With the recent record high numbers of short sales and foreclosure sales, many Mt. Pleasant homeowners are concerned about the impact these distressed sales are having on their home’s market value. This is a very legitimate concern, particularly for homeowners that currently have their homes on the market and for those that may be considering selling their home in the near future.
Can One Distressed Sale Impact Value?
For example, let’s say that the recent sales for comparable homes in a neighborhood suggest that the average value is approximately $350,000. But, suddenly a neighbor’s home is sold at a foreclosure auction for $250,000. Does that mean that the average market value for homes in that neighborhood is now at $250,000 instead of $350,000?
This answer to this question is not an easy one. I have spoken to some local appraisers about this issue and they tell me that it really depends on how many distressed sales there currently are in that particular market. For example, if a high percentage of recent home sales in a neighborhood have been distressed, then a real estate appraiser will likely take those comparable sales into consideration when determining value. On the other hand, if distressed sales comprise a very small percentage of the recent activity, it is less likely that the appraiser will use those distressed sales as comparable data in determining value.
This is good news for sellers of homes in neighborhoods that have had very few distressed sales in recent months. It’s not likely that their market value will be adjusted significantly just because a bank decides to “dump” a property at a price that is well below market value for that neighborhood.
Ultimately, It’s the Real Estate Appraiser’s Call
However, it is important to note that this is always going to be judgment call on the part of the real estate appraiser. Determining the true value of a home can be very challenging in this market environment. There are fewer home sales which translates to fewer comparable properties for appraisers to use in their evaluation process. This requires the appraisers to really “dig deep” for relevant comparable homes to use in their market analysis. Sometimes the appraiser may have no choice but to use a few recent distressed sales in their market analysis.
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