property appraisal and foreclosure

tigerfamous · Joined: 11 Jul 2009 Posts: 57 6.74 Dollars($)

In an area where there are some foreclosures going on after I purchased a property, How could this have an impact on the appraisal value of the property I purchased? Will the appraiser use the forecolsures as comparables if my property is in really good shape, say renovated?

Thanks.

jameshogg · Posted: Tue Jul 28, 2009 11:00 pm Post subject:

Hi tigerfamous,

The property appraiser would consider the value of similar properties located in your neighborhood while appraising the property. This may effect your property thereby reducing it's value.

Thanks

apexoffice · Posted: Wed Jul 29, 2009 9:49 am Post subject:

Appraisers do not arbitrarily select sales at random. We must analyze the market and form an opinion or an interpretation of the reactions of buyers in the market. Obviously if buyers are paying most of their attention to the foreclosures in the area looking for the best deal, then foreclosures can become your primary competition in the market. Having said that, you may have an advantage over the foreclosures if your property is in good condition, unless of course the foreclosures are in good condition as well.

The sales comparison approach, also called the market approach to value, is based on the economic principle of substitution. What would a potential buyer consider as an adequate substitute to your property and they will most likely choose the lowest price substitute plus or minus any specific criteria they deem favorable, meaning that they may be willing to pay slightly more just because they like the floorplan better or slightly less because they really don't care about that tile backsplash.

In the end, we must put ourselves in the buyers shoes, and form an opinion of what a buyer would be willing to pay for the property based on the actions of other buyers in the neighborhood. That is what market value is all about.

I hope this helps.

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