Comments on: Valuing Homes ex-Foreclosures

By: fdoleac

fdoleac — Tue, 09 Dec 2008 21:22:07 +0000

Buyers do not exclude foreclosure and short sale comps in the evaluation of the market. In many cases they are not the best values. Real estate is very, very local and sometimes by street. On the listing side, Realtors must educate the Seller as to the “foreclosure” comp next door and how it effects the pricing strategy. In a Seller’s market, we can’t get deals closed because they would not appraise. Value is always established when a willing and able buyer closes on the property. And, in some markets, foreclosures are the market.

By: Mortgage Advisor

Mortgage Advisor — Sat, 22 Nov 2008 17:27:38 +0000

Barry,

You are correct in your belief that foreclosures in the current environment cannot be excluded.

In a “normal” market, from an underwriter’s perspective, if homes are trading at a “fair market value range” in a given neighborhood, and similar homes for example sell for $485,000 to $505,000, and all of the sudden there is a “comparable sale” at $440,000 — I do not have to take that value into account if it can be shown it was due to a divorce, death of the owner, foreclosure, or anything else that may have caused a party to essentially “blowout of the trade” irregardless of price.

HOWEVER, when the entire market is being forced down, supply is increasing causing an overhang of inventory, foreclosures are a growing part of the “normal” market, and you do have to consider the values they bring the market down to.

By: leftback

leftback — Sat, 22 Nov 2008 04:06:51 +0000

Lots of nice $750,000 houses for sale suddenly in the Connecticut suburbs, the problem is they are all on sale for between $2-3million, and nobody is taking home boffo bonuses any more… reality is going to be a tough sell in this neck of the woods. These people are going to have to feel the cold wind blow down the back of their necks for a year or so before they come to the table with a realistic price.

By: dig1

dig1 — Sat, 22 Nov 2008 02:49:27 +0000

most of you here are traders and wizzes of the Wall street… I wouldn’t know a put from a call and yet, it amazes me still that nobody could have predicted this debacle as early as 2002 or 2003. One thing i have learned through this debacle is that most wall street have no clue the average person that lives with a wife and kids is doing financially because if it were so, what WINSTON MUNN said above would have been obvious to you all. I knew one thing for sure as far as i am concerned back in 2002: and this from an electrical engineer twat that don’t know a single she-aite about trading. When inflation was higher than the increase in house pricing from month to month- something was seriously wrong. I have the scars to prove it because I refused to buy a house that I had had wanted so badly back in 2003 when I saw the price double for no reason. A lot will laugh at this guy called Peter Schiff (which I have come to know just in the past week), but boy, you don’t have to be a scientist like him to have been able to see this tsunami coming. The moral of the story: most wall street including traders have no FN idea how the average man and woman that lives outside of New York state or California is doing financially.

By: wunsacon

wunsacon — Fri, 21 Nov 2008 22:09:27 +0000

This just in:

“News ex-bad-news: ~~It’s All Good!~~~”

By: zzzzmd

zzzzmd — Fri, 21 Nov 2008 22:00:28 +0000

who will buy my house? All this academic business talk…gobblygook!
put 25% down on a 1 mill home in lower westchester in 1999. As a pretty successfull physician, it was a stretch at 7% 30 year mortgage with taxes of 24k. (refinace to 15 year at 5.5% last crisis)Allegedly my home was worth up to 2.2, now maybe 1.8mill. Who can afford that? taxes are 49k. So even if it is worth an alleged 1.5 mil, with50k taxes, who can afford that at the good ol’ fashion way? ie 20% down, 30yr mortgage at 6.5%?
The person would need 300k down, and pay 11k per month. He would need to make about a minimum of 500k. With this economy, who is that person, how many are there?

By: AGG

AGG — Fri, 21 Nov 2008 21:40:28 +0000

How come nobody mentions that foreclosures and access to them is a cash cow for banks and moneyed customers? They charge for the information. It’s a business model. Get it?

By: eric davis

eric davis — Fri, 21 Nov 2008 21:26:10 +0000

Wow! BR,

You aren’t going to call a “Bounce” today?

the contrarian in me says…..

By: R. Timm

R. Timm — Fri, 21 Nov 2008 20:50:18 +0000

There are a lot of good reasons why a foreclosure isn’t comparable apples to apples with a typical transaction. Foreclosures/REO are a different market because they are often sold without warranty / as-is. They are often sold at the courthouse steps sight unseen, hence there is imperfect information making it an inefficient market in comparison to a typical real estate trasaction. Foreclosure sales often come with the unpleasant and expensive task of getting rid of the current tenant through eviction. Foreclosures are often from folks without the means to properly maintain the property and in some cases folks maliciously trash the place.

In many places foreclosures are the majority of the homes being sold right now. That means non-distressed folks are holding out for higher prices or are underwater and can’t sell. Once foreclosures subside there will be few properties for sale. The pent up demand of buyers on the sidelines over fear of declining prices will emerge and prices will rise. I’ve been following the housing bubble very carefully at thehousingbubbleblog and calculatedrisk since 2004. I predict nationally housing prices will bottom nominally in fall 2009.

By: mitchn

mitchn — Fri, 21 Nov 2008 20:41:37 +0000

Slight off topic. Hank Paulson: Worst. Treasury. Secretary. Ever.

http://finance.yahoo.com/tech-ticker/article/133469/All-the-Wrong-Policies-Paulson-Gets-%27F-Minus%27-from-Former-Regulator?tickers=GS,XLF,JPM,BAC,C,WFC