Real estate comps using different communities (La Mesa, San Carlos: short sales, real estate market, foreclosures)

[JustLooking619]

When looking to buy a home, is it reasonable for agents/appraisers to use homes that are less than a mile away but in different cities to use as comps? For example, attempting to list a home in La Mesa using comps from San Carlos?

[sdjimbob]

Sometimes they have to, if there haven't been any recent sales on adjacent streets or the neighborhood in general.

[shmoov_groovzsd]

sdjimbob is right. In my experience, this may also apply if there are lots of distressed sales (below market value) near the property where getting a fair appraisal may be affected.
This was one of the difficulties in Otay Ranch and other areas where literally half of a street was in foreclosure or pending foreclosure.

[JohnAlt]

Originally Posted by shmoov_groovzsd

sdjimbob is right. In my experience, this may also apply if there are lots of distressed sales (below market value) near the property where getting a fair appraisal may be affected.
This was one of the difficulties in Otay Ranch and other areas where literally half of a street was in foreclosure or pending foreclosure.

I wouldn't agree they were going for less than market value any more than the prices they paid at the peak were more than market value. Just different markets.

Other than the occasional estate sale where the family tries to dump a place quick, the only time a house would go for less than market value is in a non arm's length transaction.

[NYSD1995]

Originally Posted by JustLooking619

When looking to buy a home, is it reasonable for agents/appraisers to use homes that are less than a mile away but in different cities to use as comps? For example, attempting to list a home in La Mesa using comps from San Carlos?

There are some areas of San Carlos / La Mesa that are essentially indistinguishable in almost all categories, home style, age, lot size, distance from jobs, freeway access, demographics, school quality, etc. So a mile might not matter in an area like that. However in more central areas of SD a mile could be the difference between multi-million dollar homes and squalor.

There's definitely a case where sellers try to price out the distressed sales (which are the majority of the market now). If you are a homeowner in good standing with a family and a pending job transfer and all the comps in the neighborhood are are first-timers bailing out with short sales and foreclosures and bank-owned property, you'll roll the dice and price your home higher and try to wait it out... because you can't afford to compete with the comps anyway. Doesn't make sense given an efficient market but real estate markets are tremendously inefficient and most homeowners cannot afford to treat selling their home like it's a used car.

However in tract communities like Otay Ranch where each home is literally the same, built at the same time, and no owner has been there longer than any other, I would say those are the best comps you will ever get, and the most efficient market you will ever get as well.

[shmoov_groovzsd]

Originally Posted by JohnAlt

I wouldn't agree they were going for less than market value any more than the prices they paid at the peak were more than market value. Just different markets.

Other than the occasional estate sale where the family tries to dump a place quick, the only time a house would go for less than market value is in a non arm's length transaction.

JohnAlt,

Right, I should elaborate more. Actually Sassberto's comment is more in line with what I was trying to explain in my short comment.

Here is an example of where I was going. I was looking at a property about a year ago in Central SD. The market was still heading south and the Government (F)Reebate was about to expire. For all intents and purposes the house was 300k.
When it came to time to appraise, 1-2 miles from said property was the difference between muti million dollar properties and dumps. There were also a ton of distressed sales that mixed in within those various price brackets. WIth that being said, getting fair comps were almost nil or had to be tracked back further in time when again, the Govt's intervention indirectly inflated prices slightly and then came down again. Any other sales that were "comparable" were distressed sales AND in a declining market for a house of similar style, size etc. This is evident in areas east of South Park and North Park more specifically.

So getting the quasi FMV for the house in an appraisal was pretty tough especially when I was looking at financing with a 203k loan for this house. At the time every month made difference in comps and how it affected the appraisal of said property. Eventually I bailed on the whole deal because the process just got so out of whack it seemed like it would never materialize.

In the case of the OP, an appraiser can/may have to go outside the area for 'good' comps, but again, the market right now is on unstable ground. Even if you are trying to sell a house and it was listed correctly, this could very well slap the buyer in the face when it comes time for the bank to appraise in a declining market.

The trend and strategy I have seen used more frequently over the past 6 months is list for 90 days, pull from market, wait and then relist so the DOM is reset in the MLS. Now some of the ones I saw pulled a couple of months ago are coming back up for the spring/summer albeit at lower asking prices but many times at the same asking price. So gauging FMV for selling a house is extremely difficult in some markets right now because it could be sitting on the market for a while unless it is priced aggressively (basically giving the finger to traditional market tactics) to sell, not just look pretty in pictures but priced unrealistically.

To the OP, if you are really trying to sell/buy a house any decent agent that is working for you should be giving you some straight common sense if selling/buying the house is what you want to do. There isnstill some left over Kool Aid out there....

[JustLooking619]

Thanks for all of the replies. I ask because I'm interested in buying my siblings out of my parents' house and am trying to ascertain FMV. The comps that were used on the original appraisal (done by a friend of one of my siblings who does appraisals for a living, but who didn't step foot in the house) were not true comps, in my opinion. They were homes in a different community that had upgrades and pools, in some cases. I had a broker do a CMA, and it was MUCH lower than the appraisal because she used comps from the La Mesa side of the fence. I'm paying for my own appraisal this week. Seems like this has the potential to turn ugly; and, since the house isn't being listed the other siblings don't want to get agents involved. If we can't come to an agreement about FMV, I'm going to have to pass on the house, unfortunately.

[shmoov_groovzsd]

JustLooking,

Yeah I know that scenario with the appraisers. Banks are pretty tough now, especially with the market valuations so I am not sure how well the drive-by's are flying these days.
If its not good enough, the bank will just send another appraiser out or make the same appraiser take photos inside etc. This is all assuming you are financing the property and in some cases where it makes sense to use a bank to finance a purchase in this market. It sort of protects you and the bank's asset to make sure you are buying with some sense of accuracy in valuation.

If you are going all cash, then you want the best valuation you can get for certain. The knucklehead broker that did the CMA was obviously clueless if he/she was matching up houses that have nothing to do with the property or just limited it to La Mesa.

If you have the time, looking at websites online to zero in on your property and look at comps nearby are available. They can give 'round' numbers and just sort of see if the paid appraiser is really doing his/her homework.

Good luck