common sense when determining their weight, and adjust appropriately.
Laurel Jack via Facebook
March 25, 2011 at 1:48 pm
In our area, many times the only comps are distressed sales so I think it’s extremely important they remain “considerable”!!!
Mary Pope-Handy via Facebook
March 25, 2011 at 2:01 pm
Awesome!
Benn Rosales
March 25, 2011 at 2:11 pm
I’ve been saying this for a year, just because you can get a bargain at walmart doesn’t mean it has to be cheaper at a name brand retailer – come on! Instant market credibility with this one change.
Gina Kay Landis
March 25, 2011 at 2:30 pm
There was a thought at one time that foreclosures are a distinctly different market from regular sales. As foreclosures increased, however, it became apparent that every neighborhood was being affected by them – from the fact that they are often not cared for on the exterior or that the interior has been ravaged by vandalism. As such, people such as myself that do BPO’s (broker price opinions) and appraisers have had to take into consideration the foreclosures when valuing properties. Why? Because foreclosures could be the only sold comparables within a desired radius of the subject property. For a blanket assumption that this may not be true by the named states, I’d challenge anyone to find non-foreclosure comps in certain areas. As one increases the radius with which one hopes to locate non-foreclosure solds, distance from the subject property becomes too much to consider for comparative values of that property.
Gina Kay Landis, REALTOR
@ginakayRE
Vicki Lloyd
March 25, 2011 at 2:33 pm
I have noticed that foreclosed homes seem to average about 5% under traditional sales, and short sales look like about 10% less. I’m sure it varies by area, but if appraisers could separate them out and use adjusting factors, it might be more accurate.
The other problem with valuing short sales, is that it may record at one value, but the buyer had to pay back property taxes, HOA dues, and other liens that don’t show in the purchase price. This can add up substantially!
James Malanowski
March 25, 2011 at 2:44 pm
Foolishness. Once again, real estate is local. And sometimes, real estate is extremely local (ie: one neighborhood is different from the next). An appraiser worth his fee will be able to analyze the market and determine which comps he should use.
Our market is REO/Short-Sale driven. Distressed comps MUST be used because that IS the market. In fact, for the last year, REO actually sells faster and for more money than short-sales and, in some cases, the rare standard sale in our market. Walmart isn’t always the cheapest place to buy something.
In addition, REO != crap. I’ve sold some pristine bank-owned properties that would put some traditional sellers to shame.
If you have an area that is populated by standard sales, there is no reason to use the one REO comp unless it is a true comp for the neighborhood. Just as you should not use the one totally rehabbed and upgraded home as a comp for a stripped down REO sale that is surrounded by 50 other recently sold stripped down REOs.
The government needs to keep their damn fingers out of the market and let us do our job.
Ben Goheen
March 25, 2011 at 3:06 pm
In some areas I appraise 95% of sold comps within the past year are distressed. And I just appraised a condo where there were only 3 sales in the prior year in the development. Guess what – they were all foreclosures. How do you ignore those statistics?
There is NO solution that will work for every area. As Troi said, you have to use common sense.
Artur
March 25, 2011 at 5:15 pm
The answer is easy: yes, if they influence buyer’s decisions.
SHERRI MELTON
March 28, 2011 at 8:09 am
I THINK WHEN THEY ARE FIGURING COMPS. THEY SHOULD COMPAIR APPLES TO APPLES. DISTRESSED PROPERTIES SHOULD BE IN A CATAGORY OF THEIR OWN.