Should Regular Sales be Compared to Short Sales When Pulling Comps?

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Real Estate Agent with Long & Foster REALTORS®, Manassas, VA VA License # 0225089470

Should Regular Sales be Compared to Short Sales When Pulling Comps?

Oh how I LOVE this conversation.  I love it because there is a general sense in the Northern Virginia home buying and selling population that Short Sales are bargains.  Banks, staring foreclosure in the face are willing to do bargain basement deals on homes that will otherwise end up in their inventory.  

Nothing could be farther from the truth.

Banks accept or decline Short Sale offers, based on BPO values or appraisals.  When the banks ask an appraiser or agent to go out and DO these evaluations or comparable market analyses, they don't ask them to pull comps only for other Short Sale that have closed.  They are pulling Regular Sales too.   Even Foreclosures, which are priced to the market value of Regular Sales, if in comparable condition.  That means that banks are pulling market value from the ENTIRE market.  As such, Northern Virginia Short Sales that are approved, where we are experiencing low inventory and high buyer demand, tend to be at prices that jive with the comps in the neighborhood.  Yes, that even means the comps of the Regular Sales.  

Some Short Sale listings are priced low.  Those prices usually don't indicate where the home will ultimately SELL.  Again, we're talking SOLD prices here.  This is probably where the myth that they are bargains comes from. Stay focused on the solds and you'll see a different story.

So should Regular Sales be compared to Short Sales when pulling comps?  If banks are using Regular Sales to determine if they have a good offer on a Short Sale, and will counter an offer that isn't to reflect that value pulled from the WHOLE market, absolutely.  Why?  Because the sold prices of Short Sales are in line with the market values in Northern Virginia.  So if banks are using Regular Sales to determine whether they will accept or decline a Short Sale, the values are going to be in the same ball park.  Any agent who tells you otherwise is attempting to buy your listing.

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Topic:
Home Selling
Location:
Virginia Prince William County Bristow
Groups:
The Vent
Bartender, Make it a Double
Short Sales Specialists
America's Best Agents
Short Sale REALTORS®
Tags:
are regular sales selling for more than short sales
short sale home prices vs regular sales

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Rainmaker
529,847
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Chris Ann, I'm writing a very similar post regarding Short Sales and couldn't agree with you more. I've been doing BPO's since 2002 and only do them in my immediate service area. Some lenders now asking BPO agents "Not" to use Short Sale transactions as comps even if the market is Short Sale driven. I've done a BPO on a Short Sale listing and the market value of the house(based on comps) was $30,000 higher than Short Sale list price. Listing Agent was told BPO came in too high and of course he called me to express his not very warm and fuzzy feelings. Forget the fact he priced the house low. Banks don't want to leave any money on the table and they know some short sale listings are priced lower than all the comps in the area. Great post!!

Aug 03, 2012 04:33 PM #1
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Chris Ann Cleland
Long & Foster REALTORS®, Manassas, VA - Bristow, VA
Associate Broker, Northern VA

Beth:  It's so true.  Banks are losing their shirts on these deals.  Why in the world would people think they would leave anything on the table?  And I seriously doubt most buyers or sellers even realize that regular sales are used in BPOs.  Sounds l ike exclusivley in some cases.  

Aug 03, 2012 04:38 PM #2
Rainmaker
414,746
Peggy James
EXIT Realty Associates - Woodbridge, VA
Lake Ridge Virginia Real Estate Specialist

Chris Ann, my response is NO. ( actually Hell No!) LOL! I have negotiated and sold a lot of homes already this year. Most have been "regular owner,healthy sales" here in the Woodbridge Virginia area. That said none of the appraisers used  short sale or foreclosure comps.  Thank God. When that was happening in 2008 and 2009 it was so difficult to get the market going in a forward direction. It drives me CRAZY when I see agents list short sale listings at Stupid Low Prices. It is so unfair to all involved. Ultimately, the prospective purchaser'swho holds on hoping against hope the bank will accept the under market contract is sorely disappointed when the the bank returns a fair market counter. No one wins, not the distressed homeowner, the purchaser, the loan officers nor the bank. I wish all real  agents would just list homes for Fair Market Value. Period.

 

Aug 03, 2012 05:43 PM #3
Rainmaker
529,847
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

I don't even think some of the Realtors realize that regular sales are used.

Aug 03, 2012 05:43 PM #4
Rainmaker
980,981
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Chris Ann, if at all possible, NO. But when they are there in numbers, yes, they have to be used if they are the only comparable sales and that includes foreclosures as well. I use regular sales all the time in the BPOs I do.

Sharon

Aug 03, 2012 09:47 PM #5
Rainmaker
847,506
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Back when I was an agent, any foreclosure in inventory adversely affected the selling prices of other homes. We were always glad to get them sold and out of the way so we could get back to "normal."

