Home Selling in 60067>Question Details

Fran, Both Buyer and Seller in 60067

How will a very low sale price (but not a foreclosure) factor into Comps?

Asked by Fran, 60067 Fri May 9, 2008

Late last year, an elderly couple in our subdivision sold their coach home to a relative for what they paid for it in the 1990's. The final sale price was $100K less than any other unit that has sold lately. How will this affect the comps for other units in the subdivision? Is it the same as a foreclosure?

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You could certainly argue that the sale to the relative was an intentional "gift" to them and didn't reflect true market value.... The fact that you have that information is good - as it will help your case when you fight to keep your price above that. Not the same as a foreclosure... One thing I do when representing buyers (which is all I do..) is to bring up foreclosures and pre-foreclosures in the neighborhood, macro and micro real estate trends, and much much more to fight for the best price for my buyer client.

They are comfortable - because they know I have the most expertise in the Chicago area in research and negotiation and credentials in representing buyers - and that unlike "buyer agents" (they and their company list property for sale) - I am always on the buyer's side (because I and my company never list property for sale) -- so they never get into the "dual agency" conflicts of interest...
0 votes Thank Flag Link Mon Aug 9, 2010

It is not the same as a foreclosure and shouldn't affect an appraisal. However, a good buyer's agent will try to use it against you during negotiations. Be sure your agent is competent enough to handle it when it comes up. (most agents are)
0 votes Thank Flag Link Fri May 9, 2008
Thanks everybody for your answers! I figured as much, but just wanted to know for my own info. We don't plan on selling until next spring, but I always like to keep on top of what units are doing in our subdivision.
0 votes Thank Flag Link Fri May 9, 2008
An appraiser exercising proper due diligence when researching comparables, would research that particular sale and find that it is not an arms length transaction and it would not be used as a comparable. I cannot say the same for any buyer looking for properties in that market area researching comps on their own. Any online valuation service will include that sale along with other sales data (including foreclosures, short sales, and reo sales) in the value or value range they provide rendering the conclusion inaccurate. That particular transaction as you described it is not the same as or considered a foreclosure.
0 votes Thank Flag Link Fri May 9, 2008
Because that wasn't an arms-length transaction, someone doing an appraisal--if they're aware of the connection between seller and buyer--should take that into consideration. And the appraisers I've worked with are cautious about price "outlyers"--properties that sold for substantially more or less than other similar properties. Nevertheless, if the appraiser isn't aware of the connection between the buyer and seller, or if there haven't been any other sales since that low sale, it might appear that home prices have dropped in your neighborhood when, in fact, they haven't.
0 votes Thank Flag Link Fri May 9, 2008
Don Tepper, Real Estate Pro in Burke, VA
Fran, when choosing comps, agents tend to find homes that are the "norm" in a given neighborhood. Provided there are other homes in the area that are still comps they can get a very clear picture of a true average sale price. I generally try to stay away from homes that are not the "norm" unless I absolutely have to for the sake of the Market Analysis.
0 votes Thank Flag Link Fri May 9, 2008
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