The Chicago Association of REALTORS® in last week's e-blast sent property statistics that separate foreclosures and short sales from traditional sales. COOOOL Right? Well, there is debate going on (in my head… right now) that perhaps we should not separate these numbers. I’m sure the wise one (President D.H. he’s everyone’s Facebook friend) who came up with this truly inspiring and brilliant idea, disagrees. I do not deny the fact that we need to know. I believe all information as detailed as it can be is GREAT! I work in the field and have to meet with, starts with A and they are sent by the banks, you guessed it APPRAISERS.
Appraisers are including foreclosures and short sales in the comparables when evaluating traditional property sales. Yes, it SUCKS! The banking institutions are looking for the comparables to include these distressed properties because the theory is that all sales impact an area and these must be included as well.
For example: Condo Building A (655 W. Irving Park) has currently 56 units for sale and 9 are either short sale or foreclosure; 16% of the inventory. Now let’s look at just one bedrooms; there are 31 for sale and 7 are either short sale or foreclosure, now that makes it 22% of this particular block of like-units. The bank and its weird way of doing math (mortgage backed securities, sub-prime, T.A.R.P., etc… don’t forget fees, I hate banks) believes we cannot ignore 22% of like-kind inventory within a building when doing a property evaluation. (data from MRED)
So what is the problem?! Well, how do I tell an appraiser the value is justified when they will include distressed properties anyway? Should we force their hand and use these brand spanking new statistics (and they have pretty colors) to wow them and convince them there is value. OR! Do we get used to this new upside down world and include them in our fancy packets we hand them. I would like to know which is best? Do we push the new stats and get told we are coercing them or suck it up and include the distressed like-kind units, especially in condo buildings. Especially when you have 2 units that have closed in the same tier and there is a $60,000- spread. So… which price is right?...(I read Bob Barker was back!)
Another group of people I talk to everyday and meet with are Buyers (folks who wish to live the American Dream). Just yesterday when writing an offer the buyer suggested starting at an approved short sale price for a unit in the same tier on a higher floor. The unit they wish to purchase is not distressed and the sellers have been making their payments. The Buyer believes that offering the approved, actually APPRAISED price, is what the unit is worth. Buyers believe from a negotiating standpoint that foreclosures, short sales and traditonal properties are all part of one market, not two.
Are we the last hold-outs, in an upside down world? This is a market correction, that's what the media says, in fact we have even said this as an industry. Since we all agree this is a correction, perhaps we do a disservice to sellers when we list it at a traditional price, and DO NOT include distressed properties. Or is market correction a myth that now is a truth.
Here is another myth that perhaps is true now. These properties were overpriced to begin with and that is why these seller's are defaulting.
I do believe banking institutions are forcing depreciation in many communities; especially communities of color. It appears as if a fire sale has taken place. This forced depreciation has had a negative impact on many neighborhoods and if this continues it will start affecting those you would not think would have a foreclosure problem. Condo buildings are currently facing these challenges.
So what’s the next step for our industry, for REALTORS®?
I’d like to know. Help me here folks, I would really like to hear from you!
BLOG ON!... ADVISE ON!