Do you think it's appropriate for sales of REOs to be included in appraisers' valuations of other houses for sale?

This is one of the questions that is asked on "The Housing Bubble" blog by the Mysterious Flying Miser to Bruce Norris.

 His answer:

No, not at all. We buy REOs and rehab the properties into near-new condition. The cost is about $35,000. Let's say an REO is priced at $65,000. With repairs, my cost is $100,000. What would be my motivation to repair this property and improve the neighborhood if I could not sell the property for a profit? If I sell this property for $130,000, it would be double the REO price. My sales cost would be at least 10%, or $13,000. I would net $17,000 for taking on this construction project. If the appraisal came in at $113,000 or less, then I would have done all that work for nothing.

The problem here is that if professionals did not use all the current sales data, then it would not be accurate for all buyers. I do understand the issue of the capital opportunity that is being described here, but you can't change the economic reality that the whole world is facing. How would an appraiser be able to exclude certain homes and only cherry pick the comparable sale of his/her choice? It is a cold hard world out there in real estate and no one says it is going to get easy any time soon. This is a eye opener for buyers who are looking for a home in good condition with a few problems who have since... been on the fence. If these guys can buy up homes and turn around and put them on the market for double the price...then Why Can't You?

Buyers...take advantage of the current window of opportunity. Get out there and BUY A HOME. Of course call me first!

Renee Baccaro Realtor Lic. 01718366 Century 21.

Link to article: http://thehousingbubbleblog.com/?p=5563