Can foreclosures and short sales be factored in to a house appraisal?

Asked by E.H., Ashburn, VA Sun Mar 9, 2008

I have heard that when a house is being appraised, foreclosures and short sales cannot be included within the comparable homes in the neighborhood that have sold; I have also heard that foreclosures and short sales can be included. Which is correct?

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3
Tman, , 30642
Mon Mar 10, 2008
It can depend on the lender or the appraiser - or both.

Think about it for a moment .. appraisals have never been an exact science, far from it.

Most appraisals were really like throwing darts .. appraisers would look at the "stats" of 5 or 6 comps in the neighborhood and basically do a drive-by of yours, look at the loan figures and add 10% ... and depending on the area and how long the the lender had carried the paper and it wasn't commercial property, it would be accepted ... it's been that way for 20 some years.

I've seen appraisers spend 4 minutes doing an appraisal on a 6,500 sq ft home when it takes 5 minutes just to walk around it .l.o.l.. .. and some appraisers haven't left their office since 1995 .... I bet they are now.

I would guess that some lenders will have a much tighter reign on it now - but that's a guess ... but I do know every lender does have a whole new set of policies and procedures and they're not supposed to use the distressed figures ... but some lenders still do.


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1 vote
Joshua Jarvis, Agent, Duluth, GA
Mon Mar 10, 2008
E.H,

Foreclosures or distressed sales (including short sales) are not supposed to be used at all. However, the market is such that in some cases, Foreclosures or distressed sales ARE the market. IN a good market, you can throw out one or two comparables that might not fit due to circumstance.

It's also important if you are trying for a higher appraised value that the appraiser takes into account the cost of repairs for the home.

So the answer is, that NO they are not supposed to use them, but may be forced to. Location is more important than circumstance in this case.
1 vote
William M "M…, Agent, Suwanee, GA
Mon Mar 10, 2008
The appraiser should use the 3 most current sales in the neighborhood. Some of the time a short sale or a foreclosure may be included. I don't think there is any stead fast rule that they must be used or not.
1 vote
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