Effective May 1 the rules for appraisals have changed. It will have yet another adverse market reaction in the short run which, over time, should moderate the market some. The new appraisal rules elevate the value of square footage while negating the value of improvements. When the market educates itself to that fact and home improvement industry begins to feel pressure, I expect that to change.
If the foreclosed home sells first it will value to the AVERAGE of 3 comparable home sales within 1 mile. It will then have a bearing on the other home's price and appraised value and vice versa.