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.