Why do appraisers use short sales and foreclosures as comps if there are arm’s length comps available?

By March 6, 2015Appraisals

When the housing market crashed, it created a lot of distressed sales and bank repossessions that are still impacting markets today. An appraiser is typically appraising a property for current market value. If the current market has a significant percentage of distressed sales, they will be a factor when determining market value. If 50% of sales are distressed, that’s representing half the market. It would be misleading for an appraiser to ignore that and only use arms-length sales.

  • Market crash = distressed sales/bank repossessions still impacting today’s market.
  • Must appraise for current market value.
  • Appraiser should support the use of these comps with commentary

It’s the appraiser’s job to do their due diligence and select the most appropriate sales as comparables. If the appraiser feels an REO or Short Sale is the most appropriate, they will use it and should support the use within the appraisal with data regarding the prevalence of these sales and the impact on the market they’re having.

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