Guess that shows how long it's been since I was an agent. At that time I handled the local Fannie Mae listings and we only had about 3 or 4 per year.

Aug 04, 2012 12:28 AM #6
Rainer
276,890
Kathryn Maguire
GreatNorfolkHomes.com (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

Fair market value is fair market value and that means straight sales ARE comparable.  Great post!

Aug 04, 2012 04:19 AM #7
Rainmaker
1,158,277
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

Good Morning Chris Ann, I can not make my NO big enough. Because there are no rhyme, reason or rules on what a bank will accept, I have seen crazy low prices on homes that are in good condition where all other homes in the area are a good $40,000 higher in price. The bank rejects the ones they should take and accepts the ones they should reject for being too low....It is a shame and ruins neighborhoods. Short sales should only be used if they are the majority of sales within that immediate neighborhoo, if not, dismiss them from your valuation.  Have a great Saturday

Aug 04, 2012 05:08 AM #8
Rainmaker
278,184
Carol-Ann Palmieri
RE/MAX Executive Realty, Al and Cal Realty Group - Franklin, MA
"Cal" the Real Estate Gal

When looking at what is currently on the market, one never knows how someone has priced the property and  what the bank will finally accept for the short sale offering.    I just got an accepted offer by the seller on a short sale listing and the bank came back with an acceptable price of 25k higher, which it ultimately sold for.    The buyer paid the higher price because it was fair market value.    

Aug 04, 2012 06:18 AM #9
Rainmaker
1,254,695
Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

It all depends on how many homes are short sales / foreclosures. If distressed sales make up a good portion of the market, then those sales ARE the market. I see little difference in sold comps between short sales / traditional sales in Sacramento. Every so often you get an exception, but most stuff sells at market.

Aug 04, 2012 07:53 AM #10
Rainmaker
1,100,728
Michael Jacobs
Coldwell Banker Residential Brokerage - Pasadena, CA
PasadenaCA Real Estate Representation 818.516.4393

Hi Chris Ann -- I love a lively discussion and your post has certainly brought out feelings on both sides of the issue.   When preparing a market analysis for a potential seller(short sales are not a big part of our market), I include everything that a potential buyer would consider so if there is are short or bank owned sales in the mix -- that's the reality for that subject for that particular time.   It's knowing and communicating the story behind the comps that is important to consider when arriving at a list and sales price in my opinion.   

Aug 04, 2012 10:33 AM #11
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Chris Ann Cleland
Long & Foster REALTORS®, Manassas, VA - Bristow, VA
Associate Broker, Northern VA

Peggy:  But you make the argument that Short Sales priced low won't sell, so why shouldn't a Regular Sale be compared to a closed Short Sale?  Banks are looking at Regular Sales when they figure out what their Short Sales are worth.  They aren't looking to other Short Sales.  I don't know why Regular Sales think they exist in some special bubble where they are worth more.  It's price and condition.  I've sold Short Sales that have gotten the highest prices in neighborhoods.  But again, CONDITION matters most.

Beth:  They haven't a clue.  They seem to believe that Short Sales and Foreclosures exist in a separate market than Regular Sales.  It's all price based on condition.

Sharon: Exactly.  And not taking the Short Sales into account when pricing a home for a regular seller would be doing them a disservice.

Marte:  It's not Foreclosures or Short Sales that tanked the market values.  It's demand when too many homes hit the market.  Banks need to sell.  If a regular seller NEEDS to sell, they are no different than the bank that needs to figure out the price to get picked first. But now that demand is high and homes are moving, banks aren't accepting any less than regular sellers.

 

 

Aug 04, 2012 10:54 AM #12
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Chris Ann Cleland
Long & Foster REALTORS®, Manassas, VA - Bristow, VA
Associate Broker, Northern VA

Kathryn:  And if it goes one way, it goes the other.  Short Sales should be taken into account when looking at Regular Sales.

Scott:  Not seeing that in Northern Virginia, which is where my opinion comes from.  Banks will routinely want 100% of whatever their BPO value was determined to be.

Carol Ann:  Doing Short Sales for some years now, it's no mystery what a bank will accept.  If they are accepting seemingly lower than market value prices, then they are selling in a market with increased inventory and decreased demand.  In our market, we have the opposite and banks are right there cashing in every penny of the demand with limited supply.  They are no different than Regular Sellers with one major exception.  Banks don't have emotional attachment to property and can make purely business decisions based on market values.  Regular sellers have a problem with that and often shoot themselves in the foot as a result.

Elizabeth:  And I think the only reason we see banks selling for less is when demand wans and inventory rises.  And if regular sellers were more business savvy, they'd be doing the same thing.  Because when the market shifts like that, prices inevitably drop.

Michael:  That's right.  Buyers don't put on blinders or glasses that hide a particular type of sale from their view.  All they care about is price and condition.  

Aug 04, 2012 11:00 AM #13
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