For years, we've just been focused on price. Price, price, price, price, price!! And that's worked out, let's say, just fine.
Well, now we have "terms" affecting price, and affecting value. Do any of these conditions affect value: a move-in ready home that can close in thirty days, a bank-owned home that's been "winterized", a short sale that can take three to nine months to close, a courthouse-steps sale that's cash on the barrelhead?
Frankly, I can see the merit in going UP the ladder in an appraisal - it's a short sale and we're comping it to ready-to-go homes. But to comp a ready-to-close home with a winterized bank-owned home?
In general, I would prefer all distressed properties be considered in a separate category from nondistressed properties. The problem is I've been in some bank owned and short sale homes in better condition than some owner occupied nondistressed homes. This is not the rule however.
My advice to my buyers regarding short sales is that they have to be a good deal to risk the time and potential heartache you have to go through to get them. Banks holding out for "nondistressed market value" are deluding themselves, their investors and the public in the current way things are processed. If a short sale could be processed and closed in 60 days or less, the values would easily be higher.
Should distressed properties be used for comps? Only if the appraiser factors in condition and adjusts the value due to being distressed appropriately.
What would you use for comps in areas that are mostly foreclosed properties and they are the only homes that are selling.
As I see it to enforce such legislation would falsely create market value. Transaction may occur but what will happen to the home's value in the long run.....it would seek the level of the current market activity.....I really don't see it as a solution for a problem but the potential for creating an even bigger one.