Posted: Thu Apr 17, 2008 8:34 pm Post subject: Auction property used as comp ruined deal!
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Is there some sort of guidelines that are used to prevent appraisers from using auctioned properties as comps? We just had this happen and it made our appraisal come in 15,000 lower and killed the deal! It doesn't seem like these types of comps should be allowed just like a foreclosure comp should't be allowed
Posted: Thu Apr 17, 2008 9:35 pm Post subject: RE: auctioned properties as comps
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Hi joanstraughn,
Welcome to forums.
As much as I know, the appraiser conducts an appraisal by comparing market values of similar properties which have already been sold in the particular area. So, even if it's an auctioned property, I don't see any problem in using such properties for appraisal.
Quote:
It doesn't seem like these types of comps should be allowed just like a foreclosure comp should't be allowed
I didn't get what you're trying to say here. Can you please explain it once again?
If there were no other better comps in the area even foreclosure properties may be used as they are the only basis for the current value of the home. Most appraisers will try to determine the fair market value. So if your home isnt currently worth as much as you want there is nothing you can do. _________________ Eugene Volovik
Home Loan Consultant
Countrywide
612-481-3127
Conventional, FHA and Commercial Lending in 48 states
i'm in agreement with eugene - an appraiser chooses the best available comparables. if that auctioned home was truly one of the best available, that's about all that can be said. _________________ George M. Akerley
Independent Contractor - Mortgage Consultant
Word of Excellence Editing/Writing/Proofreading
860-221-5044
It is a comp and unfortunately all across the country this is happenning and will continue to happen. It is sad that one persons inability to fulfill their obligations has a trickle down effect but it does.
Definition of market value per Fannie Mae:
The most probable price which a property should bring in a competitive and open market under all conditions requisite of a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consumation of sale as a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and (5) 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.
This is the same definition that you will find built into te Fannie Mae forms themselves. By this definition, I would find it very difficult to prove that an auction sale would be a good indicator af "market value" on the premise that it does not contain the requisites for a fair sale.
Having said that, it could also be assumed that post foreclosure sales would not be a fair sale either. However, I have seen markets where foreclosures have saturated the market and become the primary competition. In these scenarios, it may be acceptable to utilize post foreclosure sales as comparables sales in the analysis under the principle of substitution.
In your situation, if other sales are available, even if slightly less comparable, I would question the validity of its use.
Benjamin _________________ Benjamin Smith
Atlanta Area Appraiser
Mortgage Forums 
joanstraughn
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